The Best MLM Compensation Plan
October 14, 2008
How do you find the best MLM compensation plan? This is one of the most discussed topics in MLM and network marketing circles. MLM compensation plans come in many varieties. Binary, breakaway, unilevel, hybrid, and more.
A good presenter can take any of these plans and make them look great. Likewise, any given MLM compensation plan can be made to look bad, when illustrated using an unfavorable scenario. This can be terribly confusing to anyone trying to evaluate these plans.
Just So Much Money to Go Around
In any MLM plan, there is only so much money available to pay out on product sales and consumption. That amount will vary depending on how much profit is built into the products. A group of products priced very competitively might have only 25 cents of every retail dollar available for paying bonuses. Products with higher retail prices or lower distributor discounts might have 35 cents of each retail dollar available. This amount can vary quite a bit, and these examples are simply for illustration. They are not intended to represent an industry average.
Can a Rookie Make the Team?
Is there enough bonus money available in the early stages of the compensation plan, such that new distributors who sign up and go to work have a realistic shot at doing well? Some opportunities do not pay well in the beginning – most of the money is reserved for the big business builders.
The big builders should have a shot at making a lot of money. They are the ones who have sponsored the most people and helped move a ton of product. However, there should be a balance. If little is available to pay out in the beginning, new distributors will get discouraged and drop out faster. This results in slower growth over time, which is not a good thing.
A Key Characteristic to Look For
When evaluating an MLM compensation plan, consider how much money you can make in the beginning, while you are building up your business. You can’t expect to make really big bucks at this stage, but there should be enough available to make the effort worthwhile.
Many MLM opportunities offer “fast start” bonuses of one sort or another, and these help new distributors make some money right away. This is very important to retention. You want your new distributors to stick around for a while. Your eventual success in business depends on them being able to make some money early on.
You can bank on it.
I’ve found MLMs with the most potential are the more established ones. Typically they let you try out their compensation/products and start for free before they ask you for a penny. Also, the goal is to invest as little as possible and still achieve a maximum turn around so it’s not necessarily the most expensive mlm that will always have the largest return.