MLM Compensation Plans

(one of the great Passive Income Opportunities )

MLM compensation plans are the reason that MLM business opportunities are defined as passive income opportunities.

Your network marketing compensation plan can either be the best one to help YOU achieve MLM success... or it can work against you.

It's all about "residual income".

What is residual income?
It's the passive income opportunity part of your commission in a network marketing company... the money you earn from the sales of other distributors that you sponsor into the business.

But the "residual income" part of your earnings in a network marketing business opportunity can be hard to ensure in some MLM companies because of the structure of their compensation plan.

So which do you think is better?...

• not fully understanding MLM compensation plans until AFTER you join a company and start to get paid (and maybe finding a nasty surprise in your check)...OR
• knowing some important details about all of the types of plans BEFORE choosing a company to join?
  

For you, and all MLM distributors, the MLM 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

There are only a few basic different structures for MLM compensation plans.

• Unilevel Compensation Plan
• Stair Step Breakaway / Stairstep
• Binary Compensation Plan
• Forced Matrix / Matrix

So no two MLM compensation plans are exactly identical to each other, and none look like any of the basic types in their pure unmodified form. In fact, it's often difficult to even recognize what basic type of network marketing compensation plan is being used! This can be good or bad for the distributor, depending on what the modifications actually are.

The best way to visualize the details of MLM comp plans are with diagrams, with terms used such as “levels”, “trees”, “branches”, and “legs”.

New distributors usually take quite a while to 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. And most never fully understand all the details of it, because many variations can be thrown into the basic plans in order to favor the most productive MLM distributors in the company. The average distributor just never gets far enough into the system to understand the requirements for earning all the special bonuses.

There are two basic building blocks of a compensation plan:
Product Sales and Recruitment of New Distributors

Commissions and bonuses are earned by selling product and by recruiting/sponsoring new distributors under you (your MLM “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 MLM compensation 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.

More detailed explanations of all of the types of MLM compensation plans are available, but it can be overwhelming to try to understand all the fine print. You really only need to understand and consider some general concepts about the differences between the basic types in order to choose the best MLM company for your situation.

In practical terms, though, the most important factor for most network marketers is how easy (or difficult) it is to start getting paid. Find out how many distributors you need to sign up in your downline in order to "qualify" for bonuses and commissions. This can make or break most distributors. You need to be able to sell your opportunity to that minimum number of other people to get on the first rung of the ladder.

By now you're probably screaming, "So what exactly IS the best MLM compensation plan?"
Sorry to have to say this, but that totally depends on you and your individual circumstances.

Both of my current companies make that pretty easy, and one of them markets a product that is pretty easy to sell.
Visit some of my other pages to learn more about me, Karen Harris, and my network marketing business opportunity.

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