The decision to choose a network marketing company should be based on the history of the company – how long they’ve been operating, first of all, but the second most important criteria for selecting a company should be based on the MLM compensation plans.
A compensation plan is just how you get paid when you work in MLM. Each MLM company has their own compensation plan and structures it to suit their preference. However, there are only a few of the more well known plans that are consistently used today.
The first plan is called a unilevel compensation plan. One of the major plus factors of signing with a company using this plan is that the possibility to make a lot of money is definitely one of the perks, but this plan is not well known to promote teamwork.
One of the reasons is because the formula for building success isn’t based on the stairstep formula. In a stairstep formula, you earn a commission off the downline you sign on and you also earn on the downline they sign on.
With a unilevel, the downline works against one another – all battling for a slice of the profit at the same level. Newcomers to MLM are not usually as successful with this type of compensation plan as those are who’ve been in the business awhile. There’s usually a ceiling that prevents a downline from rising within the company and newcomers won’t earn as much commission.
In a binary MLM compensation plan, every member can only bring in a limited number of distributors. It works sort of like multiplying. One person can sign on their limit, then those people can each bring in their limit and so on. The reasoning behind this is to build a solid downline and a reputable company rather than bringing in hundreds only to have them get discouraged and quit.
Another compensation plan is known as the Australian plan. In this plan, new members have to pay to join the company. However, that pay is used to teach the recruits how to succeed at the business.
When an MLM company uses the matrix compensation plan, this means that however the company sets it up is how the members earn commission. For example, if the limit is 2 x 4, this means that the member would get paid commission based on bringing in two recruits and on down the level.
The more distributors that they have who bring in other distributors, the more levels the original member will have and will earn from each level. Like the other compensation plans, this one is highly desired because the original member can earn based on how hard the downline levels work to bring in distributors.