MLM compensation plans can be confusing. There are many factors to consider in selecting a good MLM compensation plan. How do you pick one that will allow you to be successful? The right person can make any of the MLM compensation plans look great if you do not have all the facts. The goal is to be educated enough to recognize a good MLM compensation plan when it is presented to you. Here are some factors to consider when evaluating an MLM compensation plan.
Can You Make Money Right Away?
Many MLM compensation plans reserve most of the money for the big distributors. By big distributors, I mean those who have sponsored a lot of people and whose team moves the most product. This is generally a good strategy since those who are the biggest business builders should be rewarded. They help keep the company capitalized and growing. However, you want to look for an MLM compensation plan that also allows those just starting out to get paid too. Plans that do not allow new members to get paid in the beginning risk a high dropout rate. People tend to get discouraged if they do not see results from their efforts early on. Do not expect big bucks at the beginning stages, but look for an MLM compensation plan that will make your efforts worthwhile. Retention of your new associates is important. I suggest looking for an MLM compensation plan with a “fast start” bonus of some kind. These plans reward hard work at the beginning stages.
Is the Company Properly Capitalized?
An MLM company makes money in a variety of ways – the product, membership fee, annual renewals, training and marketing tools are just a few. An MLM company then pays out money to its distributors. A successful MLM never pays out more than it brings in. Otherwise, it will go under. In fact, a good MLM compensation plan should keep a reserve and pay out only a fraction of the profits it is bringing in. This makes the MLM company sustainable and allows for long term viability. This is important when you select an MLM business. You want one that is not going to go under after you have jumped in and brought all your friends, family and colleagues on board and invested time and money. Take a look at how the MLM you are considering is capitalized. Where is it making its money? What percent of the money it brings in is it paying out to its distributors? This amount can vary quite a bit and still be acceptable. You do not want a company to pay out more than 80% of what it brings in. On the other hand, you do not want a company that only pays out 20% of its profits to its representatives or there is a very small chance of making a lot of money as a distributor.
How Much Volume Does the MLM Require You to Move?
Some MLM compensation plans require you to purchase and move more product than others. I always recommend selecting an MLM company that markets a product you personally use. Ask yourself if it is something that you would continue to use or even need in a poor economy when people are making cuts. Is it something easy to move or sell? Are you required to purchase so much volume that you will be storing the product in your garage? You should also consider the price of the product. It must be realistic and reasonable to expect distributors to sell the product.
Who Is Responsible For Training Your Recruits?
Many MLM companies rely on others to train your new recruits. Be sure to select an MLM that requires you to train the people you have sponsored. Most of the time, people recruit people they personally know. When these people you have a personal relationship with are trained by people they do not know, the dropout rate significantly increases and it is bad for morale. The goal of an MLM is duplication. Look for an MLM compensation plan that teaches your recruits and their recruits, etc. how to duplicate the business. You want an MLM compensation plan that will allow you to step out after 5-10 years but will allow your business and your income to continue to grow for long after that. The business should grow without your efforts (or at least with minimal efforts) if it has been duplicated properly. This is only possible if each person is responsible for training their recruits personally. A good MLM company will have a training system in place to teach you how to do this.
Is the MLM Compensation Plan Capable of Being Understood?
It is not necessary to completely grasp an MLM compensation plan in your first year. However, you should be leery of MLM compensation plans that change or are too complex to explain or understand. MLM companies with complicated or evolving compensation plans will set you up for failure. Avoid novelty or fad plans. There are plenty of time tested plans that work and it is not necessary or recommended to invent something new. The traditional plans have proven to be successful. They work! There is a reason the most successful MLM companies follow them.
While a compensation plan is a very important factor in selecting a successful MLM, it is just one of many important things to consider.