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Your MLM Compensation Plan – Question Seven

Don Standard — Sat, 21 Jun 2008 03:00:28 +0000

Finally, Question seven from my June 11th post, 7 Questions To Know About Your MLM Compensation Plan.

Question Seven: How does that infinity bonus work?

Or, Why do they call it an infinity bonus if there is no such thing as a bonus that pays to infinity?

That’s right. There never has been an infinity bonus and never will.

If the infinity bonus existed, then the company would be doomed to fail.

A simple example. The company claims that you can qualify for a 1% infinity bonus. The bonus pays you 1% of all the volume in your entire downline. But the problem is this. What if your personally sponsored person is successful and qualifies for this bonus too. Everyone in his downline is also in yours so the company is paying each of you on the same people.

What if your personally sponsored then sponsored someone who also qualified and he did the same and so on and so on until you have say, 200 people qualifying for the same 1% bonus on the same people. Now the company is paying out 200%. How long will they stay in business paying out more than what comes in.

The so called infinity bonus actually only pays out to you until it comes to the next qualified person. Then it stops getting paid to you and instead gets paid to that person. Now the company is never paying the same bonus to two people on the same volume. The company can’t spend more than 1% which was always the intention.

So if it doesn’t pay to infinity, then why do they call it an infinity bonus. Is it to confuse you into thinking how much you may make if you do great in your company.

Some companies never bother to tell you how this bonus works. Others tell you but you can’t find the explanation. Some tell you and all you had to do to understand it is to read it.

If your company is willing to deceive you by calling a bonus an infinity bonus when it clearly is not and hope to have you believe that the compensation plan is better than it is, What Else Will They Do To Deceive You?

Learn more about how compensation plans really work at Mentoring For Free. Take control of your MLM Success.

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Your MLM Compensation Plan – Question Six

Don Standard — Thu, 19 Jun 2008 15:00:52 +0000

Here we go with Question Six from my June 11th post, 7 Questions To Know About Your MLM Compensation Plan.

Question Six: How much do you really get paid on retail sales?

People get confused on this one all the time. What is this biggest problem in MLM? The product are usually so overpriced that no one can retail anything. In fact we hate to sell to people because even at our cost, the product is too expensive.

Some companies have tried to overcome this by selling products that are so exotic that no one knows about them and distributors are working to create a market but at least there is no established value in the market.

Others want us to believe that their product is so special that it can demand high pricing. Funny but research outside of what the company tells you never indicates that the products deserve high pricing.

Some companies tell you how you buy at wholesale and sell at retail to make this nice 30 to 50% profit. Of course no one can sell at a profit.

Other companies know that you, the distributor are already feeling the product is priced high so they let you bring your prospects to your company website where they can buy at special discounts and even better if they go on autoship. Great but now you make so little that you don’t have any incentive to retail anything.

Hey, could be worse. Some companies show your customers the regular price on the website at some unrealistic marked up price that no one would pay and then offer them the chance to join for free and get the distributor discount. Not only does this take away most of your income but in some pay plans it blocks your progress and almost guarantees your failure.

Then some companies retail at the same price that distributors pay. They price the products competitively in the market. Then they pay bonuses for retail. A model that actually makes distributors a lot of money and encourages retail.

Why do you want to encourage retail? Let’s say that you make five dollars from everyone in your organization who buys $100 of product each month. If they only buy $100 and nothing more, no retail sales etc. then you know that you will make $5 per person and you need 2000 people to earn $10,000 per month.

What if you encourage retail sales and the distributors on your team average $200 per month. Some may not retail while others do $100, $200 or maybe $1,000 extra per month in retail. Well by doubling your average volume per person you just made it possible to create that same $10,000 per month income with half the number of people on your team.

Look for the ability to truly earn retailing income in a compensation plan. You will have some people who remain distributors just because of this income stream. You can reduce the numbers of people you need to reach income goals. It makes a huge difference and most people miss this completely when they evaluate compensation plans.

Learn more at Mentoring For Free.

Your MLM Compensation Plan – Question Five

Don Standard — Wed, 18 Jun 2008 03:00:10 +0000

Let’s talk about Question Five from my June 11th post, 7 Questions To Know About Your MLM Compensation Plan.

Question Five: What are the requirements to get paid on all of your potential pay line?

Understanding what I am talking about on this question is a little more difficult. But when you analyze a lot of compensation plans, after a while you begin to see how compensation plans are often put together so that most people can not be successful beyond a certain point. The requirements are too much for them.

If you are the company, this can be a good thing, because they may have things all worked out where they will never have to pay out all that money that they claim to be paying out to distributors. We call this breakage.

Breakage can be built into any compensation plan. It does take a little practice to see it though. But when you see a compensation plan that claims to be paying out more than 50% then you really need to start looking. To pay out large percentages, a company either needs a product or service with almost no cost to them like digital information products or they need breakage. Expect both.

Public companies have to produce reports for stockholders and potential stockholders, so this information can be very eye opening. You read on the web page of a company that they pay out 60% as an example and then you go to the public record to find that they actually pay out 30%. Things are not always what they seem.

Anytime you look at qualifications to move to the next level in a compensation plan, ask yourself if it really looks possible. If you have never built a large team before then that is a difficult question to answer. It takes some experience to be able to see this stuff.

The big space commander gurus can see that they have done it before and they know they can do it again. They like these requirements that make it hard for anyone else to reach the top because most compensation plans will pay them more if they are alone at the top.

I reviewed one company last year for a lady and noticed that they had an incredibly hard to meet requirement for people about half way through the steps towards the top of the pay plan. I was checking out her company’s pay plan because she was not experiencing any growth in her income. As soon as I saw the problem, I asked her if this was the level she was stuck on and of course it was. She informed me that she had talked to many people in the company that were stuck there.

The company had built in breakage to the plan right there. There was a huge amount of potential payout that they would never have to pay out. The next problem for these distributors is that they were making around $1,000 per month and had pretty large teams. They didn’t see making it over this obstacle to ever make a lot more money but they didn’t want to leave the company and start over with a better one. Unfortunately for them, they couldn’t see this in the compensation plan in the beginning. I saw it almost immediately.

I know people who have been consultants to network marketing companies. They tell me that the number one question they get asked by company management is, how can we keep more of the revenue and pay out less to the distributor. I guess that sums it up. They want breakage from distributors unable to meet qualifications.

Your MLM Compensation Plan – Question Four

Don Standard — Tue, 17 Jun 2008 04:23:06 +0000

Your MLM Compensation Plan – Question Four

On June 11th, my post was, 7 Questions To Know About Your MLM Compensation Plan.

It’s time to look at the answer to Question Four.

Question 4: What are the requirements to get paid?

For starters, you want there to be requirements to get paid. While lots of failing network marketers are scrambling to be first in the latest free to join, no requirement to get paid program, I’m telling you to avoid those.

If no product or service volume is created then there is nothing to pay out. That’s a serious problem.

If there are no requirements for a distributor to produce a minimum volume or sponsor a minimum number of people then most will not. Heck, most of them can’t, that’s why they are looking for such a program.

Some pay plans are effected severely when there are no minimum requirements for sponsoring. A good example is the matrix plan. If you sponsor someone on your first level in a matrix and they are not required to sponsor anyone to get paid, they probably will not. That means if you want to grow your business, then you have to sponsor for them and they still get paid. That would be for all of them, not just one or two. Expect a team of people who sign up and do nothing. If there are minimum volume requirements, then you can expect them to quit in one or two months if you don’t sponsor enough to get them to break even.

The same problem does not exist in say a unilevel compensation plan. It doesn’t cause you problems when someone does not sponsor and they don’t make money by forcing you to sponsor for them.

If people can actually get paid just for signing up and letting someone else build for them, then they will sign up in all such programs and make money from each one. Of course they never make any money. The programs will not work.

When you have programs with very low monthly volume requirements like $10, you get people with no money and no skills along with a few internet marketers who recruit but can’t train so everything falls apart after a while. A well known $10 per month program pays you $1 per month per active person. So you need 10,000 people in your pay line to earn $10,000 per month. That’s close to impossible for most people. And don’t forget about our answer to question 3. You only get paid on the people in your pay line.

So you look for programs with higher monthly volume requirements. There are many other variables so there is no perfect monthly volume requirement. Too low and you will find it hard to make any money. It just takes too many people on your team. To high of a requirement and you run the risk of limiting who will join.

The key is there has to be volume created. You don’t want people who create no volume. And watch how a compensation plan can be affected by having no sponsoring requirement.

A big big secret. Listen up. If you have a product that can truly be retailed, then anyone can produce volume and meet minimum volume requirements. The catch of course with most companies is that the product can’t be retailed. Only distributors buy the product. In fact you will have some people produce huge amounts of volume driving up your total group volume and requiring fewer people to produce high incomes.

Another catch though, even if you have a product that can be easily retailed, you have to reward the retailers are they will not keep doing it. That is a problem in most binary plans.

The next question, #5, What are the requirements to get paid on all of your potential pay line?

Your MLM Compensation Plan – Question Three

Don Standard — Mon, 16 Jun 2008 03:03:14 +0000

7 Questions To Know About Your MLM Compensation Plan

We asked the 7 Questions in one post. Then answered the first two questions in two other posts.

Time to answer question 3 now.

Question Three: Which team members do you get paid on, your “pay line”?

Great question and one that most people don’t understand. People just seem to think they get paid on their entire downline.

Let’s look at an example. In a unilevel plan you can build as wide as you want. There are no restrictions on width but they do have a restriction on depth, usually around five levels or so. For this example let’s just assume that there are no additional ways to earn recurring income. Of course in todays compensation plans there are many ways to earn which tends to confuse things even more. But in this simple plan you get paid on everyone in your first five levels. That is your payline. You make nothing on anyone in your downline beyond the fifth level, levels 6 to infinity.

Another easy example is the matrix plan. The matrix will tell you how deep they pay. A 5×7 would pay seven levels deep. That is your entire pay line. You get paid nothing on the levels eight to infinity.

I will go into this in more detail in another post one day but the shape of your team in terms of numbers of people per level will always be diamond shaped. So if the widest part of the diamond was your bottom pay level then you are only getting paid on half of your team.

If the widest part of the diamond is at your tenth level and you only get paid to your fifth, then you are getting paid on about 17% of your team.

That is why newer compensation plans usually add additional ways to get paid on your team outside of the pay line created by the unilevel or matrix plan.

However there are a lot of plans available that do not pay you on the people outside of your main pay line and others that pay so little or make it so difficult to earn the bonus that they are just making it look like you can earn a lot of money while creating breakage for the company.

So you need to know the pay line not only on the basic part of the plan but on each added way to get paid.

You need to know the answers to all 7 Questions for this to all come together for you.

In the end even if you have great success with your company, the compensation plan and how they pay you on the people real deep in the organization will have a major impact on your income.

Don’t wait to build a team of 100,000 people before you learn that you only get paid on a small percentage of them.

Learn even more in group training at Mentoring For Free.

Your MLM Compensation Plan – Question Two

Don Standard — Fri, 13 Jun 2008 19:10:27 +0000

Two days ago on, 06/11/2008, I did a post called, “7 Questions To Know About Your MLM Compensation Plan”. On 06/12/2008, I answered question one.

Now we are ready to tackle question #2 and it is another big one.

Question Two: How many active people do you need on your team to break even after all expenses just from your recurring income?

I have found the most common break even requirements to be between 20 and 60 active distributors.

Think about all the people you have ever sponsored or even came close to sponsoring. How many of those people have ever built a team of more than 20 people?

The first reason you need to know the answer to this question is because the more active distributors that are needed for someone to reach break even, the fewer people will get there to become successful. The higher the number goes, the higher the turn over rate is.

From question one we learned that the average MLM compensation plan will require 2000 distributors to make you $10,000 per month. If everyone who joins your team is successful, then you need 2000 active distributors to earn $10,000 per month. But what if only one half or successful. You still need 2000 active distributors but you had to have 4000 people join to find those 2000.

But what if only one out of ten stick it out? Now your team needs to sponsor 20,000 people to get 2000 active distributors. And some programs are so difficult to reach break even in that you can figure that only one out of every one hundred will stick it out so you will need 200,000 people sponsored to get 2000 active ones.

What if you think your company has the best compensation plan in the world and one day after you have spent years building it, you discover how many people you really need. Best to find out now.

Hopefully you already know that network marketing is not a numbers game, it is about building relationships and teaching and mentoring. If you choose a business where almost no one can break even then you have turned it into a numbers game.

I build my business 95% with the internet and the telephone. If you are doing the same then you should also know that people on the internet are exposed to many businesses. If your business even seems hard to break even in after a couple of months, then they will move on to another business that promises them more.

To avoid this, you choose a company that gives everyone the best chance for success and can get them to break even quickly with the compensation plan.

You build relationships. If you have no relationship, it is much easier for someone to quit the business you sponsored them into.

You use a system like, Mentoring For Free, to train your people in everything they need to know to have success in network marketing. It must be a proven duplicable system. One that works for anyone, not the so called systems that are nothing but numbers games.

I have evaluated hundreds of compensation plans and I have found some that require very small numbers of people for a distributor to break even just on the recurring income, and I have found some that require over 400 people to break even.

You guessed it, people in the company that takes 400 people to reach break even believe that their compensation plan is the best in the industry.

I have found the most common break even requirements to be between 20 and 60 active distributors.

Think about all the people you have ever sponsored or even came close to sponsoring. How many of those people have ever built a team of more than 20 people?

So even with the low number, you can see you may have a problem. You want your compensation plan to require the fewest number of active distributors possible for break even to improve your chances and the chances of everyone you sponsor.

Mentoring For Free, training will help you learn to evaluate compensation plans and other information about companies so that you can put yourself in the best possible position for success. Then we will train you and everyone on your team in all the skills you need for success in network marketing.

If you have not been properly evaluating the compensation plans of the companies you tried to build, no wonder this all seems so hard to find success in the industry. If you are building something now, then stop and evaluate it. If you are looking for a new company then take the time to properly evaluate everything about the company that affects your success. We call it the 5 Pillars.

Your MLM Compensation Plan – Question One

Don Standard — Fri, 13 Jun 2008 03:14:17 +0000

Yesterday, June, 11th, I did a post on the 7 Questions To Know About Your MLM Compensation Plan.

Question #1 was:

How many active people do you need on your team to earn $10,000 per month in recurring income?

The average number of active team members a distributor needs in the industry seems to be around 2,000.

Can you imagine, you don’t know how many people you need, then one day you find out that you are in that company that needs 40,000 active distributors.

Keep in mind we are talking recurring income. No one cares about the fast start bonus. First most people don’t sponsor many people so it’s a tiny number. Secondly it’s linear income. You have to be working to earn it. The reason most of us do this is to build a business that pays us whether we work or not, recurring income.

Rarely do I ever talk to anyone who knows the answer to this question.

When someone does have an accurate answer it is usually because they have a simple plan where they know that they make say $1 per person so the math is easy. In the answer to another question I will show you why they are actually wrong too.

Sometimes people take a guess and usually miss it a mile. Like 30 people to make 10K. These same people usually have a hard time understanding that for that number to work they would have to make an average of $333.33 from each person. How much volume do you think that might take to make that much? Don’t forget the company wants to earn an income and other distributors creating that same volume want to be paid.

The average number of active team members a distributor needs in the industry seems to be around 2,000. That would mean that you average $5 per person per month.

Now I realize that a lot of you can’t figure out how many people you need to earn $10,000 per month in your company. But you need to understand, that if you don’t know this number then there is no way to put together an accurate business plan.

So look for help. Join Mentoring For Free, and ask us to help you figure out your number.

I have analyzed hundreds of MLM compensation plans and found major well known MLM companies that range from fewer than 400 active distributors to as many as 40,000 active distributors to earn $10,000 per month.

Think about this. Let’s say your good friend, call him Bob, is in a company where he needs 400 people and you are in a company that has an average MLM compensation plan so you need 2000 active distributors.

If everything is equal, your skills, ability, drive, time, products, pricing and more, then when you each have 400 active distributors, Bob is making $10,000 per month and you are making about $2,000 per month.

Later, when you each have 2000 active distributors, you are finally making $10,000 per month but your friend Bob is making about $50,000 per month.

See a difference. It’s kind of like two people with the same job, but one gets paid $20 per hour and the other is making $100 per hour for the same work.

The people I have talked to in the company that requires 40,000 people to create a $10,000 per month income tell me that they have the best pay plan in the industry. Of course not one of them has ever been able to tell me how many people they need. They have no idea that the number is 40,000.

Can you imagine, you don’t know how many people you need, then one day you find out that you are in that company that needs 40,000 active distributors.

I guess it’s not as bad as finding out you need 2000 and your friend Bob only needs 400.

So don’t you think that it is important for you to know now instead of later? I hope so. Go get the number and if you need some help, join Mentoring For Free. You get tons of free training to go with it and you are going to need that too.

Keep a look out for my answer to Question #2. I see people get burned by not knowing this one all the time.