Understanding Compensation Plans

When you join an MLM company, one of the many things you need to consider is what type of compensation plan do they offer?

It is a legitimate question that deserves some of your attention.  However, let’s make one thing perfectly clear, the compensation plan is only a small ingredient when it comes to your success.

Having said that, what types of plans are out there and which ones make the most sense?  Well, there is the most widely used “binary” plan that seems to be the compensation plan of choice as of late.  You are given two legs under which you place sponsors or distributors.   In most scenarios you only get paid on the volume of your lesser leg.  It is pretty easy to understand and companies make additions to it like “car bonuses”, “expense bonuses” and other “bonuses” to make it more attractive.  Reality is most people and I mean 90% of those who stay in the company for any length of time will never get to see those “bonuses”.  Sorry if the truth hurts but that is the harsh reality.  The binary simply works on a point system.  For every sale or product that is moved, you will receive points.   This will add up over the course of the month and at the end of the month, you will get paid on the volume on your lesser leg.   Most likely your volume is washed, erased or reset.  Now let’s think about this for a moment.   If you get paid 10% of your total team volume on your lesser leg and you only accumulated 5000 points, which would be $500.  That means that your bigger leg had at least 5001 in volume in it and you don’t receive one penny for it.  Now let’s put things into perspective.  What if you find an amazing distributor and they build a leg/team and it creates over 50,000 in volume or more each month and if it is your lesser greater leg…..guess what?  You don’t get one penny of it.  That is right, it goes to the company.   Does that seem like a fair compensation plan?

Another type of compensation plan is the unilevel.   Basically you only get paid on your efforts and those that you sponsor.   There is no spill over from which you can earn.  We will get to spill over in a moment.  Now I am already aware of the fact that it only makes sense that you should get paid what you are worth, meaning you should only get paid on the efforts of you and those you brought into the company directly, however, there are some businesses that pay you on the efforts of your entire team.   So, spill over can actually be a good thing.  I know some of you are saying that spill over is a myth and that it creates this “welfare” mentality, but let’s say someone is just getting started and a team begins to develop around them and they actually begin to see educational and financially gains, don’t you think that this will motivate that individual?

This is where the matrix comes into play.  A  5 x 7 (5 by 7) simply means that you can build 5 on your first row and do this 7 rows deep.  In reality, the 5 in your first row will now each have 5 spots each to fill and so on.  You simply only earn percentages 7 rows deep.  This can build up very quickly because distributors above you must place people below you if you are in their team.   Some plans allow you to re-enter at the 6^th or 7^th level as an example which enables you to earn more than one commission cheque from the company.   Sounds like a win-win to me.

So, as I mentioned in the beginning, you should take a close look at your company’s compensation plan to make certain that you understand it.   Do you need to reach a certain volume or dollar amount before you can even earn from the compensation plan, do you need to have a certain amount of autoship.  Keep in mind, the industry average monthly autoship is well over $200.00!  Wouldn’t it be great if there was a company that had a monthly autoship of only $30 as an example?

Bottom line no matter what Multi-level company or home based business you are involved with, it all begins with you.  You have to have the burning desire to be successful.  If you have this attribute, then each and every compensation plan will reward you on your efforts.

Until Next Time,

Steve