10 Tips to Building a Successful Compensation Plan

One of the most important tasks when starting a new network marketing company is creating the sales force compensation structure. We at Flying Man Productions have years of experience helping start-up companies establish new compensation structures and established companies rework unprofitable or ineffective structures. Here are some tips you should consider before creating a new compensation plan – or re-evaluating your current structure:

1. Define Objectives

Before you start looking at numbers, make a list of your greatest priorities. What does success look like to you, and what do you want this compensation plan to accomplish? For instance:

  • Attract new distributors with exciting commission opportunities
  • Retain business builders with long-term growth potential
  • Encourage veteran distributors to keep selling
  • Create generous compensation without overpaying

2. Be a Good Accountant

This is so obvious, but you’d be surprised how many companies miss this step. Know your profit margin. Be so comfortable with your balance sheets, income statements, cash flow statements, and financial statement ratios that you can recall them in your sleep. The more you know now, the less unwelcome surprises you’ll have in the future.

3. Keep Growth in Mind

Enticing short-term commission checks will bring in new distributors, but long-term rewards and possibility for growth will keep hefty business builders and recruiters on board. You need BOTH for your company’s long-lasting growth! Make sure every decision you make will support the health of both new and veteran distributors.

4. Choose a Structure

While you want your compensation plan to be tailor-fit to your company, you don’t have to reinvent the wheel! There are 4 main network marketing compensation structures: Breakaway, Uni-Level, Forced Matrix, and Binary. There are pros and cons to each, so make sure you thoroughly understand them before making a decision.

Keep in mind that these four structures are nothing more than general outlines. Be bold and think outside the matrix! Pick and choose what works for you. Perhaps simple referral commission program with no matrix is your solution.

5. Don’t Be Afraid of Innovation

A little innovation can go a long way! One new idea could make all the difference. Don’t be afraid to brainstorm and entertain the idea of doing something totally different. The companies that are solving problems with old structures and coming up with new ideas are almost always successful at bringing in worn-out recruiters who have been burned by other companies.

6. Consider Bonuses or Incentives

You want the compensation to be consistent – through profitable years and difficult years. A bonus or profit sharing program will provide extra incentives during the high revenue years, and energize your sales force to continue their hard work.

7. Play it Out

Determine what you think your recruiters will want to make at the end of the first month, 6 months, and 1 year mark. Find out how much they will need to sell and recruit to make that goal. Now create a catchy, attainable business model to get there. For instance:

“Just remember the Rule of 3: You sign up 3, who sign up 3, who sign up 3!”

8. Call a Pro

Consider hiring an MLM marketing agency to help you identify:

  • What your company needs
  • What your ideal recruiter can practically accomplish
  • How you can jump over the hurdles that other companies have faced
  • A complete campaign for a memorable business model

If you have a startup company, you could use some wisdom from someone who has been in the industry and has seen what works and what doesn’t. Even if you have a healthy, established network marketing company, a fresh perspective could be exactly what you need to recharge your sales force and increase your bottom line.

9. Check the Market

Compare your sellers’ salary with other network marketing companies. If a prospective gun recruiter is looking at the same numbers, will he want to come onboard? Could he sell less and make more somewhere else?

10. Re-Evaluate

At the end of each fiscal year, re-assess your compensation structure and make sure it is still working for your budget and motivating your sales force. What could you tweak? What new incentives should you consider? Have you spotted areas that should be redefined or reeled in? Call in an unbiased MLM expert to help you re-evaluate and plan for the next year of success.

If you need help creating an exciting network marketing compensation plan, Flying Man Productions is just a call or click away!