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Each of the over 900 MLM companies has its own compensation plan, and a person could go crazy trying to analyze every one of them. Therefore, I'm going to show you how to easily review compensation plans in order to find one that is designed to maximize your success.
You'll hear seductive and fancy things like "We pay you 43 different ways"...."Power Pools"....."Rapid Rewards".... "Forced Matrix"..."Coded Bonuses".....this is where people get distracted from how to properly analyze a pay plan. In Network Marketing, you do two things. You get a few customers who buy your product or service, and you help other people become business owners. So we are paid for doing two simple things. Therefore, compensation plans should be simple.
Here are the 3 main building blocks you should use to review a compensation plan.
- Commission On Your Personal Sales
- Commission On Your Down-line Sales
- Bonuses For Product Sales
Commission On Your Personal Sales
Remember, your focus in Network Marketing is Duplication, everyone gathers just a few customers. The main concept is that you do not have to get hundreds or thousands of customers.
And because you only gather a few customers yourself, the income generated on your own personal customers will not be significant. However, the personal commissions should be enough so people experience getting a check in a reasonable time frame. When people see a check, even a check that is $25 or $50, it gives them belief that the business is working. If the personal commission on a sale is just pennies, they will not see a check for a long, long time, and when that happens, people will quit.
Commission On Your Down-line Sales
Here are the things you should take note of when looking at down-line commissions
- Are the percentages consistent?
- Is the structure easy to explain or is it confusing?
- Are the percentages too low or too high?
Most MLM Compensation Pay Plans average about 8 levels of pay, with options to get paid through unlimited levels, but for now let's assume a plan has 8 main levels. Let's say you have to plans side by side and on the first one, the percentages are consistent at 5% across the entire 8 level pay plan. And in the second one, the percentages increase and decrease several times. 2% on level one, then jump to 15% on level 2, and up to 25% on level 2, then back down to 6% on level 3, then up to 12% on level 4, then down to 3%, and so on.
Let me ask you a question. Which one of these two compensation plans do you want to try to explain to a person you're trying to enroll? The first one of course!
There's a key concept that all successful business people understand. And I've mentioned this in several of my other articles. "A confused person always says NO or quits." So you should look for a down-line commission plan that is consistent.
Bonuses
Bonuses are an important part of any pay plan. First, they provide a way to recoup your initial investment and get some additional money while your long-term residual income builds. Plus, they are an incentive for promoting your business, and an incentive for training and supporting your down-line. If a person gets a bonus when their down-line makes a sale, people will stay and continue working the business.
Here are two key components you should analyze when looking at bonus pay plans.
1. Make sure bonuses are paid only when product is sold. Bonuses paid for recruiting without products sales will get a company shut down by state and federal agencies.
2. A structure where bonuses are paid to multiple people from one transaction. Just like the commissions, a good bonus program allows you to leverage your efforts and receive bonus compensation from the efforts of your down-line. If you and your down-line reps are getting bonus checks and experiencing some income producing results, they are less likely to quit.
Ok, let's wrap this up. You want the design for all 3 building blocks to be consistent and easy to explain because "confused people always so NO or quit". Make sure the personal commissions are not just pennies for a sale, and if possible, the bonuses should be spread out over multiple people.
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