What A Balanced Network Marketing Compensation Plan Looks Like

This weekend my company just announced some modifications to the compensation plan that I am very excited about. I've noticed over the last couple of years that the compensation plan, although great, could have been a lot more motivating and rewarding to the sales force, if a few simple modifications were made.

This might come as a shock to you to hear me say this. The reason why is because when you read most network marketing distributors blogging about their company, they will tell you nothing but the positives about their company. You will never hear from them what they don't like about their company.

If you're ever evaluating a network marketing company, do you want to know a good question to ask? Ask what that person doesn't like about the company. Watch how they try to skate around that question or try to say something like "there's nothing they don't like about their company."

Here's what I didn't like about my company, up until this weekend.

To me, the compensation plan wasn't very balanced. The way the compensation plan was structured previously, a new person could move up three levels in the compensation plan with as little as 15 people. However, on average, you probably needed a few hundred people on your team to generate the volume necessary to get to the higher levels in the compensation plan.

This created two challenges:

#1) A new person could move up three levels within a few weeks. However, it might take them months, if not years to get to the next level. They get frustrated from a lack of progress and quit the business.

#2) A new person could move up three levels within a few weeks. They get stuck there because it takes a while to get the team and the volume necessary to move up further. Their best people also move up three levels within a few weeks. They only get to enjoy that override income for a few weeks and then the income gets cut off because their most productive people catch up to their level.

So what my company did is they made two modifications. First, they increased the requirements to move up. This makes moving up the compensation plan more balanced and by the time you get up to the higher levels with the new requirements, you will have the production necessary to move up because you needed it to get to those levels to begin with.

The second thing they did was they created more bonus opportunities at all levels of the compensation plan. The end result is that the people at the lower levels could make the same type of money, if not more than the people at some of the higher levels make now. The bonuses are based on the best activity in my opinion, the ability to help new people get started and make money.

The end result is that the people at the higher levels get to make money on the production of their team for a longer period of time because it's a lot more difficult to move up the compensation plan in a few weeks than it is now. Although it's more difficult to move up, the distributors are making more money at the lower levels so that they don't need to be at as high of a level to make the same type of money.

That's great for me because I now have a compensation plan that is very motivating to build into. However, unless you plan on joining my company, that doesn't really help you.

So how can you determine whether you are looking at a balanced network marketing compensation plan? Ask yourself the following questions:

#1 - If you are just getting started, how many customers will you need in order to make your money back? If it is a lot, or if it is a little but you have to sell them a lot, you are probably working too hard. This isn't a franchise. Making your money back should be very easy. You should be able to do it within your first month and it should be possible to do within your first couple of days if you want.

#2 - What does it take to move up to the higher levels? Is it too easy? If it's too easy, you are going to get to a point that everyone gets stuck at and you are going to see a lot of people drop out of the business at that level. If it's too hard, people will get frustrated and quit.

It is NOT a good thing to go to an opportunity meeting, see a few people at the bottom, A LOT of people at the middle and a few people at the top. It's also NOT a good thing to see everybody at the bottom and very few people at the top. There should be a balance, a few at the bottom and a few at the middle. There will always be less at the top because most people aren't willing to do what it takes to get to the top.

#3 - Does your company pay bonuses in addition to the commissions you make for product sales? If so, what are those bonuses based upon? The best bonus, in my opinion is one based on new people within an organization getting their first sales and/or recruits. It should reward the sponsor as well as the people higher in the compensation plan. Bonuses for reaching organizational sales volume are not a good idea because people will tend to hit that volume and then fall back.

Taking a look at these 3 areas of evaluation will help you to determine if your compensation plan is a balanced one. If it isn't that doesn't necessarily mean you should quit. Mine's wasn't, but all of the other areas that made up the opportunity were strong enough to deal with the limitations. There's no such thing as a perfect company so evaluate the other areas as well.