Why The Best MLM Compensation Plan May Not Be The Best!

A lot of companies make a big deal about claiming to have the best MLM compensation plan.... BUT

What is the point of a brilliant compensation plan if the product is naff and no-one wants it?

Or if the most generous, powerful compensation plan pays out so much that the company cannot sustain it?

Choosing a Network Marketing business opportunity on the basis of its pay plan is putting the cart before the horse. You will only be paid if the product moves and you can only earn residual income in the long term if the company has long term stability.

Those are more important criteria. The compensation plan comes with the company you choose and is just the icing on the cake.

The Simpler The Better

Some companies seem to delight in the sophisticated, and design complicated unique compensation plans that you need a Havard degree to decipher.

They are designed by compensation plan consultants for MLM professionals and assume that you already know all the jargon they use, like "matching bonuses" and "carry-over volumes"...

Network Marketing is a simple business and should be accessible to everyone. If you can't understand the plan then stay away from it. It may be a brilliant compensation plan, the best MLM compensation plan there is in that is pays out more than any other, but if you don't understand it how can it motivate you.

How can you set your goals if you don't know what you have to achieve?

Getting Over The Hump!

Most people, perhaps 95% historically, who join an MLM company drop out or become inactive by the end of 3 months.

This shows the need for the product to provide value so that people will keep on buying it for its own sake. Not just because of the business.

Distributors are customers too!

Most plans today will place customers on the company database and have them dealing directly with the company. As a registered customer you then get a discounted price.

That makes life easier if you are distributor because all the admin is done for you, but it means that you don’t make a retail profit. In turn that means there is little opportunity to make quick money.

Instead you have to go about patiently building a residual income from a downline.

But a new distributor needs some opportunity for rewards. The best MLM compensation plan will pay you a high percentage commission on the first order of someone you enrol, as well as on your first couple of levels.

With a plan that has not got a retail profit element it is especially important to take a long term view on the business.

What Do You Need To Qualify?

Look at the minimum qualifying volume to earn a residual income. Is it a level that you and your household can sustain?

The minimum volume needs to be consumable in a month or else your garage will start to fill up with stock – the bane of the MLM industry!

You may find that the “volume” is calculated on a points system rather than the monetary value and that 1 point does not necessarily equal $1.

This is done to equalise the profit made on different products. A product that is expensive to produce compared to another product with the same sales price may be have fewer product volume points. Commissions paid to distributors on that product are then lower.

For companies operating internationally this points system gives a standard measure across all the countries to calculate commissions on. The company then avoids risk of fluctuating currencies.

Other Factors To Consider.

What is the total payout? What percentage of the price charged by the company could be paid out in commissions?

The actual payout will always be lower than the maximum amount that would be paid if all commissions were qualified for. Historically an actual payout of between 35% - 42% is what you would expect.

How many levels deep does the plan pay? The more levels you go down the more people there will be on each level, so a plan that pays more levels deep will pay well.

BUT, you have to get there and be around long enough to get the depth in your downline.

Is there “Spillover”? Some plans encourage building deep and as a result you may get spillover where someone above you places someone they sponsor under you.

Treat that as a nice bonus!

The best MLM Compensation Plan will reward distributors who produce results. You will usually find that you need to qualify for payouts on the basis of your own efforts to earn decent money. Nowadays it is very rare to be able to have a truly passive residual income.

Whatever the plan, a sponsor should never compete with an enrollee but should do everything in their power to help the enrollee grow their business.

That will help the sponsor’s own business too….

The best MLM Compensation plan will reward the best behaviour and not be over-complicated. Network Marketing is a simple but powerful business. It just needs to be properly explained. Using "The Way Forward" will help.

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