6 Things to Be Aware of When Choosing a Sales Incentive Compensation Plan - By: Ryan Martin
In the network marketing industry you tend to hear a lot about comp plans. More often than not, people will argue that their company has the "best" comp plan available. Compensation plans continue to evolve just as network marketing evolves as an industry. There is always going to be pros. and cons to any comp plan no matter what, because it is like a give and take relationship. If one company offers more to distributors on the front end, then all that means is that they will take more of your profits down the road.
The KEY thing to remember when looking at comp plans is to remember that for every advantage a certain plan offers, there is also an equal and opposite disadvantage. So when you get approached by someone who claims that their comp plan is the best, you will know that there are many disadvantages also. With that being said, lets take a look at 6 things to look at when choosing a comp plan.
1. Limits On The Size Of Your Organization
When you start growing your own MLM organization it is going to grow both horizontally and vertically. For this reason it is very important to see what limits your comp plan places on your growth. The width of your organization would be called your frontline. Some comp plans such as the Matrix and Binary put limits on the width. There are also many plans that put limits on the depth of your organization, so it is very important to be clear about this before hand.
In order to reach a certain percentage of commission, companies will often require that you sell a certain amount of product each month. Not all plans work this way, but it is a good idea to see if you are going to be required to sell a certain amount of product each month.
3. Back end or Front end?
When looking for a compensation plan, it is important to find a plan that works with your goals and vision. If your goal is to make a lot of money up front, and less on the back end, then you will want a plan that will make that happen for you. If your goal is to get a little less in the beginning and get paid handsomely on the back end, then there are plans for that as well.
This is the percentage that the company is going to give to you every time you make a sell. People think that the more a company gives you the better, however, if they give distributors too much they will not survive. The company has to keep enough to support itself otherwise you would get nothing.
Breakage is the difference between what your company promises to pay and what it really pays. It is important to read the fine print and understand exactly what qualifications you will need to hit in order to receive the amount that they claim to pay. Breakage is nothing more than an advertising ploy to make the comp plan seem better than it really is. ex. $9.99 compared to $10.00.
6. Type Of Plan
There are four major types of compensation plans to be aware of:
It is important to understand the comp plan that you are looking at, but at the same time it is also important not to spend too much time analyzing a particular plan. The plans can be complicated and can take a lot of work to understand fully, find one that looks like it can fulfill your goals and go with it.
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