MLM Pay Plans – The Good, The Bad, The Ugly

When you are considering joining a Network Marketing Business, one of the most confusing aspects is the different compensation plans on offer. There are binary, step breakaway, forced matrix, and a variety of hybrid plans. What are the differences, and which works best for long term growth?

In my 10 years of Network Marketing, I have been involved with a variety of companies. First I want to state that product is king! If you don’t have a unique product to work with that excites people and offers real benefits, it is very difficult to create a real “buzz” through word of mouth advertising, the foundation of successful growth.

When it comes to growing your business, and encouraging your team to build a residual income, the structure of the compensation plan can have a huge influence on your income and that of your team. It can affect the ability of your group to work as a team or as individuals.

Why this is important.

I have stated in other articles that the purpose of business is to make money. Now I know there are many other motivations for promoting products. Indeed, I will only look at companies that offer technology with a unique property and provide real value way beyond what people pay for it. The product must have some sort of exclusivity, so it will last a long time without significant competition. After all, I am involved in companies with up to 20 years existence and it takes time to build a huge income.

Given that we have such a technology, for business builders, the pay plan really affects how we structure the business.

Fast Start Bonus.

The first aspect is an enrollment bonus. This pays you for introducing new people into the business. They can be new business builders, or regular customers who want the best price. Realistically, if you MLM company doesn’t allow you to earn 25% or more of pack cost on a new enrollee, I would leave it alone! This is money to compensate you for advertising, phoning, preparing marketing material, etc. It takes a lot of work to find new recruits. Many run out of investment money simply because the return on their recruiting efforts isn’t enough to break even. The ideal starter pack is one that consists of any of the company products. Many companies package their products. They want to sell items with higher margins and so they bundle them with their unique products in an effort to move more inventory of less popular products. My experience with marketing is that it is much easier to start with a single killer product and then expand to others once your prospect has experienced the benefits of the main product. As their income grows, they will need to maintain a monthly autoship. Here is a great place to try different products. Bundled products make it harder to recruit new team members and regular customers. Trust mw on this, the MLM company is the main beneficiary! Make sure you have a flexible and high paying fast start plan.

What about the back end?

For long term passive income, you need to build a large organisation. This is the part that pays you month after month, whether you recruit new team members and customers or not. When we build a business, we will find a number of people willing to put the time and effort to build a residual income. Everyone else is really a product user, no matter how much they talk about building a business. As a leader, you want to assist your business builders to gain income fast so they stay around for the long term. I have lost so many people who wanted to build a large income and quit because they simply didn’t cover their regular product cost. Although in reality all plans are complicated, there are a few basic considerations.

As the income of your down line members grows, what happens to your income? Does it increase or decrease?

I know this sounds like madness. Most organisations have different levels of leadership. Many offer “infinity bonuses”. These look very attractive, but what happens is that when someone below you reaches the same level as you, the swallow up all or part of your infinity bonus. After all, the company can’t pay this huge amount to everyone. One organisation I have built pays 6% to the first leader, 4% to the second and 2% to the third. If your organisation take off and you have 3 leaders vertically under you, from there on you get 0% infinity bonus! Watch out, it can happen to you. Imagine having 3 leaders on your first three levels. You could have 1,000,000 GV and get nothing! It happens. You want a plan where developing leaders has no effect on your personal income. In this case volume bonuses, where you receive extra based on your overall volume, are a better deal. I want to encourage my leaders to build a huge business. I won’t do this if it cuts off my income. This has happened to me!

Binary or matrix. These usually pay on volume divided between two lines. You can allocate your recruits to your left or right side. In some cases, you can place new recruits anywhere in your organisation. Often pay comes when certain volume levels are reached on both legs. Most people never make any money with this. They never build a substantial second leg. The get $0! The company relies on slippage. If everyone played out the plan properly, your MLM company would go broke! Mathematically, it is unsustainable, except of course, most people don’t make any money! This swells company profits. My advice – stay away from binary plans.

Step-Breakaway. This is the original type of MLM plan. At the start, you earn great commissions on your whole group. As volume increases, your income increases until…someone builds a substantial business and they break away from your volume. As their volume doesn’t count for override bonuses any more, your income can crash by 50% o0r more overnight – just for helping someone be successful. This happened to me. I lost interest in a company for years as a result. If you will join this type of organisation, enrol everyone on your front line and don’t place people under them. This will maximise your income, although it doesn’t encourage your team unless you have a killer advertising plan.

The best plan.

In my opinion, you want a plan that pays up to 10% on the first level for new distributors, and then moves that number down in levels as your organisation grows. That means it is in your interest to enrol product users on your lowest level, benefiting all your business builders and yourself as well. Everyone wins. When your leaders reach new levels, you don’t lose anything, so you can fully encourage them without risk of losing money yourself.