Compensation Plans Explained

One of the most confusing aspects of an MLM or network marketing business is how compensation plans payout. To many it can be so overwhelming that it can cause migraine headaches just to think of it. Relax, we are going to show you, in plain english, how to sift through all the data and determine which compensation plans work best for you. To work from home is a dream come true for most but the reality is it must PAY OFF. Home based businesses are everywhere but you must do your due diligence when researching compensation plans.

Mike Makler explains:

The first type of pay plan is called the Unilevel- Matrix

1 - Uni-Level MATRIX PLANS

This is often referred to by the un-informed as the Dreaded "Pyramid". A Unilevel Matrix allows you to have Unlimited Width and Limited Depth. Simply Point 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 in fact sign up 100 or 1,000 or even 1,000,000 or more people on your first level). Now lets Say each of your 10 Team members Sign up 10. Since 10x10 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. A very promising but highly unlikely scenario. Here is a typical uni-level payout plan. The percentages of commissions can vary greatly depending upon the individual network marketing company-

Level 1—10% These are the people that you have personally sponsored

Level 2—8% These people were sponsored by those you sponsored

Level 3—6% and so on, and so on

Level 4—4%

Level 5—2%

Level 6—2%

Level 7—2%

Level 8—3%

Bonus Level—4%

2 - FORCED MATRIX PAY PLANS

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 Very Popular Kind of forced Matrix is a 3x9 Forced Matrix.

With a 3x9 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, A 3x9 Matrix By the Levels

3

9

27

81

243

729

2.187

6,561

19,683

Total - 29,523

One Advantage of a Forced Matrix is 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 3x9 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.Check out this video on compensation plans as a 2 x 10 Forced Matrix is explained in detail by Stuart Finger of GBG 10 in 1 Health and Wellness Co.

3 - Fast Start Bonus

A Fast Start Bonus is Seldom the only part of the compensation plans. More often then not 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 Matrix Pay out on that team member or anyone in that part of the Matrix (the Break Away). You do however receive a Lump Sum Monthly Commission of the entire Volume of the Break Away Unit.

6 - INFINITY BONUSES

Are often Used with matrix Pay plans. They allow you to earn down an Infinite number of Levels if you meet the Qualification. You could be blocked by someone on a lower level who also qualifies.

7 - BINARY PLANS

A Binary Plan is like a 2xInfinity 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 (via a Carryover) on your Strongest leg.

Prof. Josiah Go of DSA Phillipines explains:

There are 3 common reasons why the binary (MLM) plans are quite attractive to both distributors and companies:

1. The “spillover” concept attracts new distributors because technically, they can receive commissions by sponsoring only two distributors and let uplines (those who signed up earlier) do the “spillover” for them.

2. Binary plans are quite simple to understand. This allows distributors to duplicate their effort easier, a necessary tool to succeed in network and multilevel marketing.

3. Binary plan offers fast-paced growth opportunities, which attract the segment of our population who wish to “get-rich-quick”.It is said that there are only two types of motivation — greed or service to humanity. Binary offers a potentially quick way to make money while providing a “service” that allows recruits to earn from the same method. Given the above, it is understandable that more and more companies have adopted the binary compensation plan method to attract new distributors.

While the pay plan is important. It clearly is only one small part of the MLM you choose to join. You should look at the whole package, Pay Plan, Product, Automated Tools. Market Size, Start-Up Costs etc.

These are the main home based business compensation plans. Most others are derived from these root plans.