The best MLM compensation plan is the one that pays the most money for the least work.
That’s not lazy or greedy. It’s just smart. It’s as smart as getting paid $50 per hour rather than $10 per hour for doing the same job.
After seven years of failure, but hard work and determination they finally figured out how compensation plans really work. Over the past 5 years they have analyzed over 500 MLM company compensation plans. From binary, to matrix, to stair-step-break-aways; you name it they have analyzed the pay structure. They know what pay plan works the best.
As mentioned above, the best MLM compensation plan IS the one that pays the MOST money for the LEAST amount of work.
Here is what Bob and Anna have learned over the past 5 years and posted in their article The 10K Formula.
We get paid for just one thing – selling stuff. We sell the stuff ourselves and we find others to sell stuff with us and we get paid for that too. We can’t do it all ourselves, so wouldn’t it make sense to find a compensation plan that requires finding the lowest number of people to reach our financial goals?
That’s where The 10k Question comes in handy. It’s the best yardstick we’ve found to compare comp plans:
How many active people do I need in my business to generate $10000 per month in walkaway residual income?
In the 500 or more companies we’ve analyzed in the past 5 years, we’ve found an astounding variety of answers to that question, ranging from a reasonable low of 400 all the way up to an astronomical 40000! No wonder people are confused and failing!
But how do you figure it out? How can you find the 10k answer for your company or one you are considering?
You can use our 10k Calculator or follow this simple two step formula:
1. Average income per person:
Find the average autoship in your company or in your team. For example, a company may require a minimum of 100 points or $150 per month to qualify for all bonuses. If you have variable requirements, find the average for your own team, or call your company and ask for the figure.
When we don’t have the company number, we always use 100 points, standard in the industry.
Example One: Let’s say the average (residual only!) commission paid out is 8%. It’s low, but common among MLM companies.
Your average earnings are 100 points x 8% = $8 per person per month.
2. Number of people required:
This tells you that in your company, you will need about 1250 people purchasing 100 points per month for you to earn $10000 per month. If your goal is $5000, just divide 1250 by 2 to get your answer of 625 people.
In short, the number of people needed for 10k is $10000 ÷ (average autoship x average % commission)
Example Two: Let’s consider a communications company with an average monthly bill of $40 (used in their presentation). The average commission they pay over seven or eight levels is about 2%. No kidding.
Each person would generate $40 x 2% = 80 cents in income to you each month. The number of people required in this company would be 10000 ÷ 0.80 = 12500!
Is that a small number or a big number?
Don’t be surprised. Excel Communications lasted fifteen years with these numbers, and there are still many companies out there with the same plan or worse. It helps explain why so many MLMers are failing, having never done this kind of simple math. We speak from experience, as we ignored our multilevel poverty for five years!
Example Three: Excel paid an average of 2% on a long distance bill of $25. That meant we needed 10000 ÷ (25 x .02) = 20000 customers to reach 10k! No wonder we never made it.
Example Four: Here is the lowest number we’ve been able to find. A streamlined company offers an average team commission of 25% on a monthly autoship of 100 points. The 10k answer for partners in this company is 10000 ÷ (100 x 0.25) = 400 people.
Now which sounds better to you, 20000 or 400? Would you knowingly choose to work 50 times harder than you have to?
How To Calculate Average Commissions:
Example Five: If you are in a matrix or unilevel, the calculation is straightforward. Let’s say you are in a matrix of seven levels deep with commissions of 7%, 6%, 5%, 4%, 3%, 2%, 1%.
The average over seven levels is (7+6+5+4+3+2+1) ÷ 7 = 4%. 10000 ÷ (100 x 0.04) = 2500 people!!
If you are in a binary program, you are paid only on your weaker leg. You are usually required to activate your position by sponsoring two people – one on the left and one on the right. Your efforts are immediately split in half.
Less than half actually. If you sponsor Alice and Betty and Alice is a big builder, you will be paid on Betty’s leg. If Betty is the bigger builder, you get paid on Alice’s leg. Always the weaker leg. You are not paid on Alice AND Betty – you are paid on Alice OR Betty. Does this seem fair?
Suppose you were a track coach taking your team to the meet. Your two fastest runners are Alice and Betty, but your team will be represented only by the slower of the two. If Alice is the speedster, you’ll watch her disappear into the distance, and you will be left watching Betty struggle to keep up. If Alice wins, your team will not receive the gold. You will have to settle for Betty’s silver or bronze, or perhaps no metal at all.
Example Six: Let’s assume that the binary company pays you 10% on your weaker leg (a very common commission rate among binaries). In reality, since you are responsible for growth in both legs because you sponsored both Alice and Betty, you are being paid not 10%, but 5%.
If the average autoship is 100 points, the 10k answer is 10000 ÷ (100 x 0.05) = 2000 people.
Example Seven: A company we analyzed recently paid 20% on the weaker leg (10% overall), but the monthly autoship was only 40 points. In this case, the 10k answer would be 10000 ÷ (40 x 0.10) = 2500 people.
Here is a generalized summary of the 10k answers we have found, based on analyzing over 500 companies in the past five years.
Over 20000: Most travel companies and online shopping clubs pay extremely low commissions. Most ‘commissions’ are earned by the sales of the businesses, not by sales of the stuff.
10000 – 20000: Communications and energy companies with Excel-like pay plans. “Buck of The Month Clubs” like website companies that charge $10 per month and pay out $1 per user. They make the math easy but don’t do much for your wallet.
3500 – 10000: Many well established industry giants and some of the door-to-door and home party plans fall into this category.
2000 – 3500: The vast majority of MLM companies are in this range. The first company we looked at required 2800 people for 10k, and we still use it as a reference point for all others.
1000 – 2000: You’ll find some older companies in this range, but it’s mostly young MLM’s with modified comp plans that pay more money to the average distributor.
Under 1000: Streamlined companies doing almost all business online. Overhead is kept extremely low, so much more money can be paid to the field.
What’s YOUR 10k answer?
Most companies will try to divert your attention away from this important question, but you have to know. The numbers don’t lie. One and one is two no matter what you do!
We would be glad to help you understand how hard you are working. Just contact us. Most of all, we love helping people avoid wasting their time and money as we did for seven years. From that experience we learned …
You can learn more if you listen to Richard Dennis interview Bob and Anna Bassett RE: The 10k Formula.
Bob and Anna Bassett
Commit To Success Today
Dave and Darlene Mills
Leadership With A Vision
Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world. by Joel A. Barker