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Author: Kerry Johnson

The Best Way To Understand Network Marketing Compensation Plans

Copyright © 2008 Kerry Johnson

Millions of people join MLM and Networking Companies everyday and do not understand the compensation plans. There are millions more in networking companies right now struggling and have no idea that they will never make any money in the company they are in because the compensation plan, most likely is impossible for them to have any success.

My experience, when coaching others in this industry who are building a good business as I am, ask the same question about not understanding compensation plans. My question is would you start a job without knowing how you are paid? Of course you wouldn't. So why would network marketing be any different? The thing is we really don't know how to look at compensation plans and some of them are extremely complicated. Here is a tip for you to figure out if the compensation plan for the company that you are either with or looking at is any good.

First, find out the minimum amount of product that you have to order every month. Then determine how many people you would need actively ordering within your entire team, every month, to make the income that you want. It is that simple. Let me explain. When you look at the number of people who actively order your product every month, to make a residual income of "X" amount of dollars, you can determine if it is worth your time and money for your efforts.

Let's use ten thousand dollars as a reference point. How many people do you need to make ten thousand dollars of true residual income every month? I use ten thousand dollars because it is a simple value to calculate. Secondly, if you want to make twenty thousand, multiply by two, if you want to make five thousand divide by two and if you want to make a thousand, divide by ten. So ten thousand dollars is a good way to determine if the compensation plan for any company is good or not.

The sad thing about this industry though is when you average out all the compensation plans of different companies, you start to realize that in order for any individual in network marketing to make ten thousand dollars a month, they would have to build a team of about twenty-five hundred people. That is, to make ten thousand dollars per month of residual income, a distributor needs about twenty-five hundred people actively ordering every month! How is that likely to happen? It's not. This is the reason most people fail in network marketing.

That is the sad part but here is the good news. Once you start to look at compensation plans from this perspective, you start to notice things. Like, if I need a thousand people to start to make money, this is definitely not a good opportunity. There are worst companies than that. Other companies you need two thousand to make ten thousand a month. I've seen companies where you can make ten thousand a month with less than four hundred people.

So if you look at it from a part time person's perspective and there is a company where they need twenty-five hundred people to make ten thousand dollars, that would mean for a part time person working one or two hours a night to make only a thousand dollars of extra income, would have to have a team of two hundred and fifty people actively ordering. How likely is that to happen with a part time person? Not too likely. But if you're in a company where you need less than four hundred people to make ten thousand a month, divide that by ten, now it means your part time person can make a thousand of part time income with less than forty people. Now that is a lot more doable for your part time person than two hundred and fifty people.

So the way I look at it is what is your time worth? For example, you are building a business in network marketing and you have to build a team of twenty-five hundred people to make ten thousand a month and, your next door neighbor is in a company where she needs less than four hundred people to make ten thousand a month. Well, you're both putting in the same efforts in building your businesses but maybe your making about five to ten dollars a hour compared to your next door neighbor putting in the same amount of effort, who is making two hundred or greater per hour. I think your effort is worth two hundred dollars per hour. If you don't agree, that's ok.

So when you start to look at compensation plans from this perspective, you can literally determine if it is a good opportunity or not. I hope this help those who are either looking to get into network marketing or those who are already in a network marketing company.

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