The Comp Plan Conundrum

When it comes to network marketing, compensation plans make or break your experience. Most mlm companies build their compensation plan using confusing math and language to ultimately confuse you. Why? So they can pay you less while making you think it’s a good deal.  Let’s be honest, we all love the idea of financial freedom. But it’s vital to understand the mechanics of the comp plan you’re working with before diving in headfirst. Having gone through dozens with a fine tooth comb myself, I have a clear understanding of how they work.

In this blog, I’m going to help you understand the crucial pieces you should be looking for in a compensation plan to ensure that is fair, legal, sustainable, and rewarding.

 

Compression: No one should be left behind

Compression is one of the key factors ensuring that everyone gets their fair share of the pie. If you’ve ever heard that some people “pass you by” when it comes to commissions or rankings, this is what that means. Compression ensures that if someone in your downline isn’t active, the sales or commissions go up to the next active person.

Why it matters: Compression allows for better team growth and stability. You want to make sure that your compensation plan rewards engaged team members, but doesn’t penalize you when someone in your downline isn’t pulling their weight. A good comp plan will encourage teamwork without leaving anyone behind.

What to look for: Find a plan that doesn’t rely heavily on inactive legs to determine your commissions. This ensures that your income is based on the active work you’re doing — and the active work of your team.

 

Breakaways: Understanding How Breakaway Levels Work in MLM Comp Plans

Breakaways occur when a downline member hits a certain rank or sales volume and “breaks away” from your structure. This causes you to lose a substantial amount of compensation on that volume. Essentially what this means is that they form their own group. While breakaways are a sign of growth and leadership, they can also have a downside if the compensation plan doesn’t reward leaders for developing these breakaway teams.

Why it matters: If your mlm compensation plan doesn’t compensate you for breakaways, you might end up building someone else’s team without seeing the financial rewards. On the flip side, if breakaways are structured well, they can incentivize you to develop strong leaders and create a thriving business.

What to look for: Look for a plan that rewards you for building leaders while also providing you with continuous income as they grow. You should be able to support your leaders without feeling like your efforts are leading to someone else’s paycheck without benefiting you.

 

One-Time Rank Payout vs. Ongoing Rank Compensation in Network Marketing Comp Plans

In many network marketing compensation plans, achieving a specific rank may come with a one-time rank payout. This means that once you hit that milestone, you receive a bonus or payout, but after that, there are no additional rewards unless you achieve a new rank.

Why it matters: While a one-time payout for reaching a new rank is exciting, it doesn’t provide long-term stability or consistent income.

What to look for: A solid compensation plan should reward you not only for hitting a new rank but also for consistently maintaining that rank. Ongoing compensation for maintaining your rank ensures that you’re continually compensated for your hard work. This keeps your motivation high without the stress of hitting a new rank just to receive your payout. You want a system that rewards consistent performance, giving you more stability and long-term growth.

 

Residual Income: How Long-Term Earnings Can Grow

Residual income is one of the most attractive aspects of network marketing. The idea that your hard work will continue to pay you for years after you’ve done the work is a game-changer.

Why it matters: If you’re looking to build long-term wealth and freedom, it’s crucial that your compensation plan rewards you for residual income. This is the kind of income that comes in month after month, primarily from all of your client’s and team’s repeat purchases, like subscribe and save orders. This lets you know your work has a lasting impact, giving you the financial freedom to grow a sustainable business.

What to look for: Make sure your compensation plan includes generous residual commissions on product sales, especially on repeat purchases such as subscribe and save orders, and ongoing team performance. This helps ensure that your long-term efforts pay off.

Be mindful of commissionable volume. Sometimes, the percentage you earn from your downline’s sales may be hidden or set lower than expected. Always ask about how much commission you’ll earn and how volume is counted.

Lastly, it’s essential that you’re paid dollar for dollar on your personal sales. For example if a sale was $100 then your commission is a percentage of $100 and not $50 or $75. The compensation plan should reward your individual efforts directly, providing fair pay for the work you put in.

 

Rank Advancements and Bonuses: Rewarding All Levels of Growth

Most compensation plans reward you with a bonus when you reach a new rank. But it’s important to truly understand what it takes to reach those new milestones. The process of achieving rank advancements can vary greatly from company to company. And the journey isn’t always as easy as it seems.

Why it matters: Rank advancements and bonuses are fantastic motivators, but if the focus is only on reaching the top ranks or making major leaps then you will see a lot people burn out. This is especially true when only the highest levels are rewarded. A compensation plan that truly supports growth at every level is key for sustainable success. Your team should feel that all progress is valued and rewarded.

What to look for: Make sure your compensation plan doesn’t just reward the “big hitters” at the top, but also supports and rewards the efforts of those building at the bottom or mid-levels. Offering smaller, incremental rewards along the way helps prevent affiliates from burnout. Remember, a healthy, growing team relies on all levels of success—not just the top ranks.

Quick Tip: Check out my guide on scaling a high performing team

 

Double Dipping in Compensation Plans: Uni-level vs. Generational Pay

One of the benefits of a well-structured compensation plan is the opportunity to double dip. This means you can earn from both your direct sales and the sales generated by those you’ve recruited. Usually this is found in definitions like uni-level and generational pay. These structures allow you to earn multiple commissions from your team, based on your leadership level and their ongoing sales.

Why it matters: Double dipping creates an incentive for you to grow a wide network of business builders, not just a deep one. The unilevel structure often allows you to earn a flat percentage from everyone in your downline, while generational pay rewards you as you reach higher leadership levels with even more commission from your recruits. This incentivizes your personal growth along side building your network.

What to look for: When evaluating compensation plans, consider the flexibility of building wide rather than just deep. A good plan should allow you to benefit from both your direct sales and the success of your wider team. Ideally you want strong uni-level commissions. They allow you to earn as your team grows horizontally, in addition to generational pay that rewards long-term leadership development.

A Compensation Plan That Works for You

When choosing a network marketing or makeup direct sales company, make sure you understand the compensation plan thoroughly. That means comprehending everything from compression to breakaways to bonuses. Find a plan that’s built for everyone to experience sustainable growth and rewards leadership. The right plan can change the trajectory of your entire life. Make sure you’re business is backed by a compensation plan that supports your vision and goals.

If you’re serious about making moves and growing your brand, let’s have a conversation. I’m happy to take a deep dive into any comp plans you’re exploring and explain why I went with Bellame.