Have you chosen a compensation structure for your start-up network marketing company? Since it is extremely difficult to switch structures once you have an established company, this is one of the most important and permanent decisions you’ll make.
There are 4 main structures that have become extremely successful and popular: Breakaway, Uni-Level, Forced Matrix, and Binary.
Let’s take a look at each of the 4 structures:
BREAKAWAY COMPENSATION STRUCTURE
The Breakaway Structure is a generation commission program, where distributors are deeply paid on the group volume of his downline and the downline of his sales leaders.
The Breakaway Structure allows successful distributors to break away from their upline and start their own organization. Once the successful distributor has broken away, his original upline will receive a lower commission rate for his team’s sales.
There are 2 types of sellers in the sales force: Pre-Sales Leaders and Sales Leaders. Sales Leaders are paid more for the Pre-Sales Leaders in their downline than they are for the Sales Leaders (who have typically achieved a higher rank in the business).
Good for: Companies that can recruit full-time sellers and business builders. Although part time distributors have had some success with a Breakaway Structure, it was created for the full-time “gun recruiters” and still caters to them.
Pros: The Breakaway has stood the test of time. It was the chosen compensation structure of one of the original network marketing companies, and is still extremely successful today! In fact, the only MLM and network marketing companies that have reached a billion dollars in annual sales have had Breakaway Structures!
Cons: Teamwork is often discouraged out of fear that a downline will break away if he becomes too successful. There is not a lot of support or camaraderie among distributors – a fact that has negatively impacted the long-term growth of some smaller network marketing companies. The Breakaway Structure is also not as friendly to brand new distributors, especially compared to the Binary and Forced Matrix Plan.
UNI-LEVEL COMPENSATION STRUCTURE
Uni-Level Structures are the least complicated and friendliest to new recruits. This Structure is unique because it is only 1 level deep. Recruiters can only sponsor one line of distributors – putting them all on their frontline. There is no limit to how wide a distributor can build his business, so there is much potential for growth of new recruits. Most network marketing companies allow distributors to earn indirect commission payments 5 to 8 levels deep. This creates team building, sales training, and replicable success.
Good for: Start-up companies that want to attract part-time distributors looking for a chance to earn supplemental income.
Pros: This structure is friendly to new distributors and part-timers. With a minimal amount of sales volume per distributor, and a greater push to motivate the downline, it is extremely flexible to different schedules and demographics.
Cons: While it’s great for new recruits who want to earn a fast paycheck, the Uni-Level Structure may seem limiting for gung-ho business builders who want to work full-time and build a lifelong lucrative business. The income potential with this structure alone is often lacking, which is why many Uni-Level companies have created a generous Bonus Program to complement this structure.
FORCED MATRIX COMPENSATION STRUCTURE
The Forced Matrix Structures sets a predetermined width and depth matrix. For example, a 4×5 structure allows distributors to directly sponsor 4 people, and they will earn income on the sales 5 levels deep for those 4 original recruits. Most companies allow a distributor to “spill over” by placing new recruits under their 4 frontline distributors within the 5 levels. This has been extremely successful in promoting teamwork and giving distributors a great deal of control.
Good for: Companies with both part-time and full-time distributors who are willing to shift from a “Seller” role to a “Trainer” role.
Pros: Teamwork! Teamwork is the secret that helps distributors in a Forced Matrix stay with the company longer and achieve greater success! Once a distributor’s frontline is full, he can devote his time to training and motivating his team. And that’s why Forced Matrix companies with powerful training and marketing tools can go a long way.
Cons: Growth is limited. Many companies have added new bonus programs and “rollup” plans to help veteran distributors earn commission beyond their matrix.
BINARY COMPENSATION STRUCTURE
The Binary Compensation Structure allows distributors to sponsor 2 new recruits on their frontline. This creates 2 downline “legs,” and most companies only pay the distributor for the weaker leg. For instance, if one leg is generating 400 sales a month, while the other is generating 200 sales a month, the sponsor will be compensated for the second leg. As a result, distributors work hard to motivate and train the weaker leg, generating a lot of ongoing support and shared business interest. Once a distributor has maxed out his income potential, many companies have allowed them to begin a brand new organization, and start the cycle over again.
Good for: Start-up companies who want to attract both part-time and full-time go-getters. This structure is enticing to both new distributors and business builders who have left other MLM companies.
Pros: Friendly to just about every demographic: part-timers, full-timers, new recruits with no sales experience, and life-long network marketers.
Cons: Many MLM companies have found that Binary Plans cause them to overpay and lose profits. Make sure you consult an MLM marketing company before decided on this structure.
If you have any more questions about Compensation Structures, the answers are a phone call or click away! Reach out to our Marketing Team at Flying Man Productions to learn which structure is right for you, and how our MLM Software can help you manage your compensation plan.