Can We Have A Simple Compensation Plan?

October 21, 2010 By admin Leave a Comment

Simple MLM compensation plans are attractive because they are easy to explain.

Unfortunately, simple compensation plans don’t motivate all of the behaviors that we want from a direct selling sales force.

For example, a compensation plan that provides one level of compensation on the sales volume of others doesn’t motivate representatives to teach people how to recruit others. And teaching people how to recruit others is a vital behavior we need to build a multilevel sales force.

We also want to motivate and reward the development of new leaders by current leaders, regardless of where the new leaders are in the downline of the existing leader. Compensating representatives on the volume of others one, two, or three levels down doesn’t do the job.

While it is true that the average representative never recruits anyone, the recruiting rate is important. The percentage of representatives who recruit at least one person is between 20% and 25% in most party plan companies and between 30% and 40% in most network marketing companies. If your starter kit cost is low, you will see a lower rate of recruiting, because more people will join just for product discounts.

Most representatives of party plan companies earn the majority of their income from personal sales, but the top earners receive most of their income not from personal sales, but instead from bonuses earned upon the sales volume of others. As a sales force matures, the bulk of the volume generated moves down the tree. In other words, representatives who recruit others, over time see their bonuses being earned from volume generated from deeper in their organizations. To be able to provide full-time income to those representatives who seek it, compensation plans need to pay upline representatives on more than just a few levels of volume.

If you look carefully at the compensation plans of successful direct selling companies, you will find that none of them have single-level, two-level, or three-level compensation plans. In fact, none of them have simple compensation plans. To sum up, while simple compensation plans are attractive to many, the reality is that they don’t work to build a multilevel sales force.

One of our frequently requested services is compensation plan design. If you’d like help with yours, we’re here for you! For answers to your questions, call 503.244.8787.

Jay Leisner, the President of Sylvina Consulting, is a top compensation plan and direct selling expert, a trusted adviser to new and established network marketing and party plan companies. For more than 30 years, Jay has enjoyed assessing and improving network marketing, party plan and referral marketing companies across the globe.

Jay Leisner and Victoria Dohr authored the top-rated book for new and young network marketing, referral marketing, and party plan companies, "Start Here: The Guide to Building and Growing Your Direct Selling Company".

Available in English and Spanish. This startup guide contains 250 pages of wisdom that will guide you through the right steps to start and continue on your journey to build a successful direct selling company.

You will save thousands of dollars and hundreds of hours of your time using the information you will read in our book.

In 1986, Jay began his career in direct selling by working for a major direct selling software provider. First as a software developer and later as a project leader and a business analyst, Jay worked closely with new and established network marketing and party direct selling companies to provide them with software solutions to meet their unique requirements.

Jay contributed in many ways to the success of large implementation projects for many companies. Jay also worked with dozens of smaller companies to assist each of them in various capacities to provide them with the systems they needed to help their businesses to grow faster.

Along the way while working with them, he learned the secrets of successful direct selling companies and the challenges faced by them. In true entrepreneurial spirit, Jay’s decision in 1999 to start Sylvina Consulting as a direct selling consulting company was driven by what he saw was a need for answers, advice, and solutions.

In 2004, 2006, 2009, 2014, and 2018, Jay gave presentations on compensation plans, recognition, and field leadership development at conferences held by the US Direct Selling Association.

He traveled to South Africa in 2015, 2016, and 2017 to conduct workshops on compensation plan design and recognition programs for member companies of the South African Direct Selling Association.

In 2017, Jay spoke at the Canadian Direct Sellers Association Meeting on the importance of recognition.

More than just a compensation plan expert, Jay is exceptionally skilled at advising new and established companies on business strategies. Before offering advice or solutions, he asks important questions to understand each client’s specific concerns and goals.

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