The compensation plan is a critical part of your business. It requires a great deal of insight and expertise and, because it is very complex and you are dealing with vast amounts of real money over an extended period, I highly recommend that you find an expert to design your plan. If you get this part of your business wrong, you will end up with never-ending pain and frustration.

Over the years, I have found that I can place most of my clients into one of two groups. The first group consists of companies who are very unhappy with their compensation plan and are desperate to change it, and the second group consists of new clients who are trying to copy the first group's plan. Ironic, wouldn't you agree!?

Changing your compensation plan once you are up and running is one of the most devastating activities you can undertake. You automatically undermine your network's trust and your credibility. Your members spend a lot of time building belief and sharing the plan with their friends and family. When you make changes, you send a clear message that you got things wrong and that they have been inadvertently conning people they care about. In my experience, changing your compensation plan is the single quickest way to crash your network.

So, if you are thinking of changing your compensation plan, my advice is to be extremely cautious and get help from a compensation plan expert. If you are a start-up, never copy someone else’s compensation plan. 

Successful MLM companies tend to grow very big, very fast. The average successful company will have 20,000 active members with average monthly sales of $50 per member. This results in an annual turnover of $12M and annual commissions of $4,8M. When dealing with these types of numbers, a variance of just 10% can cost you $480K. This is serious business and needs to be taken seriously. 

When designing a compensation plan, you are not looking for creative ways to give away your money - you are trading money for effort. As a result, your compensation plan will be a complex set of rules that drive specific behaviours with the aim of creating highly predictable outcomes. 

In conclusion, the compensation plan is critically important and forever! You need to get it right out the blocks. Over the next few days and weeks, I will address these issues one at a time and try to provide as much insight as possible. Topics I will be covering are:

1. Product Margins and Average Payout
2. Commissionable Value
3.     Points
4. Breakage
5. Normalisation
6. Status Rules
7. Ranks
8. Compensation Mechanisms
9. Pitfalls to Avoid
10. Case Studies

I will also be interviewing several compensation plan experts from around the world who will provide you with their unique take on how to design a compensation plan.