There is a lot of hype surrounding MLM compensation plans. Many opportunities are sold primarily on the promise of making big money on high payout percentages. Don't be blinded - this article discusses what you really need to look for.
MLM compensation plans are an important part of the overall picture, but sometime the hype surrounding them blows everything out of proportion.
I was reading some articles about MLM pay plans this morning. Consider the following comment I clipped from an article I found floating around the web:
"Breakaway plans are also known as 'takeaway', because when a distributor breaks away from your group you will lose all commission and bonuses on their sales."
This is an example of outright false information. I know of no stairstep breakaway plan where you lose everything when someone "breaks" from your group. In this type of plan, which is used by many of the longer-established MLM opportunities, a distributor is rewarded with a "promotion" for reaching a certain level of achievement. This is based on personal and group volume.
When they "break" from their upline group, they are eligible for better commissions and bonuses. Meantime, their original sponsor will continue to receive a bonus on activity in that group. It might not be quite as much as they would make before the break occurred, but that's a reasonable price to pay for long-term stability.
When a distributor breaks and forms their own group, they have become a proven leader and are making money. They will most likely stay in the business for the long term. This is a great benefit and helps an organization to remain stable and profitable.
Just as a side note, the article from which I pulled this misinformation went on to promote the wonderful advantages of some other type of compensation plan. It isn't hard to see why they might want to tear down the stairstep breakaway plan, and others as well.
Take care when evaluating MLM compensation plans. There is a lot of hype and (shall we say) misleading advertising out there. All plans have advantages and disadvantages - none are perfect. To be fair, MLM compensation plans have to be structured in such a way as to reward both part-time and full-time associates.
Here's another example. Take the situation with a binary type MLM compensation plan. In the simplest terms, you start by building two legs - one to the right, and one to the left. MLM distributors promoting a binary plan sometime try to get your attention by saying "we'll build half of your business for you". This is partly true. What they will do is help build one of your two legs by placing new distributors there.
It is then up to you to build the other leg before you can make any money. What they don't always tell you is that there has to be a certain balance between the legs for you to get paid. You may have $3000 in volume this month in the leg that was built for you, but if you don't have pretty close to that in your other leg, you won't make anything. How much depends on the structure of the plan.
The bottom line is that you have to work as hard, and sponsor roughly as many people, to make money in a binary as with most other plans. There is no free lunch.
The whole point is this - before you commit to an MLM business, take time to evaluate the products and the company first. Never start a business based on compensation plan hype. The pay plan is important, but take claims with a grain of salt and look for common sense and reason.
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