Understanding MLM Compensation Plans

All network marketing companies have MLM compensation plans which determine the monies paid to their associates and distributors.

More and more people are thinking about getting into MLM because a good home based business can make you lots of money.

But be careful. Look hard and long at the MLM compensation plans the company offers before you make your final commitment.

MLM Compensation Plans: Points to Consider

For this example, we’re going to assume that you have looked around and found a company and product that you are interested in. You’ve done your required research and looked around online and carefully weighed all of the information you have found.

Along the way, you might have even found “bad” information about the company you’re researching. Take some of that with a grain of salt.

Oftentimes complaints about a company come from distributors who did not make any money for any number of reasons. Perhaps they were misled into believing that MLM business is an easy lottery ticket to riches. They might have even been told something like “You try hard at your real job don’t you? Well, with all of the  friends you have, this is going to be simple for you!” What a crock!

The truth is, network marketing is a business, not a lottery ticket.

As you did your research, did you look at the MLM compensation plans the companies are providing? Did you take the time to look at them and understand them? Please don’t think you’re stupid if you don’t understand MLM compensation plans. Some are complicated.

Even though many MLM compensation plans have fancy names, they don’t seem to be too difficult to understand if you sketch them down on paper.

(By the way, you should be making a number of notes anyway, not only about the compensation plan. You should also have a written list of your goals and an outline of a business plan already down on paper, too.)

Don’t get all hot, bothered or confused about what these compensation plans are called. The most significant difference between an “Australian One Up” structure and a “matrix”, “unilevel” or an “MLM binary” plan isn’t really that significant. That’s not what matters.

The question you should ask yourself is, are other folks in this business making the type of money that you want to make yourself? If they are, then it’s obvious the compensation plan is working for them. Therefore, you’ve got the perfect chance to get in and build up your very own business.

Sign-Up Bonuses in MLM Compensation Plans

A starting place to look at is to compare sign-up bonuses offered by the companies you’re looking at. Say for example it costs $500 to join the program and one company offers a bonus of $50. It is a nice sum but when you have a look at another company’s bonus plan, they might be offering $140. This shouldn’t be your only deciding factor, but it’s just a point to consider.

Here’s why: At some point everybody on your team is going to run out of people they know and they’re going to have to get involved in marketing their business. Good marketing costs money, even if you just do Facebook pay-per-click advertising.

Sign-up bonuses are an important stream of income so that you can continue to market your business. The amount of these bonuses and commissions is exceedingly important to keep your business going.

Downline Bonuses in MLM Compensation Plans

Another factor to consider in MLM compensation plans is the amount of money you receive when other people join your team, especially when they are sponsored by other members of your downline. This is called a “downline bonus”.

This type of bonus can be lucrative if a “heavy hitter” joins your team. Heavy hitters are the people that join up, are stupendously successful, and build their businesses fast. As you look at MLM compensation plans, find out if you are going to get paid for the efforts of others on your team regardless of their position in your organization.

A good question to ask is “how many levels down do I get bonuses?” A good compensation plan goes to unlimited levels.

Residual Commission in MLM Compensation Plans

Finally, consider the residual payouts you’ll receive from use of the companies products and services throughout your organization.

Typically there is a “monthly minimum order” of product people need to maintain to be qualified in the business. In some companies, you have the potential to earn a percentage of those orders by everyone in your team. In other companies, the residuals are paid out only to a fixed number of levels.

It’s a good idea to ask “how much commission is paid out on product orders, and how many levels down do I get paid on?”

Concluding Thoughts on MLM Compensation Plans

When you are shopping around for a network marketing company to partner with, you should look closely at how they pay their reps. It’s even a good idea to compare multiple MLM compensation plans side-by-side to determine which is going to work best for you.

If you’ve written down your goals and ambitions in this industry, it’s up to you to decide which companies and MLM compensation plans will help you achieve your financial and business targets.

To your continued success!

David Caban
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