Direct Selling Compensation Plan Payout Analysis

This article will introduce you to the steps necessary for estimating payouts from your network marketing / MLM compensation plan or party plan compensation system. Whether you are analyzing an entire MLM compensation plan or running a what-if analysis of changes or enhancements, the LaunchSmart™ Payout Estimator can be a helpful tool.

Because every MLM compensation plan is different, you must rely on fundamental payout assumptions and variables. We have found that the best approach begins with organizing the plan into three basic commission groupings: Retail Profit Commissions, Front-End & Team Bonuses, and Back-End Generation & Leadership.

Because network marketing / MLM compensation payout analysis is such a vital step in the creative process, we recommend that you become familiar with the following absolutes of a proper analysis:

  • You must understand your nework marketing / MLM compensation plan in its entirety
  • Consider all the ways a person might exploit the plan in order to achieve its maximum payout
  • Consider behaviors in light of known production principles, such as the Perato principle and breakage
  • Accept that the MLM compensation plan will evolve as the company grows and its culture unfolds
  • Make sure that everything makes sense to you. (Magic is in marketing, not in the numbers.)

This section will give you the checklist for analyzing the payout of your party plan compensation plan, and network marketing / MLM compensation plan, whether it is a new plan or whether you are considering upgrades, enhancements or changes:

MLM Compensation Plan Payout Checklist & Key Considerations

  • Have we identified the behaviors rewarded by various elements of the plan?
  • Have we allocated the payout to various compensation plan elements based on informed estimates?
  • Have we estimated the percentages of plan participants who will perform at the various behavioral levels?
  • Have we organized our plan into the three basic commission groupings for analysis:
    • Retail profit commissions
    • Front-End & Team Bonuses
    • Back-End Generation & Leadership
  • Have we determined whether our products / services require the use of points or commission volume
  • Have we had a fresh set of eyes examine the plan to see where the plan can be unexpectedly exploited?
  • Have we worked with our compensation design team to thoroughly analyze payout exposures?
  • Have we reconciled “face value” of the plan with anticipated payout?

Network Marketing and Party Plan / MLM Compensation Plan Payout Estimator

Because each plan has its own unique fingerprint, you need a dependable tool to guide you through the payout analysis of the plan as a whole, or changes that you are considering. COMPAY™ is a consultant’s tool, now available to you with additional features, for estimating behavior under the plan and projecting payouts at the various levels of your compensation and incentive system. This powerful tool integrates with JACKRABBIT™ to provide users with fast and reliable results. At each step in the launch process, LaunchSmart™ tools dramatically increase your percentages for success.

The content of this article is extracted from ServiceQuest® RetentionSmarts™ Modules. For more information on RetentionSmarts™ training and mentoring systems, contact a member of the LaunchSmart team.

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