Trying to understand compensation plans can be a very difficult task. And to the beginner in network marketing, it can be a combination of simply scary and terribly confusing.

This may very well be the first time you use terms like up line, down line, and spill over in a sentence. You may have just learned that MLM stands for multi-level marketing. So how can you be expected to understand what determines a good compensation plan?

This is a very important decision to make, because it will determine how much money you will be making, when you invest your future in one of the companies out there. To help you out with this decision, you need some basic knowledge of some of the more popular compensation plans offered.

Unilevel

A Unilevel, allows you to sponsor one line of distributors. Therefore everyone you sponsor is on your frontline, and your goal is to go as wide as you can. Sponsor as many people as you can on your frontline with no limitations. Commissions are normally paid out on a limited depth of 5 to 7 levels, but few are without limitations, and worth looking into.

A Unilevel can be fairly easy to understand and explain to others. Depending on the structure of the plan it can be easy enough to earn an income, but restrictions of your particular plan may limit the amount of your income.

Australian 2-Up

When you agree to give up your first 2 sponsored people to your upline, it is called an Australian 2-Up program. In return, you then receive the first 2 people of those you bring into the organization, starting with your third sign-up.

When the average person in network marketing only signs up 2.7 people, you will have a hard time at ever making your money back. Unless you have that “Type A” personality that can sell anything to anyone. (Some companies have added additional bonuses to the basic 2-Up program that improve the benefits to you.)

Matrix

People you recruit into your organization will fall into what is called a matrix, which is referred to as your down line. This matrix builds below you as the other people in your matrix also recruit, and build a team. As a result, your down line in your matrix continues to grow.

The term used to describe this is spill over. As the first line of your matrix is filled up, your new recruit then falls into the next line of your matrix and builds from there. This can be a big help to your new members when even newer members fall in their down line through spill over from their up line.

The people in your matrix determine the amount of income you will receive. Those who can recruit sales oriented people into their organization will have a great residual income to look forward to. Your efforts help your income, as well as the income of those above and below you in your matrix.

Binary

As a distributor in a binary, you occupy a business center which is limited to two downline legs. You are paid on group volume of the downline legs rather than a percentage of sales of multiple levels of distributors.

But the problem begins as you try to keep the two legs balanced in order to be eligible for your commissions, which are paid out (often on a weekly basis) at designated points or target levels. The amount of your commission will be determined by the shorter of your 2 legs. This can become a true joggling act to keep the people in both legs active and advancing equal at all times.

Compensation Plan Conclusion

When doing your research of any compensation plan, you will see they all have their own strenghts and weaknesses. You have to make the decision as to which one is right for you.

The perfect compensation plan would combine the best of all plans, and create a never ending source of income for their members. This is exactly what has been done. Read more about this 3D Compensation Plan.