As with any complex task, it is best to break designing an MLM commission plan down into small steps and tackle them one at a time. The five steps of commission plan design include:
- Establish your MLM company’s mission, product and service strategy, and intellectual distribution strategy. Intellectual distribution is education, which requires teaching potential consumers what a product does and how it can help them.
- Decide what percentage of your product price you want to pay out in commissions.
- Divide your commission payout between sales commissions and sales management commissions.
- Decide which commission and qualification methods to use.
- Create an ongoing series of incentives that fit with the commission plan you created.
If this sounds like a great oversimplification, it is. In fact, designing an MLM commission plan is like playing chess against a grand master—unfortunately, some people treat it like playing tic-tac-toe. It seems easy at first. All you have to do is learn what each piece can do. The bishop can move diagonally, the knight can jump over another piece and then scoot over a square, the queen can move in any direction, etc. But, then when you start playing actual games of chess, you find out that you have to think about a whole lot more than the basic moves of each piece. Are you overlooking an opportunity to capture your opponent’s powerful queen? What is likely to happen three moves from now, or six moves from now? Is your king open to checkmate? To develop a winning strategy, you must strive to understand not only the basic moves of all the pieces but also their varying positions and possibilities on the game board.
Source: Understanding Multi-Level Commissions and Their Role in a Successful Company, Mark Rawlins.