Have you ever considered how many people do you need in your downline to make $10,000 per month?
Once you work this out, the answer to this question may surprise you. It may even anger you depending on how serious you are about becoming financially independent via network marketing. The real question is: how much does your MLM company reward you for bringing in revenue?
The best compensation plan is one that will pay you the most money for the least amount of effort. Why do some companies have “better” compensation plans than others?
Simple, some companies simply don’t run as efficiently as others. Some companies have large numbers of employees, large buildings, private jets, and other high overhead items that they can’t pay their distributors more generously.
The network marketing industry average for the earning $10,000 per month is about two thousand people, that’s $5 per person, per month. That’s not too bad when you consider that some MLM’s require you to have 10,000 people in your downline to earn $10,000 per month. There are of course, companies that only require you to have 300 to 400 people to achieve the same result. Obviously, you’d rather be in the latter rather than the former.
This is what’s really strange about network marketing…
When people go for a job they want to know exactly what sort of work, how much of it they’re going to be doing and exactly what they’re going to be paid. They can then pick and choose the company that will pay them the best for their efforts.
That rarely happens in network marketing because most people simply do not have the experience to understand how they’re going to be compensated.
It’s very unfortunate that people still get into opportunities because of some hyped up income claim made by one hot-shot heavy hitter at the top, assuming that they can get the same result, while in reality the majority of the distributors in the field are making pennies.
If you’re planning to build to an income level that will allow you to retire “happily ever after”, it pays to understand your compensation plan. That’s because your compensation plan will determine whether you’ll actually make any money in the first place, whether you can actually retire on a full time income, or whether you’ll have to keep buildling your downline for the rest of your life.
The biggest cost to you is acquiring new customers and distributors. How much does it cost you to bring in a new distributor? Even if a distributor stays with you for the rest of his life (most don’t), it could be a long time before you recoup the costs of just signing him up.
The bottom line is, the more people you require, the more it’s going to cost you in distributor acquisition and the harder it is going to be to build to your income goal. Plus, and it’ll be even harder to maintain it. The more people you require, the more downline attrition you will have because the people who are sustaining the business, the part-time networkers are not being rewarded for their efforts. Why should they stay?
If you’re serious about success in network marketing, it’s not just a side hobby, then it would be in your best interests to figure out your company’s pay plan and make an informed business decision on your company as an appropriate vehicle for financial independence.
It doesn’t matter if your product is super duper and has every vitamin and mineral under the sun. That doesn’t matter if the compensation plan stinks. People need to be rewarded fairly for their efforts and they will vote with their feet.
To your MLM success,
Wayne Wu
Founder, The Profitable Networker
P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.
P.P.S. Share the love. If you enjoyed reading this article and think others will get value from it, please share it on Twitter or Facebook by clicking on the "Tweet" or "Share" buttons at the top of this post. Thank you.
I will personally help you get, mentor, and keep your people – for FREE, 5 nights a week! At Mentoring For Free, we teach you all the skills you need for long term success in network marketing. We teach you 'How to think, Not what to think' Click here to find out more.Related posts:
{ 3 trackbacks }
{ 2 comments… read them below or add one }
Very well written article however there is one point I would like to add. The compensation plan should be “encouraging” to yourself and your downline. One particular comp plan that I became very familiar with was discouraging in one major way.
When you helped specifically a new downline recruit new people into the organization your “bonus” rolled up to your upline and you received no compensation for the 3 ways, the training, the start up overview etc. etc.
It was discouraging to me and to my downline when their organization started to grow and they realized neither one of us was getting the “big” bonus. Discouraging especially when the pay plan was weekly (you had to qualify each week) and the pin level you needed to get to each week to receive those bonuses was difficult. (200 points for the month PLUS 300 points each week to get a portion of that bonus, 2500 EACH week to get the bigger portion)
The little guy just starting up or with a small team worked hard and watched their bonus go elsewhere. Discouraging !!!
When searching for a new company that was a criteria for me. The comp plan had to be encouraging, there had to be growth (even if it was small) each month so it was a motivator to everyone if they just did a little more their cheques would continue to grow. They had to be paid for helping their downline. The qualifier had to be a lot less i.e. 100 points a month.
It’s sad when people don’t understand their comp plans or join an opportunity without looking at what happens when they spend X amount of time doing this or that, is there compensation for it? It might not matter personally to them but when you look at 95% of your organization are going to be part timers then you have to look at how the comp plan works for them ! And the weekly comp plan definitely is not an encouraging comp plan.
To your success,
Joyce Penner
Hey Joyce,
Thanks for your comment.
Yes, some compensation plans are just not fair to most of the distributors who are working hard in their part time to build their future.
It sounds like the comp plan you were talking drives the behaviour of recruit, recruit, recruit. I can just see the heavy hitters at the annual conventions telling everybody “You gotta get everybody you know into this deal!”, laughing all the way to the bank with their Fast Start bonuses.
Volume driven comp plans, like the one you’re talking about, are very, very hard for the average networker. There’s just no money in it for them, so why should they keep working for nothing?
That’s why it pays to do your homework when it comes to comp plans because if you don’t, you could be pushing sh*t up hill.
All the best,
Wayne