Overall
Payout
How much of the sales does the compensation plan pay out to its distributors? Most plans pay
between 35 and 45 percent of the company’s wholesale purchase volume, and about
30 percent of suggested retail volume. Look for a plan that divides the pie in
your favor, without going overboard. A plan that is overly "generous"
to its distributors can run itself into financial ruin. And that’s bad for
everyone.
Orphan
Commissions
When distributors fail to
qualify to earn the commissions or bonuses on their purchase volume in a given
month (usually because they fall short of the minimum purchase qualifying
amount), the commissions they would otherwise have earned are called
"orphan" commissions. Avoid plans in which orphan commissions return
to the company. A plan should be structured in a way that orphan commissions
"roll up" to the next qualifying distributor that month, rather than
return to the company. This approach is also called "compression."
Orphan commissions from terminated distributors should be handled the same way.
Lock-In
Look for a plan that has
the lock-in feature; that is, when you reach a certain level, you "lock
in" and cannot be demoted because of a temporary drop in monthly
performance.
Other
Perks
The compensation plans of
most companies offer at least some perks for top performance above and beyond
commissions and bonuses. These come in many forms: company cars, health
insurance, free training, lead and co-op advertising programs. A few publicly
traded companies even offer stock or stock options.
No matter what other
advantages a plan might have, always ask this pivotal question: "Does it
emphasize getting products or services into the hands of consumers; or does it
emphasize making money by finding new recruits? If it falls into the latter
category, run away — fast. In the end, says White, it’s the product — not the
compensation plan — that drives success.
No comments:
Post a Comment