Compensation plan engine | MLM commission calculation

MLM Commission Calculation Software

A compensation plan is the engine of every MLM business. This is what defines the rules of the business, how it will expand, and what type of relationship the company will have with its network of independent partners – the consultants and distributors.

The compensation plan is also responsible for the rewards each distributor and salespeople get. Therefore, it’s critical that all rewards defined in the compensation plan are calculated on time and accurately. MLMSOFT compensation plan engine is the ultimate software for the job.

MLM Soft Compensation Plan Engine

This is the core component of the MLMSOFT.com Cloud Platform and it runs as an independent service in the platform’s architecture. The compensation plan engine operates according to certain programmed rules, also known as algorithms.

This means you can feed it certain rules based on your business. The MLMSOFT compensation plan engine is designed based on a graph math theory that allows your MLM company to operate with large-scale network structured data and perform fast computations with it.

The data here can be any type of compensation plan and that includes any number of trees (matrix, linear, binary, genealogy), any period (monthly, weekly, daily), and any set of metrics to be calculated.

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Types of Compensation Plans

There are several different compensation plans and each plan comes with its pros and cons. Every multi-level marketing business has its preferred MLM compensation plan.

Therefore, before implementing a certain plan, it’s in your best interest to understand what works for your business. This way, you’ll set yourself up for success. Having said that, take a look at the common compensation plans used in the MLM business

Uni-Level

This is one of the easiest plans in the MLM business. An MLM company that uses this method can introduce as many newcomers as possible. This means there’s no limitation on the number of people branching from an individual.

In today’s Uni-level compensation plan, organizations use different commission types. Nonetheless, the base commission remains Uni-level and each distributor will get this commission. Further, the commission paid out will be on a set percentage of the volume of individual distributors.

However, a distributor’s rank will determine how many paying levels they’ll get although the percentage remains the same on all levels. This means a distributor with a single paying level will have to generate a lot of sales to earn a decent commission.

To level this, an MLM company using this compensation plan supplements the commission with extra bonuses such as a fast start bonus and a pool bonus.

Break-away or stair-step

With this type of MLM compensation plan, there’s a representative responsible for group sales and personal sales volume. To generate the volume, a distributor will have to retail products while also recruiting new members.

In terms of discounts offered, the breakaway plan focuses on two types of distributors: the sales leaders who are paid a generation bonus and the salespeople who are paid a differential bonus. The best part about this plan is a sales leader and a salesperson will receive rewards depending on their efforts.

Should your efforts elevate you to a set group and/or personal volume, you’ll move up a level. This will continue until you get to the “breakaway” point, which is the top of the upline.

Binary

This is another popular compensation plan but unlike the Uni-Level plan, distributors will only have two downlines, otherwise known as “legs.” After a distributor fills the first two spaces, the subsequent newcomers will fall under the downlines under him.

In this plan, the distributor will construct both downlines but will only receive payment for the downline with the lowest volume. This is called the pay leg commission and the commission is calculated as a percentage of the distributor’s entire pay leg – i.e. to the bottom of the tree.

Nevertheless, the percentage remains the same regardless of the level of sales a distributor racks up. Therefore, to avoid the weak leg scenario, it’s advisable to balance both downlines.

Each MLM company using the binary method uses the same pay percentage and this solution comes with a cap on how much revenue can receive a commission. This cap allows the payouts to be sustainable, otherwise, companies may have to pay over 100% at a go. Similar to Uni-level, a binary plan also offers a fast start bonus for the salespeople while top-level distributors receive a pool bonus.

Matrix

Also known as the forced matrix plan, this compensation plan follows a fixed width x height when arranging the downlines. This means the distributor can only grow his downline to a fixed number of members.

Often, distributors are limited to only five members or less on the first level. Some of the common matrix MLM plans include 2x12, 5x7, 4x7, 2x2, and 3x9. One of the advantages of this plan is earning increased productivity, especially those distributors who choose to work part-time.

An efficient software such as the MLMSOFT.com cloud platform can help your MLM company to manage all aspects of the matrix compensation plan.