To determine the Best Compensation Plan, there are a number of factors that should be considered. Some compensation structures are more suited towards those confident in their recruiting ability and those with industry experience, while others are more supportive to people that are new to the industry, part-timers and the so called average distributors. On this page we will discuss a list of factors that you can use to help identify a good compensation plan.
The difficult part when evaluating the Best Compensation Plan is not to listen to peoples opinion because you find when you ask someone in the industry what they think is the best compensation plan, they will almost certainly respond with the compensation plan used by their current company. In particular they will highlight features that they find attractive and have found to be a good selling point. However, if you were to ask the same distributors what they know about other compensation plan models; it is usually followed by a blank look on their face and the fact that they know very little about other plans. Because the Network Marketing Industry is highly competitive, where individual companies are consistently trying to out-promote each other, it is not uncommon for companies to use propaganda by promoting their compensation plan as being the best in the industry. Additionally since all network marketing companies have a compensation plan, it allows for companies that sell different types of products (eg vitamins, technology, insurance etc) to use their compensation plan as a means for comparison and as a benchmark for success against both direct and indirect competitors within the industry.
# MLM Compensation Plans are KEY
For you, as for all MLM distributors, the MLM comp plan determines the way that you earn your money.
For the MLM companies, the plan determines whether they stay in business and how successful they are...
*by influencing how well they meet regulatory guidelines
*by determining how attractive they’ll be to network marketers looking for a company to join
*by affecting how likely it is that new distributors will succeed enough to stay in the company
*by affecting how much product distributors are likely to sell
*by designing how much profit the company keeps after it pays out commissions to distributors
#Components of a compensation Plan
An MLM compensation plan essentially consists of two parts:
*Network Marketing Product SALES
*RECRUITMENT of New Distributors
Commissions and bonuses are earned by selling product and by recruiting/sponsoring new distributors under you (your MLM “downline”).
The percentage of product sales that you earn in commission varies by company and also varies within any given company for different categories of sales.
There are the sales that you make personally… and the sales that are made by distributors in various levels of your downline.
There are sometimes different percentage commissions for the various products that a company sells, or other variations that can be unique to each company’s MLM compensation plan.
Also, in some plans, you may receive a sign-up bonus after distributors in certain positions in your downline reach a certain sales volume.
#How To Choose?
It’s a tough balancing act, and not all new MLM companies will master this balance.
So please only consider joining a established company with at least a couple years or more in business and no debt.
To join an “untested”, brand new MLM company... no matter how exciting or interesting it might sound... is too much of a gamble... a risk of your valuable time, peace-of-mind, and the money you spend to get started (even though this is pretty low, in general, compared to almost any other type of small business).
Only a "super MLM expert" who would know how to evaluate every financial and legal detail of the company's business plan and compensation plan should ever join a start-up company. And anyone who knows that much often starts their own company, rather than joining an existing one.
That super expert is NOT you (or me, so please don't contact me to ask my opinion of any particular MLM company.)
There are only a few basic different structures for MLM Compensation Plans.
This sounds simple, but it isn't. Because each MLM company usually has specific particular variations that they add to one of these basic plans... either to benefit the company OR to benefit their distributors... usually both (the best situation).
So no two MLM Compensation Plans are exactly identical to each other, and none look like any of the basic types in their pure unmodified form.
In fact, it's often difficult to even recognize what basic type of network marketing compensation plan is being used!
This can be good or bad for the distributor, depending on what the modifications actually are.
The best way to visualize the details of MLM Compensation Plans are with diagrams, with terms used such as “levels”, “trees”, “branches”, and “legs”. Every company has diagrams of their plan to show you that are essentially unique to each company.