Pre-Paid legal Services, Inc.

Pre-Paid Legal Services (PPLS) marketed its memberships through a multi-level program that back up buyers to become gross revenuepeople. Members that sought to become sales associates paid the community a fee of $65 to cover the cost of rearing materials, training meetings, and home office support services. Registered sales associates interchange the companys services to their friends and business associates. The most successful even recruited their sales force. Sales associates were compensated on a commission basis. precedent to 1995, associates that signed up a immature member accepted a commission of 70 percent of the first social class premium and up to 16 percent commission for accompanying year renewals. First year commissions were paid in hand whereas renewal commissions were paid as premiums were received.

In a Fortune powder store word, the author sites concerns around PPLs income growth being improved by the spreading of commissions across a cardinal-year period, even though the skilful 3 years commission is paid to the seller at once. They contend that the pelf would be flat if they recognized commissions at once. The article speaks of the retention rate of contributors at 75%. The article also claims the cancellation rate to be 24%.

With these retention rate and accounting practices, PPLs net earnings would not be poorly hit during the years of 1997 and 1998, with a reduction of net earnings adding back in the capitalized commissions. The company still showed strong income growth. The new sales were growing at an enormous rate. As broad as the company keeps their growth the retention rate testament be applied to an increasingly large subscriber base.

One study problem is the matching of expenses and when do the benefits actually occur. PPL signs a subscriber for $19 a month and pay a three year commission of $171. The company pop outs $57 the...

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