MLM COMPASS - Direction To MLM Success; A Proven Duplicable System » MLM Compensation Plans

Does This Picture Remind You Of Your Business?

Don Standard — Thu, 24 Jul 2008 18:45:45 +0000

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Do you understand your MLM compensation plan, and know how many people you actually need to reach your desired income so that you can put together a business plan?

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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.

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?

The Myth Of The Ground Floor Opportunity To MLM Success

Don Standard — Tue, 03 Jun 2008 23:30:03 +0000

Many people doing MLM will tell you that the only chance for most people to have MLM success is to get in on the ground floor.

What they mean by that, is to get in with a company as early as possible, like pre-launch.

The first problem with this belief is that if you really believe it, then you will be building a team of people who do not get the same opportunity that you did. The more time that passes, the less opportunity your new team members have if your belief is true.

The next problem.

The problem that most people never see is that they do not get in nearly as early as they think. In the beginning there are the company founders and they are the only ones that know about the plan. Then they hire one or more master distributors to put at the top of the pay plan.

These master distributors go out recruiting people they already know in network marketing who have built organizations and may be looking for a new company to build. Keep in mind that you and I have never heard one word about this company so far.

As these top level distributors are added, then they go out and recruit more network marketing people. There could be a sizable number of distributors in the company and there is still no public information about the company.

Finally the time comes for the leaders launch. Well actually they just give it a name like that to suck you in. Open advertising is going on and they don’t have a clue if you can be a leader and build or not. And if they are recruiting the public, then they have already launched.

They are just advertising and with a little bit of luck, the people who do not see themselves as leaders will wait to join. They want the best people near the top.

Then the pre-launch rolls out. Again, the company has launched. It is just a way to suck you into thinking that you are really getting in on a ground floor opportunity. If they survive long enough, they will eventually drop the pre-launch name.

Chances are, with many MLM compensation plans and companies, you have already missed the true ground floor that you needed for MLM success based on your belief. (My belief is that the opportunity is yet to come from a timing aspect.)

But it gets worse.

Ninety-Five percent of these companies will not survive for even two years. Those numbers hold true for new companies in general. It’s not just an MLM thing. You can verify through Forbes or Business Week.

That is the same as saying that 19 out of 20 new companies will fail in their first two years.

Are you a gambler?

Those are lousy odds. Can you afford to put two years of your life into a company that has a 95% chance of failure. When they lose, you lose. It’s time to start all over again with the same lousy odds and hope you get lucky the next time.

Has anyone ever jumped on the new company and gotten lucky. Yes, of course. But even with a lot of luck you have to do the work to make it happen. There are a lot more people who got in at the same time as those that did make it, but they never built any income. So even if you get lucky it takes work and MLM skills.

So not only are you gambling that the company will survive at least two years, but you get to live through all the growing pains with the new company.

And possibly the most miserable feeling of all will come after you have built a team. Then the ground floor opportunity doesn’t look so good to prospects. The sponsoring slows down. The people at the bottom are not making money and there are ten more ground floor opportunities calling them. They quit. Then those above them quit. The cycles continue until you lose most of your team. Now you have a tiny team, little income, and the ground floor opportunity is gone. What now?

My suggestion is, join Mentoring For Free, and read Success In 10 Steps. You can plug into free live training calls and hundreds of recorded training calls.

I hear things like this from people quite often, “I have learned more about network marketing in just the first two weeks of free MLM training than what I learned in all my previous years of network marketing combined.”