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compensation plan

Compensation Plan Basics Page 5

Calculating Business Volume and Commissions

The commission that you will earn from your Network Marketing company's compensation plan is based off of business volume generated in your organization. Therefore your goal is to build your organization a big as possible as fast as possible to generate as much business volume as possible for larger pay.

As there are a multitude of variations to how compensation plans pay the distributors / associates, we cannot go through all the variations. We can however outline some of the main items that are usually considered in compensation plans and what they take into account for calculating your business volume.

  • Level Volume - This is the business volume generated and accumulated in a level of your organization.
  • Leg Volume - This is the business volume generated and accumulated in a leg of your organization.
  • Group Volume - This will be the amount of business volume generated and accumulated throughout your entire organization.
  • Carry-over Volume - This is the amount of business volume that is not used in a pay period. This business volume is then "carried-over" to the next pay period, where it is combined with new business volumes generated in your organization. Carry over business volume acts like a bank that allows you to keep business volume that you have not been paid on so that you do not lose commissions. Most companies have a carry-over policy in place, but be sure to ask what that policy is so you understand what you have to do to keep the carry-over volume.

 

Variable Level Commissions

This is usually the area that generates the most confusion for people looking at a compensation plan for the first time. It can be difficult to understand the levels and their respective percentages for commissions. Understanding the levels of commissions and how they change is usually required if you are looking at a Matrix, Stair Step or Unilevel Compensation Plan.

Compensation Plan Organization Variable Commissions

The image simply shows the same organization, in this case a (3 X 2) Matrix, and on the left shows a variable pay rate, where on the right it is a consistent pay rate. You will have to refer to the compensation plan that you are looking at to see what type you will be working with.

Simply put, you will earn these percentages based on the business volume that is generated in this levels. Understanding what the percentages are for each level will determine which levels you will need to develop and work with most.

Ranks and Advancement

This is not something that every Network Marketing company and compensation plan have. There inclusion or exclusion does not make it a better or worse plan.

When working with a compensation plan that has Ranks and Advancements, you will need to understand what signifies these changes. They will always be based on your organization's business volume, as well as numbers of distributors in your organization. Asking the questions will inform you, as well as create goals for you to achieve.

As the Ranks and Advancements are always tied to your organization's business volume, as you progress through the ranks, you will also start to earn more money. The various Ranks and Advancements will come with increases to your commissions as well as leadership bonuses. Again ask about what the various Ranks and Advancements are and how they effect your pay.

Bonuses

Many Network Marketing companies will offer bonuses to entice new distributors / associates to join. The bonuses can be anything from cash amounts to vehicles to trips. Be aware of what the bonuses are for your potential network marketing company, and also be informed as to what is required to achieve them. A lucrative bonus should not be in place to make up for a sub-standard compensation plan.

They will always be based on some form of organization performance and sometimes they are out of reach of most distributors / associates. That is not to say that bonuses are only an illusion, they are just an area that you need to understand and not base your decision to start with a network marketing company on the types of bonuses you can receive.

What is the Best Compensation Plan?

That covers the basics of what a Network Marketing company's compensation plan is all about. You should now be able to decipher the jargon that you will see when investigating a Network Marketing company's compensation plan. If however you have further questions, questions regarding a topic that we have not covered, please ask us. You can contact us through our Contact Us section.

There is of course the question that we receive many times when talking about Network Marketing compensation plans . . . and that is what is the Best Compensation Plan? To answer that question, we have put together 7 Factors to Consider for the Best Compensation Plan that you should look at when considering a compensation plan.

Read what 7 Factors to Consider for the Best Compensation Plan are right here.

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