No doubt you've heard of MLM or MLM opportunities, but the fact remains that there is a large percentage of people that don't understand how the MLM compensation plan works. I've decided to break it down in easy to digest steps for the beginner. By understanding how MLM compensation plans work you can choose the best one for you.

So let's get started.

It's very common for most MLM companies to use a Matrix compensation plan structure. In short it means that it all depends on your individual efforts to recruit a few people that will form the next tier, which some people refer to as a "frontline". You then take your frontline and help them to gather more people onto the next tier below them and so forth.

The result of the MLM plan depends on how many good workers you have signed up, and by continuing to offer proper support and training, then in essence every level should end up with more people than on the previous level.

By examining different MLM opportunities you will discover that either you will receive a set percentage of each level as compensation or more commonly you will find that some companies may offer different percentages on different levels.

The advantage of the Matrix MLM compensation plan is that you will get more commission the deeper the levels are, with more people. So, you may as an example, earn 7% on your first two levels, but on your 3rd level on you may earn 10%. This is just an example so you get an idea of how it works. In fact it works out better getting different percentages than a set percentage of 5% on every level.

That doesn't mean that if a company offers a set percentage that it's bad. Some people prefer a stable percentage which often works better on the frontline and a few levels below it, then levels that are deeper than 7 tiers.

The downside of a MLM compensation plan is determining whether it's easier to sign up someone to a service that is $15 as opposed to a service that is $75. That is one factor you need to consider; plus that some companies require that you earn a certain amount before you get paid out as well.

The last, but most important factor you need to consider is whether the product is something that people want. There is absolutely no point in trying to sign up people to a service or product that they can't identify themselves with, so it's important that you undertake the necessary research for what compensation plan is being offered by the company.

Some compensation plans include an "infinite bonus," and that simply means you may get 2% if you sign up 5 people for example. It will continue as long as those 5 sign up another 5 and so forth.

Other MLM plans include Uni-level and Forced Matrix compensation systems. The difference is simply in a Uni-level you can sign up as many people as you want on the first level but with a Forced Matrix you may be limited to 5 people on your frontline.

Another compensation plan that you will come across is called a Binary Plan. It's simply a system built on a Matrix of two, meaning you sign up 2 people on your frontline and everyone else falls underneath them. Where a Matrix plan pays through a specified amount of levels on all purchases, the Binary plan only pays through a certain maximum dollar amount, regardless of levels.

The best thing to do in any situation is look at what support the company can offer you. Every level is directly tied to each other and how well the MLM compensation plan will work. So think carefully on what you expect out of a MLM opportunity and what compensation plan would best fit your needs.