FROM COMMISSION PLAN TO COMPENSATION STRATEGY by MARK RAWLINS

Author:MARK RAWLINS
Language: eng
Format: epub
Publisher: InfoTrax Systems, Inc.

The point at which earnings max out, hinges on the type and setup of the compensation plan. In 2010, we saw that, in general:

Binary commissions maxed out at between $15,000 and $40,000 a month.

Unilevel and breakaway commissions maxed out anywhere from $15,000 to well over $100,000 a month.

As distributors transition from sales person to sales leader, they will not only have sales people in their downlines who are directly sponsored by them, but they will also start to have sales people deeper in their downline organizations. Some of these sales people will begin to make the transition to sales leader activities. All of this adds up to the fact that they will start to have downline sales on which the only commissions they make are baseline commissions. This will continue until they get to the point where their baseline compensation has started to max out and decline. In most plans, the company determines the "box" on which compensation will be paid. It may have to do with ranks, pay levels, volume, etc., but whatever the rules that define this "box," any volume that is outside the "box" will not be counted for compensation.

The tremendous variability in these max-out amounts is due to the rules a company puts in place. The stricter the rules, the more money a company can pay out because fewer people will qualify. If qualifying for a specific commission is a formidable challenge, fewer people will earn it, leaving more money for the plan to pay out at the higher levels.

Front-End Compensation: Paying the Sales People

One of the most important goals of the compensation plan is to pay sales people for finding and servicing product users. Another is to encourage sales people to help social networkers find more consumers. A company should always consider any "outside the plan" retail compensation before they begin to plan the front-end compensation. Sales people who are earning a reasonable retail commission may not need as much front-end compensation.

There is a tremendous amount of variability in the approach to paying the Sales People. Often, companies combine multiple commission types to form the total front-end compensation to pay Sales People. The long-term health of the company depends on an effective front-end compensation.

The income a person earns as a distributor for a network marketing company is often a second income on top of a full-time job. And many (if not most) tend to view the money earned through a side business as their own (like "mad money"). That extra few hundred a month means that those people can now achieve or buy some things they want.

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