In choosing the right MLM company to build your long term executive level residual income you must look closely at the company management, the companies timing and its products. Another very important aspect that is crucial to your long term success is the company’s compensation plan. In fact, it is imperative that you understand your compensation plan.
People often ask “What is the best compensation plan?”
The best compensation plan allows average people to get above average results. The best compensation plan requires the least amount of people to make the most amount of money. It should allow the average person to become profitable in the shortest amount of time. It has to be a fair plan, otherwise the business is not sustainable.
Let’s say that all companies pay out 50 cents to the distributors for every dollar of volume that they generate. How would most companies distribute that payout?
Most companies would pay 5 out of the 50 cents to the lowest ranked distributors. That is, the distributors who are producing the lowest volume, which by the way, are the vast majority. They are ninety-six percent (96%) who are “part timers”.
They would pay out 15 of the 50 cents to the middle ranked distributors. These would be people on a full time “middle class” income. But, they are a very small percentage compared to the low volume distributors. Then the final 30 cents would be paid to the small handful of top ranked distributors.
Is that a fair compensation plan to you? Hardly.
This sort of plan would make the people who are working hard to build their business in their spare time feel like complete failures.
These plans are designed to produce a few MLM megastars who rake in millions off the back of the rest who get virtually nothing. This is so that at company conventions, the company executives can hand the megastar a big fat check and tout to their audience “You can achieve this lifestyle too, if your dream is big enough!”
But guess what, showing big checks and making big claims is illegal. There are MLM companies that do this. But it’s against the law. It’s called enticement, often used by unruly scam artists to get people into their deal.
I once heard a story about some guy who made a presentation to a group of people about a travel deal. All he did for his presentation was open up his laptop computer and log into to his backoffice to show them how much he had earned for the month.
Everyone joined, because they obviously thought he was for real and they could achieve the same result. That’s why it is against the law, because anybody can wave a false check for any amount of money to entice gullible people into a deal.
Now a fair compensation plan should pay the lowest ranked distributors, the vast majority who are actually working hard to build the business, the most amount of money. A fair compensation plan would be exactly the other way around.
It would pay the lowest ranked distributors 30 out of the 50 cents, the middle ranked distributors 15, and the top king pin distributors 5 cents.
Over the long term, even the best “sponsor monsters” who can create huge organizations in a matter of months, can’t be successful unless their downline are getting rewarded fairly for their efforts. People will vote with their feet and the business will fall apart.
It’s not that hard to figure out your pay plan. All you have to do is dig out a calculator and see how many people you need on regular autoship to make $10,000 a month. The less the number distributors, the fairer the pay plan.
To your MLM success,
Wayne Wu
P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.
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Hello,
Very interesting reads, but it looks like no plan is fair.
I have started a jewelery line two months ago and have a few consultants selling them for me. They really sell very easily, but get now lot of requests and questions. what if i bring someone in etc. So I really need to look at setting up a network marketing business. The big question is, which compensation plan to use. I want it to be fair, and compensate the people that work the most not the ones that are the closest to me (top level). For a jewelry line, which compensation would you recommend?
I only have one line of jewelery, an armband, It comes in 80 different colours and have lots of different charms. every consultants needs at least 100 of them to make an impact. For the moment, each customer buys 5 on average.
thanks
barbara
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