Well . . . maybe. There are always claims that you can find financial freedom, become debt-free, live “the good life,” and make boat loads of money as a network marketer. In this second part of the Should You Invest in Network Marketing series let’s explore making money in a network marketing or MLM businesses.

There are 4 general types of compensation plans when it comes to network or multi-level marketing programs. However, from my research, I’ve determined that many companies use a hybrid of each to fit its needs. Here is a break down of the plans along with the pros and cons of each.

The Unilevel Plan

Example Unilevel Plan

According to Wikipedia, this type of plan is often considered the simplest of compensation plans. As the name suggests, the plan allows a person to sponsor one line of distributors, called a “front-line.” Every distributor the person sponsor is considered to be on that sponsor’s front-line and there are no width limitations, meaning there is no limit to the amount of people one can sponsor in the front-line. The common goal of this plan is to recruit a large number of front-line distributors and then encourage them to do the same. According to Daegan Smith who runs perfect-home-business-opportunities,com (I am not affiliated or endorse this website in anyway visit at your own risk),

You will not earn a great deal of money fast in an unilevel plan, but you will create a steady and growing stream of residual income. This is the better choice to make money network marketing of a long term network marketing business venture.

The Binary Plan

Example Binary Plan

Under this plan you’re only required to have two distributors. Everyone you recruit after that goes under a particular “leg” of your down-line. This plan tends to yield faster results since you only have to have 2 distributors, but according to Daegan,

You make money network marketing FAST in a binary pay structure, but because of this this plan tends to attract people with the get rich quick attitude. So things can fall apart just as fast as they grow in a binary plan. Not the best choice for long term residual income.

The Matrix Plan

Example Matrix Plan

This gives you a maximum width and depth as a compensation plan. Once you’ve reached your limits you start a new matrix (I visually equate that action to getting new bingo sheets for some reason . . .anyway).

According to Wikipedia, Like Uni-Level plans, representatives in a matrix earn unlimited commissions on limited levels of volume with minimal sales quotas.

The Stair Step Plan

Example Stair Step Plan

Daegan gives a pretty good idea of what this plan entails here;

When you join one of these organizations you must buy a great deal of product at a discount and then retail it back to the public at full price.

As you recruit new distributor into your organization under this plan you move up the staircase based on the amount of product sold. When a distributor moves up a stair step he or she is entitled to a greater discount when purchasing there product for retail wholesale and then obtains a high profit on retail Sales. The problem with this plan is that it is highly front end loaded. That means…You must purchase a great deal of products up front before you’re really sure that you’re going to be able to retail it. This can be a big risk for a new and inexperienced distributor.

Note: All images are credited to the Network Marketing Business School website. (I am not affiliated nor endorse this website, but they had some pretty cool pics so I “borrowed” them for this article.)

There is a final plan of some multi-level marketing companies. It’s the black sheep of all the others …it’s the…

Pyramid Plan

Pyramid Scheme Illustration

In a nutshell, any network marketing or multi-level marketing company that does not sell a product can be deemed a pyramid scheme. This is why MLM has had such a bad name over the past couple of decades.

Reason #2 Why I won’t invest in a network marketing business – waste of money

Think about it, all these compensation plans still depend on you either investing your time in building a team or your money in someone else’s products.

@SteveBorgman said,
In theory, network marketing is a great thing, but I have been in more than a couple of ventures, and I really think that you have to be a very strong salesperson. And unless you are good at actively keeping everyone involved motivated and selling, it does not work out.

For me, investing money in buying products, paying a initial membership fee, or members marketing package is money that I could be maximizing towards something I’m really passionate about.

Reason #2 Why you might invest in a network marketing business – income is only limited to your investment

As with everything you do or don’t do, what you put in is what you’ll get out of it. So, if you invest your time into building a strong distributor line, your money into products or promotional materials that will work for you, and work it like a full-time business, you’ll be successful.

Biblical Perspective

The Bible makes it crystal clear how we should make our money. Proverbs 13:11 (New Living Translation) says,

Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.

If you’re going to invest in a network marketing or MLM business make sure you’re seeking long-term success and not an easy buck. Do you think the compensation plans presented here can make you millions if you really worked them? Let me hear your side of the story in the comments below.

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