Which MLM Compensation Plan Is The Right One For You?

When looking for a job, you’d look carefully at the job description to understand exactly what was expected of you, wouldn’t you? You would make sure that you have the capabilities to do the job and that you’d be comfortable doing it, am I correct?

After you’ve determined that you’re the right person for the job, you’d probably want to know how much you’d be paid to do what you do best. This gives you options. You can compare several similar roles with different companies and weigh up which one is the best deal before making an informed choice.

So why wouldn’t you use the same approach in choosing a compensation plan and company that would give you the best chance of success?

If you do not understand your pay plan, if you have not crunched the numbers to see how many active distributors you need in your downline to achieve your income goals, then shame, shame, shame, shame, SHAME on you!

It’s important that you understand the basics of MLM compensation plans and the behaviours they drive. Only when you understand then you are able to assess whether you’ll ever be successful participating in a certain plan or whether you’re destined for failure. Each plan drives behaviours which may or may not be suitable for you or the people in your team.

There are five basic compensation plans in the in MLM industry. Each company will have their own variations of them, they may have a combination of two or more of these plans, but here are the five fundamental compensation plans and the behaviours they drive.

1. The Stairstep Breakaway Plan – is the oldest and most common pay plan. Since there is no width limit to this compensation plan, it’s great for people who can confidently sponsor new frontline reps. It’s very suitable for those with a forceful direct personality, who can “close” the deal. If you’re the mentoring type, you like to nurture people and develope them into leaders, then you’ll probably be bummed out as to why your check disappears after your new downline leader breaks away from you. This is a pay plan that gives the greatest rewards the very few who get to the top.
2. The Unilevel Plan – Again, because there is no limit to how wide you can go, it’s a great plan for those who can “hard sell” and sponsor multitudes of frontline reps. There is very little incentive to develop leaders and mentors here because the plan is limited by depth. You may have a downline organisation that goes 20 levels deep, but you’re only being paid on the first 6, so why would you help anybody below that? The only way increase your income is to sponsor more people, so it’s limited in terms of leverage.
3. The Matrix Plan – is a plan that actually fosters some team work because it’s limited by both width and depth. Experienced uplines can help new distributors in building their organisations with “spillover”. Unfortunately, because of “spillover” this plan attracts those with a welfare mentality – the do nothing, get rich types. Even more unbelievable are promotions on the internet shouting “Huge spillover”…”We’ll build your downline for you!” Hmm… Good luck in building long term residual income with deadbeats in your downline. Remember, each frontline position is GOLDEN.
4. The Binary Plan – is a plan only that allows you to have two sponsored on your frontline, which is actually not a bad thing as the average network marketer will only sponsor between 2 and 3 people in their entire MLM career. It’s a depth driven and volume driven plan so it does foster leadership and teamwork, which in my opinion is key to long term success in MLM. But again, spillover can attract the welfare minded. And with “gimmicks” such as balancing leg volumes, multiple business centers and “re-entry”, unfortunately it can become a bit of a “money game”.
5. The Aussie 2 Up – Oh… my… gosh! Don’t even go there. Newbies are almost 100% certain to fail with this plan. I mean, if a newbie is required to pass up his first two recruits to his upline, how encouraging is that? Is your upline ever going to return your calls again after he’s got your first two pass ups? If you’re the hard selling, churn and burn, do anything to get the sale type, you might have a chance of success with this but 99% will fall flat on their face.

Look, to be successful in network marketing, you have to work with the numbers. The numbers are: 96% of people will be part timers with dreams of becoming financially independent, the average person will only sponsor 2 to 3 people, 90% of people hate to be sold, “closed” or convinced into doing something.

And if it doesn’t work for these people, who will make up the vast majority of your downline organisation, it’s not going to work for you in the long term.

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.

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Related posts:

1. Understanding the Unilevel Compensation Plan – The Good and The Bad
2. The Matrix Compensation Plan – Who Wants Some Spillover?
3. Which Compensation Plan for Which Colour?
4. How the Stairstep Breakaway MLM Compensation Plan Works
5. Binary Compensation Plans and Their Complex Balancing Acts
6. Does Your MLM Company Have a Fair Compensation Plan?
7. The $10K Question – How many do you need in your downline?

Tagged as: Behaviours, Capabilities, Compensation Plan, Downline, Income Goals, Personality