MLM Compensation Plans
( one of the great
Passive Income Opportunities )
MLM compensation plans are the life blood of the network marketing profession.
Which do you think is best?... not fully understanding MLM compensation plans until AFTER you join a company and start to get paid... or knowing something about the details of all of the types of plans BEFORE choosing a company to join?
For you, as a distributor, the comp plan determines the way that you earn your money.
For the MLM companies, the plan determines whether they stay in business and how successful they are… - by influencing how well they meet regulatory guidelines
- by determining how attractive they’ll be to network marketers looking for a company to join
- by affecting how likely it is that new distributors will succeed
- by affecting how much product distributors are likely to sell
- by designing how much profit the company keeps after it pays out commissions to distributors
All of these factors affect how fast the MLM company grows. It’s a tough balancing act, and not all new start-up MLM companies will master this balance... a good reason to consider joining a seasoned company with at least a couple years or more in business, rather than a brand new “untested” one. There are a number of different structures for compensation plans.
Although they are categorized into broad groupings with names such as unilevel, binary, and matrix, these all have different variations.
No two MLM compensation plans are exactly identical to each other. The best way to visualize the details of comp plans are with diagrams, with terms used such as “levels”, “trees”, “branches”, and “legs”. New distributors usually take quite a while to fully understand their company’s comp plan … usually well after they sign up and start earning their first trickle of income… especially if they haven’t researched the topic ahead of time. There are two basic building blocks of a compensation plan:
Sales and Recruitment Commissions and bonuses are earned by selling product and by recruiting/sponsoring new distributors under you (your “downline”).
The percentage of product sales that you earn in commission varies by company and also varies within any given company for different categories of sales.
There are the sales that you make personally… and the sales that are made by distributors in various levels of your downline.
There are sometimes different percentage commissions for the various products that a company sells, or other variations that can be unique to each company’s comp plan.
Also, in some plans, you may receive a sign-up bonus after distributors in certain positions in your downline reach a certain sales volume. In order to be successful in your network marketing business, good compensation plans are designed so that you need to devote time to both selling and recruiting.
The reason is partially a legal one.
Network marketers are big on recruiting a “downline”.
What is residual income ? What are passive income opportunities ?
Both can help network marketers to go from debt to financial freedom.
Growing a huge downline is the way to get both of them.
A downline exponentially builds your business upon the success of those you train to work under you... your downline.
But unless products are sold by distributors to customers, the company risks being considered to be illegal by regulatory agencies. For an excellent, very detailed explanation of all of the types of MLM compensation plans (possibly more than you're interested in!), visit MLM Insider (opens in new window).
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