Common Business Challenges for Multi-Level Marketing Company
14 Aug, 2024
Multi Level Marketing Plan
Abinary plan is a popular compensation structure used in multi-level marketing (MLM) companies, often involving two downline legs under each distributor.
Here's an example of a binary plan that incorporates:
Sponsor bonus
Team bonus
Matching bonus.
1. Sponsor Bonus
The sponsor bonus is a direct bonus earned by a distributor when they recruit new members into the network. For simplicity:
Sponsor Bonus Rate
10% of the new recruit's initial purchase or sign-up fee. Example: If A recruit B and C, and B, C spends $100 on the initial package, the sponsor receives $20 as a sponsor bonus.
2. Team Bonus
The binary plan operates with two legs: a left leg and a right leg. Distributors earn team bonuses based on the volume of sales in their weaker leg (often referred to as the "pay leg").
Qualification:
The distributor must have at least one active member in both legs. Team Bonus Rate: 10% of the weaker leg's sales volume.
- Example: If the left leg generates $1,000 in sales and the right leg generates $800, the team bonus is 10% of $800, resulting in an $80 team bonus.
Carryover:
The volume from the stronger leg that exceeds the weaker leg is carried over to the next cycle.
- Example:If $800 is paid out from the weaker leg (right), the remaining $200 from the stronger leg (left) is carried over.
3. Matching Bonus
The matching bonus is a bonus based on helping your personally sponsored downline achieve team bonuses. This encourages leaders to mentor their downline.
Qualification:
Earn matching bonuses from personally sponsored distributors.
Matching Bonus Structure
Level 1: Directly Sponsored Distributors
10% of their team bonus.
Level 2: Distributors sponsored by your direct recruits
5% of their team bonus.
- Example: If $800 is paid out from the weaker leg (right), the remaining $200 from the stronger leg (left) is carried over.
4. Additional Considerations
Cap on Earnings
To ensure the sustainability of the plan, there may be a weekly cap on earnings from the binary plan (e.g., $2,000 per week).
Rank Advancement:
Distributors can unlock higher matching bonuses or team bonuses by advancing in rank, usually by increasing personal sales and group sales volume.
Example Scenario
You sponsor two people, one in each leg. They purchase an initial package worth $500 each.
- Sponsor Bonus: 10% of $500 x 2 = $100.
After a few weeks, your left leg accumulates $5,000 in sales, and your right leg accumulates $4,000.
- Team Bonus:10% of $4,000 (weaker leg) = $400.
- Carryover: $1,000 from the left leg is carried over to the next cycle.
Your direct downline distributor in the right leg earns a $200 team bonus.
- Matching Bonus: 10% of $200 = $20.
Summary of Earnings
- Sponsor Bonus: $100
- Team Bonus: $400
- Matching Bonus: $20
- Total Earnings: $520
This binary plan rewards distributors for recruiting, building balanced teams, and mentoring their downline. It also encourages active participation and leadership throughout the network.
