If you can’t understand your network marketing companies compensation plans, also referred to as MLM Compensation Plans, then it is highly likely the person you are explaining it to won’t understand it either.

And yes it can be confusing when you are new to understand the differences between the major compensation plans. The better known comp plans are the Stairstep, Breakaway, Unilevel, Compressed Unilevel, Binary, and Matrix.

Then there are the hybrids which are a combination of these such as the Stairstep Breakaway, Compressed Unilevel, Dynamic compressed Unilevel, and the list goes on.

Then there are all the bonuses such as fast start, achievement bonus, recruiting bonus, monthly matching bonus, infinity bonuses, leadership bonuses and so on. The thing to remember about bonuses is they are unsually only paid once.

I believe it is prudent to understand and fully scrutinize the compensation plan because you need to know how you are going to get paid from your company. That doesn’t mean you need to go into analysis paralysis. In the first instance find out what your break even point is - see the 20 club concept below to better understand what I’m on about.

SHOW ME THE MONEY

Jerry McGuire is one of my favorite films. It has some great one liners that have stood the test of time. One of those was “Show Me The Money”. This is the major reason why Network Marketing has such a high drop out rate. It is because they don’t have a true understanding of where the money is and how quickly they are going to get into profit.

Having said that there are many reasons why you might choose one company ahead of another but it you are in it for the money then it becomes a business decision rather than an emotional one.

A BUSINESS DECISION

Let me introduce you to what I call the 20 club. If you learn nothing more from this page then learn how to compare mlm companies compensation plans. This simple formula will give you a way of comparing network marketing companies comp plans and evaluating you how quickly you and your team can get into profit. It is a simple concept. You bring in 4 and then teach them how to do the same. 4 each = 16. The total would be 4 + 16 = 20

You
Level 1:  4
Level 2: 16
Total:   20

Now work out the total residual income you would receive each month. Not the fast starts or any other bonuses. They are just that bonuses. It’s important to do the calculation on the residual as this is the money that will keep coming in as long as you place your required order. Now does your 20 club a least pay for your order? If it does can you see how this would help you?

Let’s face it most people would know 4 people who would know 4 people who would continue investing in their product if it was being paid for?

MANY GIVE UP TO SOON

In my early days of network marketing I pretty much fell in love with a product and that was that. I loved the concept of residual income but most of the people I introduced didn’t stick it out because they weren’t getting a return on there investment quick enough. Seeing $300 per month going out of their checking account and $25 back in a month just didn’t cut it.

In realty this a good return. I believe this it is sad that the true value of these number was not understood.

Let’s do the numbers so you see what I’m on about.

$300 per month [300 x 12] = 3600 pa
$25 per month [25 x 12] = 300 pa

To receive $300 pa income you would need $6000 in a bank returning 5% [6000 x 5% = $300]

Most plans will pay this level of income with 4 people

CONCLUSION

If you join and become a wholesale member or independent distributor of an MLM company simply to acquire the product or service for your own consumption then the network marketing compensation plan does not really matter that much.  However, if your intent is to earn money working from home and earn lasting residual income, treat it like a business and not like a hobby and closely examine the pay plan or marketing plan and ask pertinent questions such as….

• What is the overall split between the company and the distributors. I suggest you look for a minimum 50/50 split gross revenue.
• Is there breakage? Where does it occur and who get it? Breakage usually results in generating extra revenue for the company. Having no breakage in a compentsation plan will provide extra financial incentives for you as payments pass up to the next qualifying person.
• Are there shareholders? Usually speaking you will find better compensation plans in private MLM Opportunity companies.
• How many different ways can I get paid? The more ways to get paid the better especially because different people possess different variable skill sets and excel in different types of actions or business building behaviors that can generate earnings.

The bottom line is you shouldn’t have to be an expert in order to analyze and understand how your mlm compensation plan pays you. If you can’t understand it chances are their is some shady underhand stuff going on and the company is getting more than their fair share from your efforts.

If you have any un-answered questions or concerns about your MLM comp plan simply give us a call or send an email.