In any direct selling business (SLM/MLM), the Compensation Plan is very critical to the success of the business. It actually makes or breaks the business delivery. In majority of New Start ups we have experienced that the company leadership tends to take the designing of compensation plan internally with their basic knowledge of finance, compensations plans of the other companies and help of few financial experts.
They look only at the basic profitability aspect of the business on a short term basis is the biggest mistake.
The key factors that needs to be considered while designing a compensation plan are –
- It is not just a payout but a nerve line for sustainable business
- Devising of a compensation plan is related to the product offering and the target audience ( Direct sellers and their customer base)
- It cannot be developed without proper evaluation(simulations, etc) with time tested results and only by experts
- Company’s fail due to plans being evolved without expertise and then trying modifications as we have also seen with some established companies.
A successful compensation plan has to ensure and deliver the following –
- The quantum of payout excites the target audience(direct sellers) to aspire and engage with the business
- The payout spread has enough incentives and rewards for all- from starters / beginners to senior leadership in the network
- It ensures and fulfils the objective of delivering higher product consumption in the short term and/or provide a long term career growth plan to the network, as the case may be
- It is legally tenable and commercially viable
- It has long term acceptability, hence scalable both in rewards with volume and future proof
- It has international appeal and acceptability without changes, in case one desires to go global
Compensation Plan can be Single level or Multilevel – Generation, Uni-level, Hybrid, Breakaway, Matrix, Binary etc. or in any combination.
Strategy India helps its clients through a team of experts to choose the right compensation plan structure based on the product category and business objectives. The plans are than tested and simulated for scalability and strength.