Is It Important To Understanding Your MLM Compensation Plan

Discussion in 'Network/Multi-level Marketing' started by FreeCashMan, Apr 5, 2013.

  1. FreeCashMan

    FreeCashMan Well-Known Member

    Is it important to understand your compensation plan before getting involved in a network marketing home business, or any business? I do believe so. A person would not buy a franchise and fail to understand exactly what it takes to get the business into a state of profit. It should be likewise with your mlm business.

    Taking a little more time to to get a few more details so that one can understand how things work in order to be successful can save a lot of heartache. I've seen people get really disappointed when they learn, after getting into an mlm and referring others, that they are not going to get paid as they thought.

    Most visual presentations can't get into the intricate details of some companies pay plans because it would make things too long but there are few things I've found that are good to inquire about that can help one understand what they are dealing with in order to making money and achieve success.

    1) Find out what type of pay plan it is, Binary, Matrix, Unilevel, Breakaway, 2up are the most common. Knowing this can help give a sense of the direction needed to succeed.

    2) Ask for details on qualifications to get paid. This is where many people find themselves facing bad news. They join they refer others but didn't understand something clearly, such as volume requirements need personal/group, and they wonder why they didn't earn the money in the presentation.

    3) Next, ask what it takes to earn "X" amount of money. This is where you really can get the facts straight. If you want to earn $500 in bonuses one-time or $5000 monthly, find out what it will takes in production of product sales/referrals so there is no confusion.

    Networking marketing is one of the best business models to participate in but many simply fail to understand essentials in order to succeed. Hopefully, the above can help.

    All The Best,
    payment proof likes this.
  2. payment proof

    payment proof Well-Known Member

    It's absolutely essential. You want to understand the compensation plan for any opportunity you get involved in.
  3. mbasa

    mbasa Member

    It is very important as it helps you set goals and targets as well. For most networkers - the compensation plan is what informs your decision to join an opportunity. I joined a business once without understanding the plan - after 250 members in my down-line, I was earning a lousy $100 a month (really now..). The sad part is that it takes the same amount of effort to recruit for a higher paying MLM.
  4. A8ch

    A8ch Gold Member

    As obvious as that may seem to be something network marketers would do naturally, it is surprising how many don't. They get caught up in the promotional sizzle and the pie-in-the-sky projections, and never critique the compensation plan with the mental sobriety that's required.

    Same holds true for many of those starting a traditional business. The will create an overall business plan that outlines the objectives of the company, but the marketing plan that contains the strategic details on how to achieve those objectives, may be weak or missing altogether.

    Very useful post, FreeCashMan!

    FreeCashMan and MarieA73 like this.
  5. talfighel

    talfighel Silver Member

    Most new people will never look at the compensation plan. I know I have never looked into it as close an I do now.

    When you sell someone the dream and show them how to do it, they will never question the comp plan as long as they are moving forward and earning the money that they see themselves as earning.
  6. MarieA73

    MarieA73 Member

    It's in my nature to examine the comp plan closely. It's probably because many years ago I was burned by a matrix plan that I did not fill out properly. Once bitten, twice shy.
  7. FreeCashMan

    FreeCashMan Well-Known Member

    This happens so much with people joining prelaunches because it's "free". Then when the facts and details hit they are disappointed. This is going on now with the opportunity Rippln.
  8. MarieA73

    MarieA73 Member

    Also, careful examination of the comp plan enables you to determine if the company is viable and realistic. Are people earning more money than is coming in? more than 80%? How much is the overhead and the product itself? Looking at the comp plan, especially with new companies, reveals alot.
  9. JTGMarketing

    JTGMarketing Member

    FreeCashMan, you are so right!

    It is important to go into any business opportunity with a full understanding of how you're going to get paid. A lot of times, MLM companies over-hype their products, and they don't tell people the reality of it -- that MLM, like any other business takes time, patience, and hard work to build.
    MarieA73 likes this.
  10. MarieA73

    MarieA73 Member

    So true, JTG. Some times it takes years to be an overnight success! (y)
  11. AviralB

    AviralB New Member

    Of course it is important to understand the comp plan. I believe this is the main reason most people get discouraged after joining an mlm business opportunity, they do not know what conditions they have to satisfy in order to be eligible for X and Y bonuses. Then they will end up bad mouthing the program and will be reluctant to join any other mlm.

    I also think it has to be the first and foremost responsibility of a leader to explain the plan well to any prospect and make sure he/she understands what will be needed for them to earn money. Or else, it will be a totally unethical behavior on behalf of the leader to just get the person to signup.
  12. JTGMarketing

    JTGMarketing Member

    A lot of times, people go into a business opportunity with the wrong expectation -- that they can make a whole bunch of money right away. But the truth is, without hard work you won't get anything that lasts a long time.
    MarieA73 likes this.
  13. wiseme11

    wiseme11 New Member

    Absolutely right...get to know the compensation plan, how it really works and how it pays.
    Never forget to find out is there any ADMIN FEEs. You can find many 100% commission
    payout program these days but they do charge for admin fees. Some company don't charge at
    all and still the payout is 100% commisssion.
    I have came across a recent launched program that is sucking members money. Members need
    to pay for $19.95 to use basic marketing tools like banners, text ads, solo ads.....also to view your
    downline detail. This is riculous. So guys, need to check before you join.
    These programs have made the admin rich..very rich...Whatever you pay can use it for your
    advertising cost.
  14. NetMecca

    NetMecca Member

    I think this is pretty important so you can measure your potential income (and RISK) against the cost of participation. The higher the cost, the higher the risk and the less the profits.

    Thats what I think anyway.
  15. ScottCofer

    ScottCofer Member

    I agree with a lot of what's been said on this thread, but there is one thing that will virtually guarantee your success in any type of compensation plan:

    Plan on working your tail off and sponsoring a large number of people (50+) personally.

    Far too many people come into our industry with the expectation that they can sponsor a few people, then sit back and watch the checks roll in. It doesn't work that way.

    It has been my experience that, on average, you'll sponsor 1 solid performer for every 10 people sponsored. Therefore, if you start with the expectation that you are going to do whatever it takes to sponsor at least 50 people, you'll end up with about 5 people that will either duplicate your efforts or outperform you. You'll also have a few "B" performers as well.

    Unless you are in a binary and all 5 top performers fall on one side (possible but not probable), 5 "gems" personally sponsored will be enough - in any comp plan - to generate a healthy monthly residual income for you.

    Start with the proper mindset, put the blinders on and go to work ... hard.

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