This blog post is the companion post to the video: Role of Compensation Plan in a Successful Direct Selling Company. The following is the transcript of MLM Attorney Jeff Babener’s own words:

Hi, I’m Jeff Babener of I’d like to talk to you today about the compensation plan. It better be good.

Does a compensation plan make or break a startup MLM company? History suggests that a good compensation plan is helpful and absolutely necessary. Does it drive financial success? Probably not. Will a bad compensation plan contribute to failure? Probably, together with other unlucky breaks. As industry expert Michael Sheffield notes with respect to a good compensation plan, “Its absence will be noted more than its presence.”

Is there anything new under as far as compensation plans are concerned? Probably not. The goal is always the same regardless of the type of compensation plan: motivate varying behaviors of distributors, ranging from direct sales, to building wide to building deep, to supporting a downline, to maximizing sales volume production and retention.

It is of key importance is that the compensation plan is easy to explain to recruits and that it is perceived as fair and balanced.

Typical plans may pay out 30% to 50% of sales volume in commissions to distributors. Various plans may divide the pie differently. As long as the perception is that the plan is competitive within the industry, it appears that other factors including bonding with the product, bonding with management, bonding with field leaders, bonding with company philosophy, and corporate communication would be a more significant driving force for recruits and distributors. In fact, the companies that pitch leads with a compensation plan are often merely hiding the weaknesses of other key components, such as the quality of product or stability of management. In designing compensation plans, leading MLM management consultants serve a vital role in balancing all of these factors.

There are obviously significant legal issues in evaluating and implementing compensation plans. Review of the compensation plan a competent MLM lawyer is essential.

Wishing you the best in your direct-selling business, I’m Jeff Babener.

For more information visit our websites: and

Or, visit these links for more information:

Is the Compensation Plan the Driving Force of Success? Video

Do Different Compensation Plans and Products Receive Different Legal Regulation? Video

How to Analyze Compensation Plans

MLM Compensation Plans – What you should know

The Next MLM Startup Conference in Las Vegas – May 16th & 17th, 2013

Is There a Level Playing Field for all Compensation Plans?

All About MLM Earnings and Compensation

Is the Compensation Plan the Driving Force for Success in a Direct Selling, Network Marketing, MLM Company?

Percent of Sales, Direct Sellers and Firms by Type of Company Compensation Plan

Make sure to visit our blogs for the latest information on the direct selling industry: MLMLegal Blog Home and MLM Attorney Blog Home. HINT: Chose a category to narrow your search for discussion topics!

Find us on our social networks:

Google Plus:





And, as always, visit, the best MLM resource on the web. The next Starting and Running the Successful MLM Company Conference will be here before you know it! On May 16th and 17th, 2013 we are hosting the MLM Conference for the 25th year! This is now our 64th annual conference (held almost consistently three times per year over the last 24 years). All executives/owners of MLM, direct selling, network marking, and party plan companies are welcome to attend. This is the original MLM Startup Conference, hosted and perfected by direct selling industry expert, MLM Attorney Jeff Babener. Call 503-226-6600 or 800-231-2162 to register. (Can’t make this event? Keep an eye out for our October and February conferences as well.)

Leave a Reply