When starting out in network marketing, your two main concerns should be, finding the right company to affiliate yourself with as well as finding the right MLM compensation plans. Many times, the two are almost interchangeable as they both are vital to your personal success. Pick the right company with the wrong compensation plan and you could find yourself doing tons of work with no reward. Meanwhile, another person in your downs line could do a fraction of the sales you are making and rake in hundreds of thousands each month. The key to finding the right multi-level marketing (MLM) compensation plans is educating yourself about the different types of plans out there. There are four basic MLM compensation plans, each of which can be slightly altered to create customized plans for a better fit with the company. Knowing what each brings to the table will help you choose the best compensation plan for your success.
Unilevel | MLM Compensation Plans Explained
Generally considered the easiest plan to not only understand, but to work within as well. The unilevel plan works on a simple concept: recruit as many frontline associates as you like without any width limitations. There are typically limited depths that you can receive commissions from, but this is a great way for anyone looking to break into MLM or for those who just want to work with a network part time. Of course, because you only have a frontline, all of your recruits then become crossline competitors making it difficult to establish teamwork without bonuses. It’s advisable that you don’t recruit friends and family in this plan, but rather use a lead generation system to recruit outside associates. Still, this is a simple way to get paid in that the more people you recruit, the higher your commission check will be. Plus, there are a lot of bonuses—including rank advancement rewards—typically paid out with unilevel MLM compensation plans.
Stairstep Breakaway | MLM Compensation Plans Explained
The stairstep breakaway is the oldest compensation plan in MLM, making it an attractive alternative for startups since all the groundwork has already been laid out before them. Basically, with the stairstep plan, once you reach a certain level of sales or success, you “breakaway” from your upline and become your own independent organization known as a “generation.” This allows you to earn a greater commission check each month since there is no one above you to pay out to (with the exception of the override commission which still goes to the original sponsor). Like the unilevel MLM compensation plans, there is no maximum width here, so all recruits are frontline, but that still leaves the crossline competition, meaning small chances for advanced teamwork. Plus, just as you are eligible for a breakaway, so is your downline, meaning you could lose your top sellers as they breakaway. This means a big hit to your short-term revenue. Of course, you will still receive override commissions from your original recruits, giving you some residual potential earnings down the line. The complicated parts of this plan come with meeting group sales volumes and personal sales volumes. There are typically about three or four “steps” for you and your organization to move up before breaking away into your own generation. Moving up these steps requires you to meet the group volumes and personal volumes. Plus, once members of your organization breakaway, they have to meet their own group sales volume for you to earn your commission. If the company sets unrealistic volumes, things can turn out very poorly for you and your distributors.
One of the newer plans introduced to MLM, binary compensation is very different from the previous two types of plans we discussed. As its name suggests, binary works on the principle of two, in that you can only recruit two frontline associates. This is your left and right leg and there are no depth limits meaning you can build as large or stay as small as you’d like. Put quite simply, the goal here is to create a fully operational sales leg through downline recruiting and team building. Then, all the two teams have to do in order for everyone to earn maximum profit is match their sales point volumes each week. Not always easy and not one of my favorite plans! For example, if the right leg generates 1000 points and the left leg generates 1000, both legs are paid on that commission. However, if that right leg only generates 800 points, both teams are paid 800 and the left leg carries 200 points of sales over into the next period (there is often a limit to this carry over after which the potential profits are “flushed,” or lost). The upside is that this helps create an environment where teamwork is critical and encouraged—everyone’s commission is only as good as their weakest leg. These MLM compensation plans get a little more complicated when you start buying business centers (001, 002 and 003) as each center can have two legs, giving you center 001 which has a right and left leg, 002 which also has two legs and 003 with another two legs. Then, the legs must work together even more in order to maximize profits. To keep it effective, you would attempt to recruit two frontline distributors and work to balance out an optimum number of sales. Add new recruits to weaker legs and work up from there.
Matrix | MLM Compensation Plans Explained
Also called a forced matrix plan, matrix plans have a defined width and depth. This maximum is indicated by the numbers used to describe the plan, such as a 5 X 7 matrix. This simply means that there is a maximum number of five width in each level at a maximum of 7 levels. Depending on the plan, you can decide where in the matrix you wish to place your new recruits or just have them fill in the next available spot on the downline. The upside to matrix plans is that their limited structure bodes well for teamwork and organization. One of the major drawbacks here is that the variable compensation levels makes it entirely possible for certain levels to be completely isolated in terms of help and growth. To avoid this, look for narrow widths and deep depths such as a 2 X 12 matrix rather than 8 X 4. Not only will the levels pay down “infinitely,” but more help will be given to generate better profits all around. Still, the forced matrix isn’t very popular, accounting for just under 10% of all MLM compensation plans in practice.
What are the Best MLM Compensation Plans?
So which MLM compensation plan is the best? The answer to that depends on many factors. How long has the company been in business? Are the products unique and in demand? The point here is to do your research, test the grounds a bit. If it’s a struggle to get your first decent payout, it may not be worth the effort. Regardless of which plan you choose, finding a way to generate leads is where people get lost and end up quitting before they ever get started.