23 Feb 2012, 10:37am
Successful Networking What It Takes To Win:

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  • MLM Tip: Compensation Plans – Five Key Questions To Ask Yourself

    When analyzing an MLM compensation plan, there are five key questions to ask.

    1.  The 10k Question:  

    “How many active people do I need in my downline to generate a walkaway residual income of $10000 per month?”

    This is a vital question for you to know how hard you (and your team!) will have to work to reach your financial goals.  The best compensation plan is the one that pays the most money for the least work.  That’s not lazy or greedy – that’s smart.

    We have found a huge range of answers to this question, all the way from a ridiculous high of 28000 to the industry average of about 2800, down to a very do-able 400.  The same way you would choose a higher wage for the same job, it makes sense to choose the lowest number of people possible for you to earn $10000 per month.

    2.  The Half K (Retention) Question:  

    “If I bring $500 in revenue to my company every month, what will I get paid?”

    If you worked on straight commission and sold $500 worth of products or services, you’d expect to earn anywhere from 50% ($250) down to about 30% ($150).  If you had some leverage and could be paid on your colleagues’ sales too, you could accept 20%, or about $100 in commissions.  Every experienced commissioned salesperson we’ve spoken to agrees that this is reasonable.

    But what happens in network marketing?  When we were with Excel Communications, the answer to this question was NEGATIVE $100!  That meant it was costing us $100 per month to bring $500 in revenue to Excel.  There are still many MLM companies in operation today with this kind of business model.  Beware.

    In most companies we’ve analyzed, bringing $500 to the company will bring you zero in commissions.  In some, you’d be lucky to earn $20, or 4% commissions!  A modern streamlined company with low overhead will pay you between $85 and $125.  That’s the kind of commissions you should be looking for.

    We also call this the Retention Question, as your main aim should be to get a fair check into the hands of your new partners as quickly as possible.  No pay, no stay.

    3.  The Break Even Question:  

    “How many customers like myself will I need to have my products paid for?”

    This is another retention question.  A terrible company will require 20 customers, and a poor company will require 10.  In a good company, you’ll need 5 customers like yourself, and in a generous, streamlined company, you’ll have your products paid for with just 3 customers like yourself.

    Most distributors regard their products as a business expense, and the sooner you have them making a profit, the happier they will be, and the longer they will stay with you.

    4.  The How Many Hoops Question:  

    “Are there any hidden hoops I must jump through to qualify for my check?”

    Read the fine print.  All of it.  The charts and lines and circles always look good at the front of the room, but what matters is what you have to actually do to earn a dime.  We analyzed a company recently that required 24 (!) active (!) front line distributors in order for you to reach the top of the pay plan.  With attrition, that would probably mean having to personally sponsor over 200 people!

    Read ALL the fine print, and ask questions of your sponsor, upline, and rep support until you get answers that make sense.  It’s your future, and you deserve to know.

    5.  The Build or Recruit Question:  

    “Will I be paid for working with my team, or must I constantly be recruiting to earn a check?”

    When Excel was going under in 2004, the leaders began to admit that 80% to 90% of their checks came from recruiting bonuses, NOT from residual.  That meant that their businesses had to constantly expand in order for them to maintain their income.  There are many companies that still use this business model, and that’s why we keep harping on it.

    Let’s forget the pyramid aspect for a moment and look at what this means to you.  If you must constantly recruit, you have no time to work with your team.  If there’s no money in team building and support, it won’t get done, and you will constantly be replacing distributors as they flounder and fail and flee.  

    That’s how we spell A-T-T-R-I-T-I-O-N.

    The above is a blog entry from my good friends Bob & Anna Basset. You can visit their blog and read their other helpful posts by clicking this link:


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