What is the Best Compensation Plan?

To determine the best compensation plan, there are a number of factors that should be considered. Some compensation structures are more suited towards those confident in their recruiting ability and those with industry experience, while others are more supportive to people that are new to the industry, part-timers and the so called “average” distributors. On this page we will discuss a list of factors that you can use to help identify a good compensation plan.

The difficult part when evaluating the best compensation plan is not to listen to peoples opinion because you find when you ask someone in the industry what they think is the best compensation plan, they will almost certainly respond with the compensation plan used by their current company. In particular they will highlight features that they find attractive and have found to be a good selling point. However, if you were to ask the same distributors what they know about other compensation plan models; it is usually followed by a blank look on their face and the fact that they know very little about other plans. Because the Network Marketing Industry is highly competitive, where individual companies are consistently trying to out-promote each other, it is not uncommon for companies to use propaganda by promoting their compensation plan as being the best in the industry. Additionally since all network marketing companies have a compensation plan, it allows for companies that sell different types of products (eg vitamins, technology, insurance etc) to use their compensation plan as a means for comparison and as a benchmark for success against both direct and indirect competitors within the industry.

So what is the best compensation plan?

In order to evaluate all of the differently compensation plans objectively to determine the best you would not only need a PHD but also a full time job to do it. Making it even more difficult is the fact that a number of network marketing companies are not willing to reveal their financials to third parties (therefore you cannot properly evaluate their compensation plan) and whilst some compensation plans might look good on paper, unless you have had practical experience working with them, it would be impossible to give a proper analysis. Whilst many network marketing companies and distributors claim to have the “best compensation plan” this is a very subjective statement and they will generally have little evidence to support their claims.

So whilst it is almost impossible to determine the best compensation plan, what we can do is to provide you with a list of features that you should be looking for to see if the compensation plan is right for you.

Finding the Best Compensation Plan for You

Important note: If you are new to the industry the first thing to consider when reviewing any network marketing company is the product line. It doesn’t matter how good the compensation plan is, if you’re not passionate about the products or services they have to offer and / or you would not feel comfortable promoting them, then it will be difficult to reap the rewards of even the best compensation plan.

In this chapter we have already discussed each of the 4 main compensation structures and highlighted that they all have both pros and cons. For more information about the different compensation structures (Unilevel, Binary, Matrix etc) please return to the start of this Compensation Plan Chapter.

The best compensation plan will be easy to understand and to explain

The basic principle of any good compensation play should be both easy to understand and with a little training it should also be relatively easy for a new distributor to explain. As a general rule the more complicated a compensation plan is, the harder it will be to explain. If your prospects can see that your comp plan is easy to understand and explain, they themselves will feel more confident in their ability to join your business.

The best compensation plan will have a proven track record

Any good compensation plan should have a proven track record. If the company has been around for 5 years or more then there is a fair chance that the company’s business model is sustainable and that the company is in a reasonably good financial position to provide you with a stable long term business. Be cautious of ground opportunities that have not yet proven to be sustainable or have a compensation structure that is new and untested.

The Company will be financially transparent.

A good network marketing company will be financially transparent and be able to provide you with a breakdown of their compensation plan. You should be able to find out what percentage of gross income are returned to the distributors, is allocated towards research and development, go towards manufacturing of products and towards company profits. All publicly traded companies have to be transparent and will provide this information in their annual reports. If the company is not publicly traded we suggest you do your homework and contact the company directly for the relevant information. Be cautious of any company that is not willing to provide this information.

Additionally once you have this information look at the big picture and not just at how much is being returned back to the distributors. For example if the company is returning a high percentage of profits back to the distributors, but is manufacturing a cheap product and is not making any profits for themselves they are unlikely to be sustainable in the long term. Most proven sustainable network marketing companies that we have reviewed are returning at least 35-40% of their income back to their distributors through commissions.

Another important consideration is the percentage of company profits being put aside for future research and development. Why is this important? Well you want to be partnered with a company that is cutting edge and continually evolving with the marketplace. You don’t want to be left promoting a product that is no longer in demand. Additionally this can help your company to improve their market position

The best compensation plan should be evenly weighted?

The best compensation plan should not be overly weighted (i.e. front-end loaded) towards signing new associates. In some cases these type of pay plans border on pyramid schemes. These types of compensation plans make it hard to earn a good income without having to constantly recruit new distributors. Even after achieving a level of success with these plans you will find it difficult to earn a passive income, instead you will feel like you have a full time job as a ‘sponsor monster’.

Instead look for a compensation plan that rewards the development and maintenance of a customer base, as this is the only way to create a truly residual income. Additionally the pay plan should reward hard work, not those that get in first. (I.e. it must fair and equitable).

The best compensation plan will be fair to all distributers?

The best compensation plan will reward hard work. It should not matter when or where you enter the company’s compensation structure, you should have the same earning opportunity as everyone else. Remember if you are rewarded for getting in early that only makes it harder for everyone else that joins your team which is not sustainable. The best compensation plan should be the fairest and provide equal opportunity for anyone who wants to put in consistent effort.

Evaluate Any Bonuses Carefully

A word of caution about bonuses, whilst a lot of modern day network marketing companies offer attractive bonuses (cars, travel etc.) to entice new comers and encourage recruitment, it should be remembered that in order to achieve these bonuses your business must first reach a certain level of success. Not everyone will go on to achieve these bonuses and as a general rule the more impressive the bonus looks, the greater amount of success you have to achieve to earn it.

Whilst bonuses can still offer incentives the fairest bonuses are those that come in the form of a percentage of extra income. For example those distributors who are responsible for the greatest percentage of weekly sales and business growth should be entitled to the greatest percentage of bonuses in the form of extra income. These may take the form of leadership or fast growth bonuses added to commission payouts to the distributor.

The best compensation plan will be practical for you?

One final thing to consider when evaluating the compensation plan is whether you believe you are capable of meeting its requirement for success. Establishing your frontline is often considered to be the first milestone and therefore a good question to be asking is how many people will you need to personally sponsor to establish your frontline and earn a your first commission with the company?

Because the Unilevel and Stair-Step Breakaway plans have unlimited width restrictions, you will generally be required to personally sponsor a large number of frontline distributors to earn a good income, therefore these plans are best suited for those who are confident in their ability to actively recruit new distributors upon joining.

With the Binary Plan and some ‘narrow’ Matrix Plans there is generally less emphasis placed on personally recruiting new distributors (ie you don’t have to personally recruit as many new distributors to fulfil your frontline), but instead there is generally more effort required in helping (training and support) new distributors to establish their business. These plans are generally more supportive and rewarding for building teamwork.

In summary Network Marketing Business School encourages you to pick a Network Marketing Company that not only provides you with the best opportunity, but one that is also supportive to your future work colleagues (downline distributors). Additionally as stated previously in this chapter, although it is important to consider the compensation plan when evaluating which Network Marketing Company to join, the product range and practicality of the company’s business model should be heavily weighted in your final decision.

We hope this ‘Best Compensation Plan’ page has helped to provide insight in what to look for when evaluating compensation plans. We wish you the best of luck. Please consider returning to this website for all your Network Marketing Training needs.

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