Compensation Plans

Phew.  There are so many types of compensation plan around these days, and I have to admit that I just don’t understand them all any more.

But most are variations of a theme and there seem to be just four commonly used types of plan. These are:

  • Breakaway
  • Forced matrix
  • Unilevel
  • Binary

I’m not going to go into great detail about how they all work because you can just Google them to find out.

But what I do think is that anyone thinking about joining a multi-level marketing company should absolutely understand how they get paid.

It’s totally astonishing that people who have been in a business for years don’t really understand how or why they get paid. So how can they tell whether they’ve been properly compensated. And how can they work out whether they benefit or not when the plan is changed.

NWM companies have a habit of changing their plans. Unfortuntely, in my experience, it rarely benefits the distributors. But they are also very clever with the way they present such changes and the majority usually think they come out of it well. The guys at the top are normally much smarter and they see immediately where the catches are. But they’re not going to explain those to their teams are they? They have a vested interest in keeping their distributors happy so they play the company line and enthuse about every change as though it would make you far richer.

In reality there aren’t many people who make much money out of network marketing. If you study a company’s plan, you’ll probably find that it all sounds great, they pay out x% of turnover and you can expect to make good money. What actually happens in most cases is that loads of distributors don’t qualify to get paid.

You may get paid for a while, but most companies make you qualify every month in one way or another. You may have to sell a certain amount of product or bring in some distributors, or maintain group sales. Sometimes the requirement is pretty well hidden but those who understand the compensation plan will know exactly what needs to be done to get paid.

When it comes to qualification, some service-based companies are better than product-driven companies because service customers tend to be long-term. They pay for their telecoms or their electricity month-after-month so you don’t have to worry about turnover quite so much. However there will still be customers dropping out, so don’t sit too comfortably and gloat about being in a service business.

As I mentioned in a previous post, if you’re in a product driven company you should look for something that has a high number of repeat orders on autoship. That won’t elimate the problem completely but it might take off the pressure a bit.

If you don’t understand the compensation plan of the company you’re thinking of joining, then ask your sponsor to explain. Chances are he won’t have a clue, so in that case ask to speak to his sponsor and so on up the chain until you find someone who knows the plan inside out.

Make no mistake, the top earners will understand it all and will be pleased to explain it to a newbie who’s making the effort to get to grips with how they’ll get paid.

Once you’ve got your head around the compensation plan, you need to work out how much you’re likely to earn, taking into account the amount of time you have available, how outgoing you are and how determined.  Most people get started then give up – the dropout rate in network marketing is enormous and I reckon only about 2% ever make a worthwhile income from it.

So be realistic with your figures and the amount of effort you’re willing to expend because it’s not going to come easy.

But if you’re prepared to work very hard for the next 7-10 years, understand the plan, use your time wisely and keep at it, you might just make a good income from network marketing.