Evaluating MLM Compensation Plans

If there is one aspect of MLM and network marketing that is frequently over-hyped, it is the compensation plans. I’ve always taught that the first thing you look at with any MLM opportunity is the products. Period. Without good products, you have no foundation for long-term business stability and growth.

MLM compensation plans are hyped so much because that’s where the money is. They are a very important part of the picture. However, I believe you should evaluate the products first, then consider the compensation plan and other factors next.

Which is better?

Great products that people buy because they want to + a fair and decent payout

or

Lousy products that people only buy to meet purchase requirements + the world’s highest paying MLM compensation plan?

I’ll take great products that people buy because they want to anytime, and build a foundation from there.

Be careful when looking at MLM pay plans, because they are often the “hook” designed to fire you up and get you to sign up right away. There is a lot of hearsay and bad information out there.

Take the case of the traditional “stairstep breakaway plan”. Although this is the compensation plan of choice for many of the older, more stable MLM companies, it is perhaps the most attacked and criticized plan of them all.

Ever heard “breakaway is takeaway”? People promoting other types of MLM payout structures have said this for years. The implication is usually that you lose all income on a distributor that “breaks”, but this isn’t true.

In a typical MLM breakaway plan, a distributor can reach a certain level of sales and sponsoring achievement and “break” from their sponsor. In terms of the compensation structure, they become a standalone group and the distributor is rewarded for achievement with higher bonuses and other perks.

Meantime, the original sponsor continues to receive bonuses from activity in the breakaway group. It might be a little less than they made from the same group’s activity before, but it is still significant. Remember, the new breakaway group leader receives higher incentive and income and is thus motivated to work even harder. It is a leadership position, and the resulting incentives for additional growth promotes downline stability and benefits everyone.

Another example of how implications and appearances can be deceiving when evaluating MLM compensation plans is the case of the “binary” type plan. In simplest terms, your downline in a binary plan starts with two legs – you sponsor two people and then help them build a group below them. It’s just a payout twist that works differently, but with the same end result – you get paid for product sales and consumption in your downline.

Some promoters of binary plans have been known, shall we say, to emphasize and make a big deal out of how they will help you build your business by sponsoring people under you. If they are good recruiters and true to their word, they will. So, the tendency is to think you can sign up and somebody else does the work, right? At least that is often the implication.

The truth is, in a binary plan, the people your upline sponsors under you will all be placed in one of your two legs. You, yourself, have to build the other leg in order to get paid anything. In the typical binary plan, you must have a certain amount of volume in both legs to get paid on any of it. If you don’t, that volume can “flush” and you won’t be paid anything at all. Some binary plans compensate for this in different ways, but that isn’t the point. The point is, nobody builds a money-making MLM home business for you. They simply help you with a part of it. The rest is up to you.

Use care when judging MLM compensation plans. Be sure you have a real, quality product first before you worry about how much you get paid on it. This is one of the big keys to choosing the right MLM home business for you.

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