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"How to Choose an MLM Opportunity that will Give You the Best Odds for Success Before You Ever Get Started!!!" (Part II)
by Linda J Bruton

In Part I of this series, you learned that there are 4 very critical components of the perfect MLM opportunity for YOU. The first 2 are the most critical.

1. An Exceptional Upline Support Team

2. A Compensation Plan that Rewards Part-timers, but also Offers Generous Leadership Bonuses for Heavy Hitters.

3. Good, useful, fairly priced products or services that members will happily buy month after month.

4. An MLM company with a good track record, low debt, good management, a good product development strategy, and a good customer support organization in place.

In Part I of this article, we looked at the first of these important components. Let's move on to the second.

For too many years, too many MLM compensation plans have caused the high attrition rates that have created the revolving door syndrome that has made it so hard for the average person to succeed.

These plans were generally designed for the heavy-hitter - the big recruiters who could build a deep downline fast - not the average part-time distributor. Most of the big profits were either earned on lower levels of a matrix, which the part-timer couldn't fill, or very high monthly group volume requirements.

Unfortunately, the majority of people who join MLM programs never sponsor more than 6 people on average! In too many MLM programs, that isn't even enough people to break even on monthly product purchases. And if part-timers can't break even in a reasonable time, they're not going to stay with a company very long.

If you're with a company that places the highest payouts of a compensation plan in the lower levels of a wide matrix, you're going to have a very serious attrition problem. Most of the people you sponsor will never attain that payout, or even make enough money to break even. And if your downline doesn't make money, you don't make money.

In fact, you're going to end up spinning your wheels. You'll end up with the necessity just to recruit a certain number of people every month to replace all those who drop out. And that's just to maintain your income, not increase it!

That's why it's so important to choose a company right from the start that has a compensation plan that gives you the best chance for success. If you want to increase your income every month and not spend all your time replacing lost income, you need to choose a plan that prevents attrition.

The best compensation plans are those that reward the newcomer right away, get members to breakeven fast, and also reward the "heavy hitters" who build large downlines.

Many MLM pay plans accomplish these goals by paying out the highest percentages in the first 3 levels, plus pay some kind of infinity or leadership bonuses that will attract the professional, full-time network marketers.

Such pay plans are often referred to as "compressed" pay plans. They have become increasingly popular in the past few years because they have been proven to dramatically decrease downline attrition.

Compressed pay plans generally pay out 55-70% in the first 3 levels. The best ones pay out the highest percentage on Level 2. And there is a good reason for this. With a big payout on Level 2, members are encouraged to help their first level members! And that means growth, low attrition, and the development of good partnerships, which is the basis of network marketing!

Now take a look at compressed pay plans from the point of view of a part-timer, or a prospect that is brand new to MLM and not sure they will be able to recruit anyone after they join. One of the compressed plans I'm familiar with pays 15% on the first level, 40% on the second level, and 10% on the third level, plus infinity bonuses to leaders who meet certain requirements.

For the sake of this example, let's assume that everyone is at 100 BV product purchase. Our part-timer can achieve breakeven from this compensation plan with just 4 members, 2 on the 1st level and 2 on the 2nd. The 5th person they recruit will put them solidly into profit! Our part-timer can be earning an income of over $400 per month with just 12 people: 3 on their 1st level and 9 on their 2nd level.

Now compare that to all the compensation plans you see that pay only 5% on the first 3 or 4 levels, before finally putting some real money in the bottom levels. In order to achieve breakeven in those plans, our newcomer will have to sponsor a total of 20 people just to breakeven! And as we've seen, the average person never sponsors more than 6 people into an MLM program! A big reason for this is that they never reach breakeven, so they drop out of the program before they sponsor more members.

Compressed pay plans can reward our newcomer for just a few successes. Studies have shown over and over again that when people can get to breakeven fast, and then build a check of just $200-$300 per month, they seldom drop out. That's why it's so important to choose an MLM program with a compensation plan that will make that possible.

But what about the heavy hitter? If you want a downline that will grow quickly and expand every month, you definitely want a compensation plan that will attract big recruiters. In fact, your compensation plan should do both - attract heavy hitters and part-timers - because you will get both in your downline.

Let's take another look at our sample compressed pay plan. We've already seen that it is set up to work well for the part-timer and will get members to breakeven fast. This particular company pays 2-14% on levels 4 through infinity to those members who meet the requirements for the infinity bonus.

The problem I've seen with most of the current compressed pay plans, however, are the extremely difficult requirements for reaching the leadership levels. Another problem is that these programs have often built in a lot of "breakage."

What is breakage? One good example is the BV or PV system.

This particular program requires you and several first level members to be at 100 BV in order to attain the leadership bonuses. However, 100 BV is not the same as ordering $100 of product. In fact, the cost is closer to $180/month! And yet, the compensation plan only pays you a percentage of the 100 BV, not the actual $180 being spent! That extra $80 is pure profit to the company that they don't have to pay commissions on.

Another example of breakage is all the many members who don't attain the leadership bonuses. Thus, they don't get paid on their 4th levels through infinity. So even though the company may advertise that they are paying out 80% of BV to distributors, the reality is very different! In most cases, they only have to pay out 65%. And again, that's 65% of BV, not the actual sales amount of all the product being bought.

When you are looking at one of these compensation plans, be sure to check out the issue of breakage when you consider how high a percentage the company is really paying.

The Internet and many new Internet-based MLM programs are already changing a lot of perceptions regarding compensation plans and what they should look like. But I think the most important issue to keep in mind is choosing a plan that is fair to distributors and produces very low attrition rates. This should be your #1 consideration.

With low attrition, your downline really can grow geometrically, as members of your group become more and more successful. Your income can increase month after month. With a high dropout rate, you'll have to work harder each month just to maintain your current level of income.

Why make it harder on yourself? Choose a compensation plan right from the start that gives you the best chance for long-term success!

One of the worst compensation plans I've ever seen was the 2 X 12 matrix that was popular a few years ago. Its big claim was the promise of massive upline spillover. This was supposed to come about simply because a member could only put 2 people on their first level, and everyone else would spillover below.

The big problem is that with so many pay levels, each level only paid a small amount - about 4-5%. And such a low payout meant members had to have 20-25 people in their downline just to breakeven, let alone make any money!

The attrition rate was very high in companies using the 2 X 12. And to add insult to injury, most of them didn't even use a roll-up feature when members dropped out. That left matrixes with so many holes they looked like a piece of Swiss cheese! Needless to say, none of those companies are still in business.

Other very complicated, convoluted compensation plans have emerged in recent years with all kinds of catchy names. But if you don't understand how a compensation plan works and what you'll have to do to make money, avoid it like the plague.

If it requires you to do things you don't like to do (such as retail product), don't buy into it, no matter how high the rewards. It really doesn't matter how much a plan pays if you can't do what it takes to earn the commissions!

Don't choose a plan that requires you to retail large amounts of product. Even if you're a great salesperson and enjoy selling, most of your downline won't. And if they don't also sell, they'll drop out, and you won't earn the commissions you could be earning.

Once you've located a good MLM upline support organization, take a good hard look at the compensation plan of the company they promote. It should be fair, easy to achieve breakeven quickly, be attractive to heavy hitters and part- timers both, offer good leadership bonuses, have reasonable requirements for reaching the leadership levels, and be fair to distributors.