7 Factors of a Compensation Plan
As stated on Page 1 of the Best Compensation Plan, here we have the 7 Factors to Consider the Best Compensation plan. Remember as you read these 7 factors, that each and everyone will vary depending your skill level and your background.
This should be the basic principle of any compensation plan, that it is easy to understand and therefore easy to explain. If you are looking at a new company and their compensation plan, even if you are new to the industry you should be able to quickly grasp and understand the compensation plan. Then with a little training you will be able to easily explain it to new prospects.
If the compensation plan is difficult to understand for you, when the time comes that you have to explain the compensation to your prospects they too may experience difficulty understanding it. The easier a compensation plan is to explain, the more confidence your prospects will have that they too will be able to explain it.
Hype is an area that will always be in the Network Marketing industry. Hype is great for building excitement, but that is about all it is good for. When looking at a compensation plan of your potential company you need to look at how long the company has been in business. Yes there are those that say the sooner you get in the more money you will make, but what they are forgetting to tell you is that also the riskiest time too.
Start-ups and "ground floor" opportunities do not have history to prove that their business model, complete with their compensation plan work. You can not verify that information that you are being told is accurate and truthful. On the other hand companies that have been around past the 3 year mark will start to have the history and actual numbers that you can look at to see how well the business model works.
Remember, the newer the company the higher the risk you are taking. A balance is needed and only you understand what level of risk you are willing to take.
Being financially transparent is something that every network marketing company should be. Being financially transparent means that if asked for, the network marketing company will provide you a break down of their compensation plan. This information would include items such as the percentage of gross income that is paid out to the distributors / associates, allocated towards research and development, spent in the manufacturing and distribution of products and last but least, the percentage of gross revenue that is profit.
If the network marketing company that you are looking at is publicly traded, you will be able to easily see this information as all publicly traded companies have to be financially transparent. Simply look at their annual statements. If however the company is not publicly traded, you will have to do some additional "homework" and contact the company directly. Be cautious of any company that is not willing to share this information with you
Simply getting this information about your potential network marketing company is not all you need to do. You must now look at the bigger picture of what this information tells you. How well balanced is your potential network marketing company? For example, if the company is making a lot of money, but paying most of that out to the distributors / associates, making a very cheap product and not making any profits for the company, that is not a sustainable situation long term. So what is a sustainable solution?
From the reviews that we have conducted, most successful network marketing companies have a very good balance of what they return to the distributors / associates in the form of commissions. It is usually in the range of 35-40% commissions paid back to the distributors / associates.
One more very important thing that you will have to look for is research and development. What percentage of income is being directed to research and development of new products? This is important as you do not want to get involved with a network marketing company that is not staying currently with customer's needs and wants.
Research and development will ensure that new products are being introduced by your potential network marketing company that allows all of its distributors / associates to promote and sell products that are relevant. If no monies are being allocated to research and development, this again is not a sustainable solution long term.
7 Factors to Consider for the Best Compensation Plan, . . . Page 3 >>
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This is why you must inform yourself of the possibilities which exist all around you to achieve your desired lifestyle. Information is key, then taking action is vital to your success.
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