So You Want To Be An Entrepreneur! (Part 2: What Is An MLM?)

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Congratulations! You’ve decided to forge your way into the unknown and take the plunge in to the world where men and women are kings and queens of their own destiny–the world of the entrepreneurs.  If you’ve read Part 1 of this series, then you’ve created your list of what you desire out of life and are now ready to decide whether to go with an MLM company or become and affiliate marketer.  In Part 2 of this series, we are going to focus on MLM and what it’s all about.

MLM Defined

MLM or Multi-level Marketing (also known as Network Marketing), is a type of marketing system in which companies contract people to work as distributors and sell their products and/or services to others–either in person, over the phone or via the Internet.  The multi-level part comes in when the distributor enlists other people to become distributors under him/her and earn an income.  Depending on the type of MLM system that is used, a certain percentage of the money from products or services sold is passed on to the distributor.

The Many Facets of MLM – Compensation Plans

There are several ways that an entrepreneur can get compensated for their efforts in MLM.

• Unilevel
• Forced Matrix
• Binary
• Breakaway
• 1Up/2Up

Of all the different compensation plans out there, the Unilevel, Forced Matrix and Binary plans are the most common that companies use to pay distributors.

Unilevel Pay Plan: The distributor is typically paid the highest on their front line–those who have been personally recruited–and earns a small percentage on every level built in their downline.  Then there are Unilevel pay plans that compensate only a small amount for personal enrollments and a higher percentage on the downline levels.  There is usually no limit to the number of people that can be sponsored on the front line; however, with most companies there is a limit to the number of levels a distributor can have.

Forced Matrix Plan: This plan is basically the same as the Unilevel plan, with one exception: There is a limit to the number of people you can sponsor on the frontline.  This means that if, for instance, you had a 3X5 Forced Matrix, then you could only have 3 direct referrals–anyone you get to sign on after your initial three would then be placed under one of your three.  This process would continue until you have filled all five levels and then you would “cycle out” and start again.  Once you’ve sponsored your 3, then you can focus on helping them train their 3, etc.  This is actually a great way to grow your team and see profits increase faster.

Binary Pay Plan: In this plan you have two “legs” with an infinite number of levels in your downline.  You are compensated based on the number of people in your weakest leg–if you have 30 people in one leg and 20 people in the other, you will only receive payment for the leg with 20 people in it.  The idea behind this is that you have more of an incentive to help your downline in the weaker leg and balance the legs in order to be able to receive full compensation for everyone in your downline.

Breakaway Pay Plan: This plan, also known as a Stairstep Breakaway Plan, is actually the first and oldest (circa 1959) type of pay plan ever used in the industry–and is still widely used to this day.  What is interesting is that once you have achieved a specific qualification level, then you and your downline “break away” from your upline–become what is known as a generation–and you will receive higher commissions.  Your sponsor receives a small commission, known as an override commission, as compensation for losing you and your downline. The problem with this is when someone in your downline breaks away, your commissions suddenly become significantly less than before–the override commission doesn’t usually make up for the loss of income.  This is just another incentive to continually build your frontline.

1 Up/2Up: Typically used with high-ticket products and/or services, the 1Up/2Up compensation plan goes like this:  The first sale you make (or first 2 sales as in the 2Up plan) goes directly to your sponsor–any sales you make after that first one (or two) then go to you.  The same applies to those in your downline–you would receive the first 1-2 sales that your frontline gets and they would keep the rest.  This is not usually recommended for the newbie entrepreneur; however, that is for YOU to decide!

Just Remember This…

It is extremely important to understand your company’s compensation plan in order to best use it to your advantage–however, no compensation plan can work for you if you do not believe in the products/services that you are marketing.  If you joined a company solely for the pay plan in hopes of becoming a gazillionaire and could care less about WHAT you are marketing, then you need to re-think what you are doing, because I can guarantee you that you will not succeed unless you are 100% sold on what you are marketing.  Make sure you do your homework and learn everything you can about the company and products/services in addition to the compensation plan and you will be you will be on your way to seeing real success in your business.

Well, that’s it for this installment of “So You Want To Be An Entrepreneur”.   Part 3 will focus on affiliate marketing and using sites like Clickbank, GetResponse and Aweber for your business.

Thank you so much for reading this.  I’d LOVE to hear from you.  Please take a moment to share any thoughts you have on this post.  If you enjoyed this content, feel free to share this with all your friends!

To YOUR  SUCCESS!

Heather Taskovics
“On A Mission To Help You Achieve Success In Life”
http://heathertaskovics.net

• So You Want To Be An Entrepreneur! (Part 1: Figuring Out What You Want To Do)
• So You Want To Be An Entrepreneur! (Part 3: What Is Affiliate Marketing?)
• What Are You Waiting For??? – Becoming An Organized Entrepreneur
• Show Me The Results! – How To Create Your Own Success Story
• The Astounding Power of Synergy
• Never Give Up: The Power Of Moving Forward
• Perfection: Letting Go Of The Myth And Allowing Creativity To Grow
• Staying The Course To Achieve Your Dreams
• This Book Is Totally Changing My Life!
• Mindful Moving Meditation: Hiking Your Way To Nirvana