MLM Compensation
Plan Design

Compliance Aspects

The Guidelines clarify the difference between a legitimate (rugulated) Direct Selling commission plan and various other illegal compensation mechanisms such as :

• Money Circulation
• Prize Chits
• Pyramid Schemes

You have to design a commission plan which is strictly according to the Guidelines and which do not fall under these illegal compensation mechanisms because if your commission plan is falling under the definition of the banned / illegal compensation mechanism then

• Your company won't comply with the Direct Selling Guidelines
• You may face civil & criminal litigations according to respective laws

Sustainability Aspect

• The Guidelines does not impose or prohibit any specific type of Compensation Plan but it is in your best interest that the Compensation Plan should be Attractive enough for the Direct Sellers at the same time it should be profitable for your MLM Company in the long-term
• A lot of people do huge mistakes with this part, most people copy some other company’s compensation plan or design the plan themselves without a thorough analysis and mathematical modeling and end up making huge losses due to unsustainable commissions being paid
• Most people make a lot of mistakes in understanding unit economics, income distributions, cash flow, margins, profits and reserves and as a result they start their company without a thorough analysis and calculations which leads to huge losses for the company in the long run which becomes unsustainable and eventually the company has to shutdown