How to Analyze Compensation Plans
FINDING THE RIGHT COMPANY
By Jeffrey A. Babener
Excerpted from Network Marketing: What You Should Know, Jeffrey Babener, Legaline Publications
NETWORK MARKETING/MLM consultant practice tips. NETWORK MARKETING/MLM Sales Tax Issues must be addressed to avoid liability for taxes and penalties. Nexus for NETWORK MARKETING/MLM Sales and Use Tax represents a unique analysis that involves activity by distributors in promoting, recruiting and training in a state. NETWORK MARKETING/MLM Legal and NETWORK MARKETING/MLMLegal.com and Babener and Associates provides expert NETWORK MARKETING/MLM Consultant and NETWORK MARKETING/MLM Consulting advise on NETWORK MARKETING/MLM corporate, NETWORK MARKETING/MLM software, NETWORK MARKETING/MLM Compensation, NETWORK MARKETING/MLM Taxes, etc. NETWORK MARKETING/MLM Consulting is an important component for NETWORK MARKETING/MLM startup. Careful Choice of NETWORK MARKETING/MLM Software is another component of NETWORK MARKETING/MLM Corporate. An NETWORK MARKETING/MLM Consultant and NETWORK MARKETING/MLM Law and NETWORK MARKETING/MLM Legal is part of the NETWORK MARKETING/MLM Startup Team. NETWORK MARKETING/MLM Compensation must be reviewed by an NETWORK MARKETING/MLM Consulting standpoint by an NETWORK MARKETING/MLM Consultant and NETWORK MARKETING/MLM Legal and NETWORK MARKETING/MLM Law professional and programmed by a NETWORK MARKETING/MLM Software and NETWORK MARKETING/MLM Technology provider.
Last But Not Least
Here are some final yet important aspects of a compensation plan to check out:
How much of the sales dollar does the compensation plan pay out to its distributors? Most plans pay between 35 and 45 percent of the company's wholesale purchase volume, and about 30 percent of suggested retail volume. Look for a plan that divides the pie in your favor, without going overboard. A plan that is overly "generous" to its distributors can run itself into financial ruin. And that's bad for everyone.
When distributors fail to qualify to earn the commissions or bonuses on their purchase volume in a given month (usually because they fall short of the minimum purchase qualifying amount), the commissions they would otherwise have earned are called "orphan" commissions. Avoid plans in which orphan commissions return to the company. A plan should be structured in a way that orphan commissions "roll up" to the next qualifying distributor that month, rather than return to the company. This approach is also called "compression." Orphan commissions from terminated distributors should be handled the same way.
Look for a plan that has the lock-in feature; that is, when you reach a certain level, you "lock in" and cannot be demoted because of a temporary drop in monthly performance.
The compensation plans of most companies offer at least some perks for top performance above and beyond commissions and bonuses. These come in many forms: company cars, health insurance, free training, lead and co-op advertising programs. A few publicly traded companies even offer stock or stock options.
No matter what other advantages a plan might have, always ask this pivotal question: "Does it emphasize getting products or services into the hands of consumers; or does it emphasize making money by finding new recruits? If it falls into the latter category, run away - fast. In the end, says White, it's the product - not the compensation plan - that drives success.
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