There’s a lot of advice out there about how to build a great MLM compensation plan. We don’t claim to know everything, but we have learned a lot during the 20 years we’ve been working with and advising MLMs. From time to time, we think it’s helpful for every business to revisit the basics and make sure their direct selling foundation is still standing strong—so, here are the four things we think every MLM needs to be successful.
1. A Consumable Product
For direct-selling companies especially, product is crucial. The product you choose needs to be a good fit for the direct selling model if you want your company to thrive—and “a good fit” means a few different things:
• Your customers’ purchases should be backed by consumer passion—products sell better if there’s an emotional aspect to the purchase. If it makes people feel better about themselves or want to be a better person, your customers will associate those feelings with your product and brand.
• If you want your customers to buy it from you exclusively, your product has to be a commodity—it should be both enticing and unique.
• Your product should be something that can be used up and used again. Then, when customers run out (preferably at a monthly rate), they’ll be ready to buy again.
• An MLM product also needs a high profit margin to be able to cover costs of everything from production to shipping to commissions. But don’t forget that a high price should also reflect the excellent value the product provides to the consumer.
2. Great Management
The next thing you need is a direct selling management team that’s passionate about what you’re doing. If your top teams can’t fully commit to your company, your chances of success drop significantly. Make sure they can put in the necessary time and energy to fully support your operations.
3. Sustainable Funding
This is especially important for growing companies—the right funding will be a powerful foundation for your business’s entire future. Here are some important aspects of your business that need to be addressed before you can experience meaningful growth:
• Getting proper legal advice and coverage. When starting with the right help, you can have confidence in your business’s legal safety, making future growth much smoother and more efficient.
• Putting the right insurance in place.
• Obtaining the right intellectual property protections.
• Making sure your contracts with vendors are right.
• Investing enough in operations so you can run efficiently from the beginning.
• Using great marketing and branding to create a professional image and high-quality promotional materials. This is one of the first ways people will come to know your company.
• Finding the right digital partners to add to your team. Everything from your MLM software provider to your payment service to your fulfillment specialists need to be chosen carefully and aligned with your goals.
If you use your funding where it really counts, you’ll have much fewer growing pains as you move forward with your business.
4. Motivating Compensation
Finally, you need a solid compensation model that expands with you. As your commission plan evolves over time, take the time to model outcomes and test new promotions and commission plan changes with a consultant.
As you do so, keep in mind that it’s important to reward distributors at every stage—from beginner to seasoned leader. And that a plan that’s too complex for the average person to explain will be difficult for your salesforce to describe to new recruits. At the end of the day, what’s most important is having a transparent plan that drives the right behaviors.
There you have it—four foundational principles of a great MLM. We hope that keeping each of these areas at the forefront of your build strategy will help you to be focused on the right goals as you grow and reach your greatest success.