MLM - Understand the Comp Plan Before You Join

Compensation plans for mlm companies can be incredibly simple or confusingly complicated. Make sure you understand what you are getting into before you join.

Most traditional companies set aside a portion of their gross revenues for marketing and advertising. This is used for classified ads, billboards, radio and television commercials, celebrity endorsements, etc.

Mlm companies are almost identical to traditional companies in every way except for how this marketing budget is allocated.

Mlm companies spend their marketing budget to compensate or pay regular people like you and me for our word of mouth referrals. Simple enough explanation right?

Ultimately, all companies are concerned with their net profit. If they say anything different, they are lying. Sure, they might also be interested in serving and helping others and that is noble and fine, but they also need to be making money.

Mlm companies usually set aside 50% of their gross profits to pay out as compensation to their consultants for business sales and referrals. They can increase their net profits by increasing the overall gross profit, or finding tricky ways to not have to pay out the full 50% earmarked for commissions.

How can they get away with that?

They might only pay you 2% to 20% down through a specific number of levels for the most basic and simple activities, but to max out the comp plan requires you to jump through so many hoops that no body every reaches the full pay out percentage.

You might have too many consultants on your right leg compared to a smaller number on your left leg.

You might be expecting a check one month or promised car bonus only to find out that a distributor on your right leg did not renew their autoship and you end up not being paid that month.

You might only qualify for a global pool, car allowance, travel money and insurance benefits once you have achieved a top rank.

They might also require you to increase your autoship and double your product purchases in order to reach the next commission level. You end up being over-stocked and start filling up closets and garages with surplus product.

If you don't increase your autoship, the company keeps more of the money that they would have had to pay you in commissions. If you do increase your autoship, the company makes more money from the increase in gross income.

These guys are smart! I'm not saying mlm companies are bad by intentionally cheating you. I'm just encouraging you to truly understand a company's compensation plan before you join. That way, even if it is super complicated, you can plan a strategy to maximize your commissions and be properly compensated for the revenue that you brought to the company.