MLM Compensation Plans – Investigation is Key!

Would it be OK if I said this is the most important part of your Network Marketing research? Let’s be honest here….you are starting a Home Base Network Marketing Business to make money right? Hence the phrase “Home Based Business”.

It’ not….

home based products
network touchy feely
multi level producting
work from relationshipping

It’s a business. And in business you are there to make money!

Yes….some people start as product users and then gravitate to the business because they simply tell someone else about a good product or service….I get that. However; most people start out because they want to make money!

Alright now that I have that out in the open and probably ticked off many of you that say it’s all about the products….listen closely.

Companies that have been in business for more than 10 years, are there because they have good products or services period! I’m here to talk about the money! Those companies that are new, just getting started, a few years old and growing rapidly are doing so because of hype and the money making opportunity they possess.

You see, start up or young companies attract the folks who do just that. Go from company to company for the fast money. Now is there anything wrong with that? Nope. That’s business and that’s how some Network Marketers operate.

I’m here to shed some light on compensation plans, and educate you before you join a MLM company by asking a few simple questions to your potential business partner.


Now based on the fact that most people start out in the Network Marketing industry on a part time basis, and never really go full time. It should be important to understand how you will be compensated while working your business. When looking for the best MLM compensation plans, you must take this into account. If you as a distributor do not have a reasonable chance of success, your attrition rate will be unacceptably high. Even as a leader, you may then drop out yourself if you cannot sustain sufficient active downlines to create residual income.

It’s all about the work right!

Business Models drive the behaviour in the field so a different approach and a different kind of person is suited to each type of pay plan – binary, stair-step breakaway, unilevel etc. But within those – whichever you choose – there are two essential features which must be considered.

There are companies offering many different types of product but for you to establish true royalty income, consumable products offer the best opportunity. That can be products in the nutriton, home care, personal care and even the technology services arena (like internet marketing tools). Why is this? Simply because products consumed on a regular basis encourage the setting up of a monthly autoship or monthly membership. Your company should offer this. Without it you are severely disadvantaged as there is no guaranteed regular turnover of product.

So the first thing to know is how many people actively ordering product or using services do you require to break even on your own autoship or membership? Those people actively ordering may be regular committed customers or team members. That cost is your fundamental business expense and everyone must expect to pay it. Nevertheless, as most of your team will be part time and possibly on a limited budget, the sooner each distributor can break even the better. Most companies offering consumable products in the health and wellness field have autoships costing between 120 and 250 $US. You should look for a compensation plan in which that break even number is between 6 and 12. If you need many more than that, the monthly financial cost may be too much for many and the resulting attrition rate will be unsustainable. Although your business will grow big through the efforts of leaders, there is a place for everyone in your organization – the leaders, the stars and the product users!

The second thing you must be clear about is how many people do you need in your downline to earn 10K per month of residual income? That is a good benchmark figure. Most Network Marketers have absolutely no idea on this one. But if you don’t know that, how can you plan your business development? You will need to crunch the numbers for this and I highly recommend you do it with your potential sponsor or business partner before signing up. If he doesn’t know, which is highly likely, look to someone else in the company for the information. Do not allow yourself to be given the brush off here. It is a vital piece of information that you must know.

The industry average is around 1500 – 2000 customers or product users to earn that magic figure of 10K. How likely are the part timers to get anywhere near that? Not very. And that figure can be a lot higher but it can also be lower in certain companies. Even if you are looking at a company where the figures are around 2000, you may choose to go ahead with them. There might be other factors that you feel outweigh this, such as a particularly strong product range or the support and training offered for example. However those numbers are crucial and you should be clear about them. Remember of course, that figures like that depend on factors that will differ in practice to theory, but get a good solid ball park number.

There are certainly other important considerations to look at before committing yourself to a company, but I believe these two factors should be on your list of important questions to ask your potential sponsor or business partner.

You may not have a good head for figures, but you will be glad you asked the questions and got the answers to the questions. Breaking even on autoship and knowing your target for 10K per month are key factors.

Happy Marketing,

Gerry Schroeder

Skype: gerry.schroeder
Office: 705-524-1286

Gerry Schroeder is an expert online business builder and MLM marketing coach in the Network Marketing Industry. He assists others with creating their true wealth working from the comfort of their home.

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