MLM Compensation Plan –
Ok, so you joined a new MLM company or you are looking into an MLM company and you wonder “What is the MLM compensation plan?”
“How does it work?”
“What makes a plan good?”
“What makes a plan work?”
In this post I will cover some of the key things that you will want to keep in mind when you are researching MLM compensation plans.
MLM Compensation Plan – Key Components
When looking at an MLM compensation plan, one of the most important things to ask yourself is, “What is the commission for recruiting a rep or getting a product sale?”
This question is very important to address because in most MLM’s the recruiter (or the original rep) should get a majority of this upfront commission.
I really hate it when certain MLM compensation plans are set up to spread the money out way to thin.
For example, if you have a $100 product and 20 people are getting paid up the line, what that means, is that you have 20 people barely earning $5 dollars off of the product sale.
These MLM Compensation Plan set ups end up turning into a near disaster because since you have so many people making barely any money, the entire team gets frustrated and gives up. Therefore the good intention of paying a lot of people is completely blown because no one earned any money.
Be aware of that.
Some MLM Compensation Plans will tell you that they “pay up to 10 people up the line” but you need to understand the implementations of this if people are getting a lot of very small commissions.
In an ideal MLM compensation plan, I would like to see the recruiter rep earn at least 75% commission off of their own sale.
Now this is sometimes very hard to find (because a lot of times the actual MLM company wants to steal half of your money) but if you focus on the internet/online MLM companies, you can oftentimes find programs that pay up to 100% commissions.
These online MLM companies are able to create this type of MLM compensation plan because they are usually selling digital products instead of having to house a “home office” and ship physical products.
2nd Question To Ask In A MLM Compensation Plan
How am I getting compensated on my team?
For example, am I getting a percentage of everyone’s sales? Or am I getting passed up every other sale? Or every 3? Every 4?
It’s important to know this so that you have an idea of how much leverage can be created.
When looking at this kind of MLM Compensation Plan, I usually prefer two types of plans.
1.) The plan that pays A LOT of people up the line on the RESIDUAL INCOME. Again, I like to give the recruiting rep as much money as possible for the sale, so that they can actually go out and make a living but on the residual income it is nice to pay many levels deep so that you can earn this residual income on many, many people in your team
2.) Pass up sales. This is a completely different MLM Compensation Plan model but I do like this one a lot too… It is when everyone passes up a certain amount of sales.
For example, maybe you pass up 1 sale every 3 to your sponsor etc.
This creates some very big commissions getting passed around rather quickly and encourages the leader/sponsor to work and train his personal recruits very well so that they pass him/her up some big sales.
This type of MLM Compensation Plan is very encouraging for both parties and has proven to be one of the most successful models I have worked with.
Again, when a MLM compensation plan pays very measly commissions 10-20 people up the line, noone is motivated to work that hard because it requires you to have 10,000 people to make some decent money.
In my opinion, this is kind of nuts and too much work.
Hope these tips helped.
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MLM Compensation Plan