Forums

[Dawn Connelly Contribution Level: 2]

MLM compensation plans can be confusing. There are many factors to consider in selecting a good MLM compensation plan. How do you pick one that will allow you to be successful? The right person can make any of the MLM compensation plans look great if you do not have all the facts. The goal is to be educated enough to recognize a good MLM compensation plan when it is presented to you. Here are some factors to consider when evaluating an MLM compensation plan.

Can You Make Money Right Away?

Many MLM compensation plans reserve most of the money for the big distributors. By big distributors, I mean those who have sponsored a lot of people and whose team moves the most product. This is generally a good strategy since those who are the biggest business builders should be rewarded. They help keep the company capitalized and growing. However, you want to look for an MLM compensation plan that also allows those just starting out to get paid too. Plans that do not allow new members to get paid in the beginning risk a high dropout rate. People tend to get discouraged if they do not see results from their efforts early on. Do not expect big bucks at the beginning stages, but look for an MLM compensation plan that will make your efforts worthwhile. Retention of your new associates is important. I suggest looking for an MLM compensation plan with a “fast start” bonus of some kind. These plans reward hard work at the beginning stages.

Is the Company Properly Capitalized?

An MLM company makes money in a variety of ways – the product, membership fee, annual renewals, training and marketing tools are just a few. An MLM company then pays out money to its distributors. A successful MLM never pays out more than it brings in. Otherwise, it will go under. In fact, a good MLM compensation plan should keep a reserve and pay out only a fraction of the profits it is bringing in. This makes the MLM company sustainable and allows for long term viability. This is important when you select an MLM business. You want one that is not going to go under after you have jumped in and brought all your friends, family and colleagues on board and invested time and money. Take a look at how the MLM you are considering is capitalized. Where is it making its money? What percent of the money it brings in is it paying out to its distributors? This amount can vary quite a bit and still be acceptable. You do not want a company to pay out more than 80% of what it brings in. On the other hand, you do not want a company that only pays out 20% of its profits to its representatives or there is a very small chance of making a lot of money as a distributor.

How Much Volume Does the MLM Require You to Move?

Some MLM compensation plans require you to purchase and move more product than others. I always recommend selecting an MLM company that markets a product you personally use. Ask yourself if it is something that you would continue to use or even need in a poor economy when people are making cuts. Is it something easy to move or sell? Are you required to purchase so much volume that you will be storing the product in your garage? You should also consider the price of the product. It must be realistic and reasonable to expect distributors to sell the product.

Who Is Responsible For Training Your Recruits?

Many MLM companies rely on others to train your new recruits. Be sure to select an MLM that requires you to train the people you have sponsored. Most of the time, people recruit people they personally know. When these people you have a personal relationship with are trained by people they do not know, the dropout rate significantly increases and it is bad for morale. The goal of an MLM is duplication. Look for an MLM compensation plan that teaches your recruits and their recruits, etc. how to duplicate the business. You want an MLM compensation plan that will allow you to step out after 5-10 years but will allow your business and your income to continue to grow for long after that. The business should grow without your efforts (or at least with minimal efforts) if it has been duplicated properly. This is only possible if each person is responsible for training their recruits personally. A good MLM company will have a training system in place to teach you how to do this.

Is the MLM Compensation Plan Capable of Being Understood?

It is not necessary to completely grasp an MLM compensation plan in your first year. However, you should be leery of MLM compensation plans that change or are too complex to explain or understand. MLM companies with complicated or evolving compensation plans will set you up for failure. Avoid novelty or fad plans. There are plenty of time tested plans that work and it is not necessary or recommended to invent something new. The traditional plans have proven to be successful. They work! There is a reason the most successful MLM companies follow them.
While a compensation plan is a very important factor in selecting a successful MLM, it is just one of many important things to consider.

[Roger Silen Contribution Level: 2]

Most important factor... Do you like the product and do you like the people... the culture...? would you use the product even if there was no income attached? Why should people join you if it is not a product that you fully stand behind!? If you can say Yes then you can double check that the comp plan is fair...

Here is my order of relevance and importance while evaluating an MLM business...
1. People
2. Product
3. Comp plan

Most comp plans are fair.... If you work hard you get paid well... Simple as that.. with Almost all the plans available today. Focus on the Company and the Products first and chances are they have a winning compensation plan...

Having said that I will make one recommendation... Don't buy into something that appears to be WAY better then the rest or way easier because chances are you just don't understand it properly...

A perfect example is companies promising One Single Downline... Sounds great right..? every single person who joins the company after you will be in your downline!! WOW!! The reality is It doesn't make the business easier it WILL NOT make your more money and all it attracts is the "Cash Over Night Crowd"! they will all be gone as soon as the next shinier red ball bounces by... At the end of the day you are paid for YOUR Production plain and simple... it's never about "Getting In" at the right time and sitting back...

..Yes of course comp plans matter but.... If you pick a company solely based on compensation.... then you are most likely the type of person who opportunity hops! Because there is always something Newer and Hotter and Improved etc... Comp plan matters but don't say to yourself.. "if only i could find that ultimate compensation model i would finally be successful"

You wont...

Over analyzing a comp plans leads to people blaming their lack of success on it.... Blame the Comp Plan... never was a more ridiculous statement made...

There are extremely successful people with ALL comp plan models.. and if you spend your time analyzing you will find they all have pros and cons... Instead find a company with a product and a culture that fits YOU!!

All the Best,

Roger S.

[Richard Bravo Company: Life Force International Contribution Level: 9]

.

The best compensation plan is one that meets the criteria you laid out that is also attached to a rock solid company with a proven product that has consumer demand.

Break even fast.
Create profitability fast.
Unlimited residual income potential.
Strong yet intelligent incentives.
Long term stability.
Equitability for "big earners."

When you take those characteristics and match them with a management team that runs a tight ship, a company that invests in it's future by capitalizing the backend for future development, growth and sustainability and on top of that a product or products that are in demand and perform as they should ...

You have a win-win-win scenario.

.
.
.

[Dany Nguyen Contribution Level: 1]

I want some names! PM me if you will!

[Bob Prisco Contribution Level: 2]

Hey guys lets keep it simple,,,,,,,,,,,,,that's why I joined my program. All this forced matrix, certain % 5 levels deep, become president or Diamond this and that, if your recruit does better then you , you no longer get his bonus , way to confusing. We are all on the same playing field, we all make the same no matter how many people you have, everyone is equal, NO levels .


For every personal referral 100 dollar training bonus and 200 points.

For every person placed under you by your up line or by one of your referrals 200 points.

Every time you or someone in your down line shops you get points.

every 4800 points totals a 550 dollar bonus,,,,,

that's it , nothing further, how easy is that,,,,,,

Products, we dont sell anyone anything, but sell them everything,,, Just go shopping at the same stores you are already shopping and get cash back and discounts thats it , thats all there is to it. IF you want to share this with others and have them shop on there own mall, great, then as they shop you benifit, But we can be used simply for personal use, that sums us up, Easy right, ? rsprisco@aol.com

[Colin Durkin Company: Global Wealth Trade Corporation Contribution Level: 3]

Good post, all of these things are very important in a compensation plan. One addendum to Richard's post however. In one of your bullets you wrote unlimited residual income potential. This one does come with a disclaimer. For companies that have binary plan plans, if there is no cap on that residual income the pay plan will eventually collapse. Be wary of any company that has a binary pay plan with no cap, this is not sustainable and the company will not be in business very long. This has been figured out the hard way when binary plans first came out in the early 90's.

When you look at a compensation plan in a business you plan to build, ask yourself these questions:
• Do you want to build your team once, properly, or do you want to constantly rebuild over and over again?
• Is the team strategy sustainable or will it collapse?
• How simple is it for your team to make money?
• How simple is it for your team to make money quickly up front?
• Are there any additional monthly qualifications aside from autoship that must be met?
• How many legs do you want to build and support?
• Is the passive income paying out a lot - short term gains versus long term business?
• What % of the plan is paid on volume versus bonuses?
• How much does each person in your team pay you?

Two of the biggest road blocks in the industry between distributors getting paid and compensation plans are Ranks & Bonuses. Both are in place to make it cheaper for companies to pay their distributors. A direct result of ranks and bonuses make the balance of payment either extremely “top” heavy (I use quotations because I don’t mean this in the literal sense, I mean people in the top earning category, not the people who “got in first”) or they use bonuses to mask a very low residual and make it relatively easy to get paid up front and at the “top” but extremely difficult for those in the middle. The other thing that can make a pay plan difficult for most distributors is a pay plan that requires you to build wide, making it more beneficial to sign up new distributors as opposed to supporting your team (duplicable). A company with little to no ranks is much more beneficial for growing and supporting a team properly e.g. – take for example a stair step breakaway plan, if someone you sponsor surpasses you in rank, you lose most or all of that sales volume you were being paid on before so it is not as beneficial to support your team. Also look for a company that pays at least *75% based on volume versus bonuses. That will give you a real residual income. * This is not 75% of the money the company brings in, it is 75% of what they are paying out, e.g. – if the company pays 50% back to the distributors, at least 75% of that should be paid out based on sales volume or 37.5%.

Other things to consider when looking at a company are:
• How many companies are selling the same product?
• What are the barriers of entry in your product/service?
• How large is your market/market niche?
• What is your competitive advantage?

A sad fact of this industry is that 96% of the 1700 registered MLM companies are either in personal care, nutrition or telecommunications. According to a Wall Street Journal study on the direct sales industry in 2007, a distributor for a nutritional company in this saturated market was forced to compete with over 30 million other network marketing distributors. Other government studies show 96% of the networkers in Amway, Usana and Freelife lost money every single month. The people that got in were promised an income that didn’t materialize for the overwhelming majority of them.

Bottom line is the bottom line and all of these questions need to be asked when looking at an opportunity/comp plan.

[Joyce Penner Company: Life Force International Contribution Level: 8]

Really enjoyed your response Colin until I read this line:

The people that got in were promised an income that didn’t materialize for the overwhelming majority of them.

In my experience Colin, the people who are not making the income they desire are the ones who are not doing the work. Inevitably if you ask them how many people they spoke to about their opportunity today the answer will be "well, none", and how about yesterday, last week, last month? The answer once again will be "well, ??"

Blaming the comp plan, the company, the stars, the product, the direction of the wind is commonplace and sad to say those people who follow the "it's not my fault" philosophy will never become or earn the level of wealth they think they desire. What company promises you a guaranteed income?? A disreputable one. What sponsor promises you a guaranteed income?? A disreputable one.

The only income materialized will be what YOU do and I believe you know that already Colin, which is what surprised me when I read the sentence you wrote above.

To your success,
Joyce Penner

[Deborah Tutnauer Company: ViSalus Sciences Contribution Level: 4]

1. You research compensation plan types

2. You decide which format makes the most sense to you financially, and philosophically

3. You then find a few companies that use that type of plan

4. You seek out a leader in those companies

5. You prepare questions and plan to not be swayed by hype

6. You do more research

7. You ask more questions

8. You then seek out leaders you trust and ask them why they chose their present company

9. You take there information and bring it back to your original research (steps: 1-6)

10. You make a decision and then go for it wholeheartedly!

[Colin Durkin Company: Global Wealth Trade Corporation Contribution Level: 3]

Really enjoyed your response Colin until I read this line:

The people that got in were promised an income that didn’t materialize for the overwhelming majority of them.

In my experience Colin, the people who are not making the income they desire are the ones who are not doing the work. Inevitably if you ask them how many people they spoke to about their opportunity today the answer will be "well, none", and how about yesterday, last week, last month? The answer once again will be "well, ??"

Blaming the comp plan, the company, the stars, the product, the direction of the wind is commonplace and sad to say those people who follow the "it's not my fault" philosophy will never become or earn the level of wealth they think they desire. What company promises you a guaranteed income?? A disreputable one. What sponsor promises you a guaranteed income?? A disreputable one.

The only income materialized will be what YOU do and I believe you know that already Colin, which is what surprised me when I read the sentence you wrote above.

To your success,
Joyce Penner

Geez I was doing so well right up until the end. You're right Joyce, sponsors should not be making guaranteed income claims. However, there are lots that do... unfortunately. There are also sponsors that will bring someone into an opportunity and not properly train their people and basically disappear as soon as they get their cheque. Sometimes... being in a community like this with so many leaders, we are spoiled and sometimes forget about some of the problems that the rest of the industry sometimes has to endure. With my people I take a "you do this, you get this... you do nothing, you get nothing, but you have to do work and it isn't easy" approach.

[John Doe Contribution Level: 2]

I think "best" can mean different things for different people, depending on what is important to them and where they are in their lives. You may think what you have is the best comp plan out there, but truth is you simply might not have shopped around or are knowledgeable about your alternatives. Once I was in a company for 6 years straight, sold out completely and would not even consider looking at another opportunity or comp plan even if I was given the chance. I had developed super-strong ties to the people in my upline, and I felt if I left I would be letting them down. I was so loyal, I was blind.

Some people are still perfectly comfortable going to hotel meetings now, all the while there are hundreds of thousands of us running similar businesses online not having to get dressed up in a suit and tie anymore.

Hindsight is 20/20, and I wouldn't change the past if I could. My failures and mistakes were not negatives, they were all stepping stones and learning experiences which led to the success I have today. But, if I were giving advice to someone truely shopping around for the best company, I'd want them to know that there are certain, specific things that an MLM has to have in order to set you up for success. Do your research, your homework, and don't get started in a company off some "sugar high". Look at it realisitically and talk to some veterans in the industry, they will allow you to follow them through the mine-fields!