MLM Compensation Plans – Three Things to Consider

MLM compensation plans come in many flavors. There are a few basic models that have been around a while. Stairstep breakaway, binary, unilevel, hybrid, and binary are all terms describing the way you can get paid in network marketing.

Let’s consider mlm compensation plans, and their importance in evaluating a home business opportunity. The first thing you should look at is your products. All the talk about payout and how much percentage is paid on what level means little if your products are weak or overpriced. Once you find good products, take a look at how you will get paid.

Monthly Volume Requirements

Some compensation plans have a requirement that you purchase or sell a certain amount of product each month to remain “active”. Remaining active means you can purchase products at discount. Preferably, there should be no volume requirements to remain active in this sense. If the products are good, the distributors should want to purchase them for personal use and sell them to others at retail.

Compare Apples to Apples

In studying mlm compensation plans, take a close look at how percentages are quoted. If a plan is said to pay “10% bonus on all sales made on your first level”, find out what that bonus is actually paid on. Is it paid as a percentage of the retail price, or on a “bonus value” that is assigned to a product? For example, in some plans, a product selling for ten dollars might have a bonus value of eight dollars. This means you would make 10% of eight dollars, or eighty cents. On the other hand, if the bonus is paid on retail prices, you would make ten cents.

This seems like a small difference, but it adds up big over time. Many companies use bonus value figures to pay against. This is perfectly legitimate, just make sure you understand this up front.

Most of the Money is Made Where?

Consider where most of the money in the plan is paid out. Some mlm compensation plans are set up to pay “fast start bonuses” and other incentives to new distributors right away. This is good. Other plans pay little up front, and save most of the payout for higher achievement levels in the plan. This would make it harder to make money in the beginning, and is something to look at closely. If a plan doesn’t pay pretty well up front, more people will get discouraged and quit before they really get going. New MLM distributors need a chance to start making money as soon as possible.

All in all, you can make money with any mlm compensation plan if you are working the business and successfully sponsoring others. Nonetheless, it is important to know where the money will be made when you are making your choices.