A lot of home based business are network marketing businesses. When looking at network marketing (NM) companies, be sure to look carefully at the compensation plan. The compensation plan is usually some sort of pyramid structure (should not be a pyramid scheme). Here is some information to help you cut to the chase when sizing up an NM opportunity.
In general, compensation plans for NM companies fall under one of four types:
Binary Plan – In the binary plan, there are only two spots allowed directly underneath you (the first level). Beyond those two, there is often unlimited depth.
Breakaway Plan – In the breakaway plan, the first level is wider; often unlimited. But the depth is often limited to around 10.
Matrix Plan – The matrix plan is very common and its first level width has 2 to 7 spots. The depth ranges from 5 to 50 levels.
Unilevel Plan – Similar to the breakaway plan in width on the first level, but the depth is usually 5 to 10 levels.
Whatever the type of compensation plan, try to understand it completely before you commit to the network marketing home business. Put yourself in their structure and try to determine where you start to make money.
Pay close attention to the percentages near the bottom of the structure and near the top. Is the company paying higher commission at level 7 and lower commission at level 1 for example? If so, it may take years for your downline to reach level 7 and for you to start earning those higher percentages. What you want to look for is decent commission percentages on the levels closer to you.
One thing to note about network marketing companies and their compensation plans: have realistic expectations. A legitimate network marketing company is not going to be a “Get Rich Quick” affair. Expect to build up the business over time. Understanding the compensation plan is only one part of sizing up a network marketing company, but it’s one of the most important parts of your home business research. Be sure to spend some some time with it so you’ll make the best decision.