If you’re planning to join a network marketing company as your home-based business, be sure to study the compensation plan carefully. Unlike a home-based business that you own completely and for which you set your own compensation (or lack thereof), the compensation plan in a network marketing company is set up by someone else — usually the management of the company.
Some of the compensation plans can be quite complex and overwhelming. In fact there are entire books written entirely on the subject of compensation plans in network marketing; check out Understanding Multi-Level Commissions and Their Role in a Successful Company to get a sense of how these look.
A compensation plan (also called a commission plan) has to be designed to motivate a wide variety of people. At the same, it has to provide both the home business owner and the network marketing company with a means to make a profit.
A good compensation plan should allow you to make at least some money right from the start. Be aware of plans that only begin paying money after you make a certain quota or get a certain number of people on your team. On the same note, beware of plans that reward teambuilding more than the actual product and/or service. In other words, if the main way to make money in the network marketing company is by recruiting other people into the company, it may be a pyramid scheme.
In other cases, network marketing companies might offer enough compensation on their product and/or service to avoid the legal definition of ‘pyramid scheme’. But the aspects of such plans have stumbling blocks, or the dollars won’t amount to much.
Unfortunately, there is no quick and easy way to assess most network marketing compensation plans. Some are easier to understand than others, but in most cases you will need to plan to spend some time learning the details and particulars of the plan.
Taking the time to accurately assess the compensation plan will be key to your success (or failure) later on, so it’s wise to spend lots of time with this up front.