Healthy bodies

MLM Compensation Plans   by Bettridge Korner

One of the most important things to consider when choosing a network marketing company is the company’s compensation plan. A company can have the best product in the world, but you will not make money if the comp plan is terrible. The problem is these plans can be very confusing. This article will provide an overview of some of the more common compensation plans in an effort to aid in their understanding. I will give a more detailed description of each type of plan in separate articles.

What makes for a good comp plan? Simply stated, a good plan is fair to its members and holds a realistic potential for them to make money.

What are the basic features of any compensation plan? The two basic features of any compensation plan are the width and the depth. The width of the plan is the number of people directy underneath you whom you can directly sponsor. The depth of the plan, is the number of layers or levels of people you can have beneath you and earn a commission for their efforts.

Okay, so what are the different types of comp plans? Basic descriptions of some of the most common plans are as follows:

? Unilevel Plan- This is probably the oldest and simplest plan. The unilevel plan has an infinite width, meaning everyone a person sponsors is directly beneath them. There are no limits to how many levels can be beneath you but five to ten are typical. The problem with this is that if there are many levels, the compensation is spread very thin, and the payout diminishes or even disappears the deeper it goes. Keep in mind that in network marketing, the total commission being paid out has to be spread among all of the levels. The bottom line in the Unilevel Plan is that the affiliate must often sponsor a huge number of people to make any serious money.

? Binary Plan- In the Binary Plan the first level is limited to two, however the depth can be infinite. Binary Plans can be very complicated; however they can also be some of the most lucrative due to the concept of “spillover.” After the first level is filled, new members that are brought in will “spillover” onto the downline. The goal in a Binary Plan is to balance the volume between the two “legs”. This encourages associates to help their downline members, and can create a feeling of teamwork within the organization. The bottom line with a Binary Plan is that although there is a limit to how much money any given business center can make, the average network marketer has a better chance of making money with this plan than some of the other plans.

? Australian Plan- Also called the Australian 2-Up. This is definitely one to avoid. With this plan the commissions from your first two sponsored people go to your sponsor, their first two go to you, and so on. This is a scam and probably illegal, so I won’t waste any more of your time discussing it, other than to say STAY AWAY!

? Matrix Plan- A Matrix Plan is a limited width plan. This will generally range from 2 to 6 people on the affiliate’s first level. As additional people are recruited, they are placed under those first level people. Like the binary plan this allows for spillover. Because of the low monthly volume usually required in a matrix plan, it can be an acceptable plan for someone working their MLM business on a part-time basis.

? Stairstep/Breakaway Plan- This is one of the oldest plans, and is used by companies such as Amway, Mary Kay, and Herbalife. It is also very complex. In a Stairstep/Breakaway Plan the distributor move up a bonus scale in steps, with his product rebate increasing the higher he goes. Eventually the distributor would reach a certain level of success, at which point he is allowed to “break away” from his upline sponsor and form a separate entity. In general this plan can work very well for distributors who have excellent recruiting and selling skills, however newcomers may be better off with Binary and Matrix plans.

? Compressed Plan- Like the Matrix Plan, this is one of the newer plans. It is similar to the Unilevel Plan in that every person recruited is placed directly beneath their sponsor. Also like the Unilevel Plan, the payout offers commissions for many levels below the first level. The difference is that in a Compressed Plan, the payout is much higher in the first few levels. This will allow a new affiliate to begin making money much sooner. Although this plan pays out less money, you might end up making more money in the end with this plan.

This all sounds pretty complicated. Can you give me any rules of thumb? In reality it is very complicated. There are many other comp plans out there, and infinite variations on each one. My advice in choosing an MLM company is to begin by finding a company with a product that you can believe in and would feel comfortable promoting to others, including friends and family. Then, I encourage you to study its compensation plan in detail to determine if it is right for you. Whatever you decide, good luck!

About the Author

If you are serious about achieving success in MLM, you need to know how to evaluate the compensation plans
offered by the network marketing opportunities you are considering. For more information click here
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