MLM Compensation Pay Plans and Real Life

The beauty of Network Marketing is that it brings the financial freedom dreams of ordinary people into their reach. Because it is so easy to get into an MLM opportunity, it is easy for companies to write compensation plans that seem lucrative but are so complicated most people can't understand them.Companies offering home based business opportunities play on our hopes, our dreams for a better life, our greed, and our ignorance. They bank on us falling for their presentation of making easy money, having a fully "automated" system, and a product so terrific it will sell itself.The biggest sell is often the demonstration of income "potential". A few examples are given to illustrate how once you build your organization 4 or 5 levels deep, you can make the big money. The error with this example is that it usually includes 2-3 superstar business builders.In real life, what most newcomers to MLM don't realize is that the superstars are far and few between. On average, most people who join an MLM company will only sponsor 2 or 3 people into their business. We rarely meet these big builders let alone are we able to bring them into our organization.The reality of network marketing home based businesses is that most of us work at our businesses part time. And yes, this includes the stay at home, work at home mom. Most others are working a full time traditional job.The key to being successful at an MLM business lies in the company's Compensation or Pay Plan. Understanding how the company pays its distributors is necessary in figuring out how much work has to be done to reach a financial goal. A distributor's financial goal is the amount of money he wants to make every month.Companies usually have multiple ways in which they pay their distributors. There are one time pay outs such as sponsoring bonuses. These are not counted in figuring the monthly income goal because a distributor has to keep working to keep that income source coming.The type of compensation to pay attention to is recurring residual income. This is money paid as a commission on product sales. What determines the amount of the monthly check is the percentage paid on a set volume of sales. Additionally, consider how deep in the organization a distributor gets paid.Other factors to be aware of are any requirements to remain active and qualified. Most companies require a distributor to maintain a minimum monthly autoship order. There may also be requirements to maintain a monthly personal or group volume. If the volume requirement is too high, it could be extremely difficult for the average distributor to meet.In summary, when evaluating a company's pay plan, look to see if a person working part time can make enough money to break even and make a profit worth their time. Understanding what the requirements are to make commission money, will also show how much work has to be done to make every dollar.Knowing the amount of volume needed to make a certain amount is not enough. Convert this information to how many people (retail customers and sponsored distributors) needed to make that money and it will be clear how much work has to be done.