MLM Formula For Compensation Plans: Tips, Tricks, & More!

Dec 10, 2018Compensation Plans

by Michael L. Sheffield

As companies selling consumer-oriented products and services look for alternative methods of distribution in a highly competitive marketplace, Multi-Level Marketing, sometimes called Network Marketing, has become a popular choice. Low-cost customer acquisition by a volunteer army of independent contractor sales people can grow your brand nationally and internationally in record time.

Recipe for Success

The Sheffield Group, under the leadership of Michael Sheffield, has helped launch and/or consulted with more than 800 MLM companies during its 28-year history. They’ve identified the complex ingredients of a successful direct selling operation and put them into a straightforward and simple system. This includes compensation programs to attract and retain top talent.

For HR Professionals in the direct selling and network marketing industry, creating and implementing your compensation program is critical for your success. It must offer the serious minded distributor a significant financial opportunity while providing the part timer and “consumer/distributor” an easy way to stay involved based on their own specific levels of interest. Add to this a competent management team and motivated professional sales leaders, and you have a textbook formula for success. But how do you get there?

According to Michael Sheffield, the MLM compensation plan should be like a piece of art with every twist and turn, every level and qualifier, every bonus pool or discount incentive carrying a specific action and positive reaction from the distributor base. It should be a hybrid system, which attempts to be all things to all people. A little more discount here, another level in depth there, infinity bonuses, compression, roll-up, pass-through bonuses.

Most importantly, your corporate and product mission, along with your distributor culture, must be considered. Therefore, adopting a plan that maintains your long established principles while incorporating current trends should be your goal.

Tips to Building a Better Compensation Program

Below are three important tips for early and continued success of your MLM compensation program:

  1. Early payout. Don’t hold back the buffet! Keep enthusiasm and excitement going. Create early payout of initial commissions and bonuses through weekly or bi-weekly distributions.
  2. Minimum and plus plans. MLM plans should mandate minimum distributor personal retail sales while rewarding for building an organization in depth. For plus-plans, all earned bonus levels are in addition to those previously earned, never in place of them.
  3. The best should make the most. Your plan should be “capitalistic” in its design to reward the business builders who contribute regularly to the company growth. Beware of plans that are “socialistic” in design dividing available profits among many and encouraging a something-for-nothing philosophy.

For more information on MLM, please visit: