How to Find the Best
MLM Company Compensation Plan
Finding the best multi-level marketing, or best mlm company compensation plan can be a difficult task. So many plans out there can be complicated and difficult to decipher. Here is a step-by-step method to determine if a plan is the best one for you.
Here are the general characteristics of a good compensation plan:
1. It should be easy to get started, with a modestly priced sales kit.
2. Rewards primarily for direct sales, rather than override commissions.
3. Rewards for personally sponsoring others.
4. Rewards for recruiting on multiple levels.
5. Sales focus should be on the end consumer, rather than to your downline.
6. Rewards for training and supporting your downline.
7. Rewards for high personal volume.
8. Rewards for high group volume.
9. Rewards for maintaining a monthly volume.
10. Should provide for recognition.
11. Should offer non-monetary rewards and incentives, such as trips or cars.
12. Monthly maintenance requirement should be reasonable - not so high that you can never achieve it, and thus never receive compensation.
Conversely, the following are not characteristics of the best mlm company compensation plan and should send you running:
1. Encourages deadweight distributors and non-producers.
2. Encourages inventory loading or large investments in products.
3. Emphasizes gimmicks rather than product sales.
4. Emphasizes the business opportunity over the product / service.
5. Uses a lot hype to entice people.
Analysis to Determine the
Best MLM Company Compensation Plan
Now for some more details that will determine the best mlm company compensation plan.
Simple. The plan should not be overly complex. Your prospective sponsor or the company website should allow you to understand the pay plan without making your brain hurt.
Pay Out at Least 30% in Compensation. A company should pay out at least 30% of its total revenues. Most plans pay between 35 and 45 percent of the company’s wholesale purchase volume, and about 30 percent of suggested retail volume. Look for a plan that divides the pie in your favor, without going overboard. A plan that is overly "generous" to its distributors can run itself into financial ruin. And that’s bad for everyone.
Orphan Commissions. Sometimes distributors will fail to qualify for commissions in a given month, usually because they fall short of the minimum purchase qualifying amount. The commissions they would have earned are called "orphan" commissions. Avoid plans in which orphan commissions return to the company. Orphan commissions should "roll up" to the next qualifying distributor. This approach is also called "compression."
Lock-In. When you reach a certain level, you "lock in" and cannot be demoted because of a temporary drop in monthly performance. This is should not be a deal-breaker if it’s not available, but definitely something to consider.
Other Perks. The plan should offer some perks for top performance above and beyond normal commissions and bonuses. These come in many forms: cars, health insurance, free training, lead and co-op advertising programs. A few publicly traded companies even offer stock or stock options.
Front-Loading. Beware of companies that require “front-loading”, “buying” your way into a certain level or commission bracket. Be sure to read the fine print before joining any kind of company that requires you to purchase large amounts of products and store them! With the ability to drop-ship from anywhere in the country, any mlm company you look out should have an auto-ship program.
Fast-Start Bonus. A Fast-Start bonus is usually given as an incentive for personally sponsoring people. You can’t make money just by signing someone up--or what the FTC calls “selling distributorships”. But, you can make a fast-start bonus when someone purchases an initial amount of your product or service. This is just a commission bonus on the initial sale of product and rewards those going out and doing the work.
All of the previous characteristics will be essential in the beginning of your business building. The following won’t have an effect until later in your business, when you have a rather large organization.
Infinity Bonus. An Infinity Bonus is where your MLM will pay you, beyond their standard pay level, an additional bonus based upon your group volume. The real motivation of an infinity bonus is to give the upline an incentive to work with people that may be deeper than the normal compensation plan pays for.
Roll-up/Compression. As previously mentioned, orphan commissions should roll-up or to the next highest distributor. This causes “compression” of the organization and avoids the “Swiss Cheese” – a bunch of holes in the organization where people didn’t purchase product in a given month.
No matter what other advantages a plan might have, always ask this pivotal question: "Does it emphasize getting products or services into the hands of consumers; or does it emphasize making money by finding new recruits?" If it falls into the latter category, run away — fast. This is for two reasons:
1) The key to business success, generating a residual income, is based on the repeat sell of a product or service.
2) Any company that promotes the compensation plan, or the business opportunity, more than the product is legally considered a pyramid scheme.
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