Most people end up quitting MLM because they realize they are putting in lots of effort but seeing little results in the paycheck. If you look at most MLM company websites, you see a lot of hype of the products, but very little effort to explain the compensation plan. This should be your mindset when hearing any sales pitch to start your own home-based business: show me the money! Why should network marketing be treated differently in relation to salary than any other job? You should be interested in knowing your salary before you take the job, especially when I'm putting your money on the line as investment.

Robert Kiyosaki (author of Rich Dad, Poor Dad), likes to group investments into two classifications: those that produce cashflow, and those that produce capital gains. Anyone who has read Robert's books knows that cashflow is king. With cashflow, you can quickly and easily reinvest in your business, whereas capital gains forces you to continue working for your income. The key is producing passive income, where you own a system and other people work for you.

With that in mind, here are some typical problems with compensation plans:

1. Your goal is to create maximum cashflow. Incentives such as recruitment sign-up bonuses or customer-only sales shouldn't appeal to you because they force you to go headhunting to maintain your monthly income. You want true residual income.

2. Low commissions for new distributors. This hurts your team morale. The average distributor gets burned out with low commissions while struggling part-time and leaves before advancing to the higher-paying levels. This affects retention, which hurts cashflow and destroys loyalty of your team.

3. Bonuses that only help the heavy hitters. This, again, does not help the average distributor who is the core of your team, creating a high dropout rate.

Here is an easy way to conceptualize how well a compensation plan pays: what do you have to do to earn $500/mo of stable cashflow with the company?

Here is an example of how to calculate this: In order to achieve $500/mo with X Corporation, your costs are a 100 "point" autoship, and customers are doing the same 100 point autoship, let's say this costs $130 (watch for large splits between point values and actual costs); be sure to include shipping.

In this simple example, you've sponsored 3 people, and each signs up 3 people. Stick to the first three levels to keep the calculation simple:

Level 1 (15% commission) x 3 partners = $45 Level 2 (35% commission) x 9 partners = $315 Level 3 (10% commission) x 27 partners = $270 Total = $630/mo, 39 partners $630 (income) - $130 (expenses) = $500 profit/mo

Therefore, for X Corporation, you can make $500 profit with 39 distributors, which is well above average. You'll find that most companies require a downline of 50-100 people. Many larger companies with high overhead costs will require over 100 distributors to make $500/mo residual.

You'll notice that the example uses a unilevel plan. Most of the best paying plans you will find will be unilevel. There has been a trend toward other styles of plans, such as binary and forced matrix, most of which reward the company CEO much better than they reward the average distributor.

Once you find a plan that pays well, see if the product is ethical, timeless and renewable. If it is ethical, you won't have any problem selling it and will maintain a loyal downline. If it is timeless, your company won't perish with the death of a fad. If it is renewable, you will retain your downline and your customers.

Good luck with your business!