Ever looked at an MLM compensation plan?
It’s enough to make your head spin.
Thing is, you shouldn’t need an advanced degree to understand how to get paid by marketing a network marketing opportunity.
Let’s look at the different types of compensation plans and earnings opportunities in network marketing:
1 – Uni-Level Matrix
This is the classic pyramid plan. A Unilevel Matrix allows you to have unlimited width and limited depth. Let’s say that you are personally responsible for signing up 10 team members. You will earn a commission on all sales generated by your 10 team members.
(You could actually sign up 100 or 1,000, 1,000,000 or more people on your first level, it doesn’t matter).
Now lets Say each of your 10 team members sign up 10. Since 10×10 is 100 You will now have 100 people on your 2nd Level. You would also earn commissions on all sales generated by your 2nd level.
A typical Uni-Level will pay down 5 or More Levels. If each person were to continue to get 10 this would leave 1,000 people on your 3rd Level, 10,000 People on level 4 and 100,000 People on level 5. This kind of payout looks good (just think of the potential!), but rarely does it play out like this in reality.
2 – Forced Matrix
A Forced Matrix is Similar to a Unilevel Matrix but it limits the amount of people each person can have in their first Level. A popular kind of FM is a 3×9 Forced Matrix.
With a 3×9 Forced Matrix the most people you can have on Level 1 is 3. Now the most people each of those 3 can have on there level 1 is 3 which leaves you 9 people on your 2nd Level.
So this is what it looks like:
Total = 29,523
One Advantage of a Forced Matrix is the alluring promise of spillover. Spillover occurs when you sponsor more people then can fit on your first level. So if we use the Unilevel example above and assume everyone sponsors 10 you would not only completely fill your 3×9 Matrix but you would actually have enough people left over to fill a 10th level of 59,049 and partially fill an 11th level of over 170,000.
3 – Fast Start Bonus
A Fast Start Bonus is seldom the only part of the compensation plan. More often it is used as an extra incentive to sponsor more people. The Fast Start Bonus is typically a lump sum payment of up to 100% of the First Months Membership for anyone you sponsor.
4 – Sponsor Bonus
A Sponsor Bonus is often used with a Forced Matrix. It is usually a monthly recurring bonus and is paid each month on everyone you personally Sponsor.
5 – Breakaways
Breakaways are used with Matrix Pay Plans. When a team member reaches certain qualification they break away from your team and you no longer receive the payout on that team member or anyone in that part of the matrix (the break away). You do however receive a monthly commission of the entire volume of the break away unit.
6 – Infinity Bonuses
Often Used with matrix Pay plans. They allow you to earn down an infinite number of levels if you meet the company qualification (this varies). You could be blocked by someone on a lower level who also qualifies.
7 – Binary Plans
A Binary Plan is like a Forced Matrix with a Twist. In a Binary you would have 2 legs. You would typically earn a commission on the entire volume of your weakest leg. Many binary’s have systems in place that may allow you to earn commissions at a later time (via a Carryover) on your strongest leg.
The BEST payment plan depends on you. It’s a personal preference, and what you are comfortable with. Do you like getting paid on bringing in reps? On selling product? Up front bonuses? Over time in residual income? There’s no ULTIMATE best payment plan, as most compensation plan will pay out 25% – 50% of total volume of sales. HOW that many is distributed depends on the comp plan.