How to pay MLM Affiliates

Ok, ive been trying to wrap my head around this concept for a while now as i get ready to launch this MLM and i am building commission structures. so here goes a general outline of the numbers associated with the products, neither of which im going to tell you what it is truly, of course

So how does this work...

I have a product that i want to sell. It is a physical product. It is not made by me and i can get it wholesale from about $4.50 per unit in bulk orders.

Retail price point for the item is 20.00 per unit

shipping price paid by consumer is 4.95

My plan is to have MLM members direct sell the items from their own replicated websites and they purchase their inventory up front from me and then i give them a percentage of the profits.

So am i figuring this right...

unit cost from mfg- 4.50
retail to consumers- 20.00
shipping to consumer 4.95

for affiliate comission ill pay 30%.. but what am i paying 30% of?

if its retail - cost = % of profit then for example:
20.00-4.50=15.50*30%= 4.65 + shipping fee paid by customer of 4.95 = 9.60

in this model... the reps paid 4.50 for the product and they sold the product for a whopping .15 profit + the 4.95 which of that at least $3 will go to postage and packaging.. so lets call it 3$ and nowthe sales reps are effectivly making around 2.10

whereas ME the company owner i am taking 70% of the profit at $10.85 per unit?



or am i supposed to do it this way...


all numbers being the same

20.00 retail cost for the item
the unit cost being 4.50

leave 15.50 after initial cost was deducted... so from my profits... am i going to give back to the sales rep who sold the item the 4.50 plus the 30% of the profit? meaning this

20.00-4.50=15.50*30%= 4.65 + 4.50 (rep initial cost) = 4.65+4.50= 9.15

if i give the rep 9.15 out of the 20$ bill... leaves me with 10.85 per unit with nothing out of my pocket

1 rep selling 300 units of product per month can generate 2745 at no cost to them plus they get to keep what ever is left over from the shipping on 300 [email protected] per unit so they get 1485 on the shipping.. but really it cost the like 3$ to ship so they make 585 per 300 units they sell.
so 2745+585=3330 pure profit for the sales rep

where as the company on the other hand makes 10.85 per units @300 units per month for a net profit of 3255.00

10 reps 32,550
100 reps 325,500
1000 reps 3,255,00

well you get the idea...


which one am i supposed to be doing? i know which one makes more sense but few reps would work for that

Stil struggling with this... but i think i got it figured out... offer a percent off of retail to the affiliates and set a standard retail rate and give them volume bonuses.

something else i am struggling with is designing a compensation plan... trying to figure out what works best and not lose the farm at the same time

Heromrk18 said:

Stil struggling with this... but i think i got it figured out... offer a percent off of retail to the affiliates and set a standard retail rate and give them volume bonuses.

something else i am struggling with is designing a compensation plan... trying to figure out what works best and not lose the farm at the same time

Click to expand...

How would you find the affiliates ?

Heromrk18 said:

Stil struggling with this... but i think i got it figured out... offer a percent off of retail to the affiliates and set a standard retail rate and give them volume bonuses.

something else i am struggling with is designing a compensation plan... trying to figure out what works best and not lose the farm at the same time

Click to expand...

So how much are you paying your affiliates affiliates? How deep is your matrix.

hazzi said:

How would you find the affiliates ?

Click to expand...

Finding the affiliates will not be ANY trouble at all. It is an sales addictive product. Meaning when the affiliates sell the product to the consumer using the sales tactic we are requiring them to utilize, other potential buyers will see the product being sold and want to purchase on their own. Plus we added an additional draw to generate more traffic per sale.

With that being said, once we are ready to start recruitment, it will not be that hard at all. I currently have 10 founding affiliates on board and each one of them is excels at recruitment. We are just trying to work out an attractive commission structure. The affiliates will come, i have no doubt about that.

blogzandstuff said:

So how much are you paying your affiliates affiliates? How deep is your matrix.

Click to expand...

Currently i am researching the unilevel plan. if we were to use this plan it would be very straight forward in my opinion and less of a struggle to show prospective affiliates income potential.

If utilizing the unilevel plan, we will be be paying a 25% retail sales commission to all front line member. in a unilevel the width of a front line can be unlimited.
as far as depth for the plan, i am playing around with numbers and trying to figure out how much money it will cost me on the back end to pay deeper. If i were to pay say 10- 15 levels deep then i would only pay out up to 24% more. so maybe something like this

Weekly payout to frontline of 25% retail sales with a $350 minimum to be considered active, or a PV.. personal volume

monthly payout of personal volume bonuses at
1000 + PV for 5%
1500 + PV for 5%
2000 + PV for 5%

giving front line members up to 40% commission from sales

if i were to go say 15 levels deep... i really dont even know how to put a number to this and this is why i find my self confused. I keep looking at this image of a competitors comp plan and trying to tweek it to make it just slightly more beneficial to members to work for us rather than them as they are in the same niche

https://imgur.com/a/JE3i1wE

Heromrk18 said:

Finding the affiliates will not be ANY trouble at all. It is an sales addictive product. Meaning when the affiliates sell the product to the consumer using the sales tactic we are requiring them to utilize, other potential buyers will see the product being sold and want to purchase on their own. Plus we added an additional draw to generate more traffic per sale.

With that being said, once we are ready to start recruitment, it will not be that hard at all. I currently have 10 founding affiliates on board and each one of them is excels at recruitment. We are just trying to work out an attractive commission structure. The affiliates will come, i have no doubt about that.



Currently i am researching the unilevel plan. if we were to use this plan it would be very straight forward in my opinion and less of a struggle to show prospective affiliates income potential.

If utilizing the unilevel plan, we will be be paying a 25% retail sales commission to all front line member. in a unilevel the width of a front line can be unlimited.
as far as depth for the plan, i am playing around with numbers and trying to figure out how much money it will cost me on the back end to pay deeper. If i were to pay say 10- 15 levels deep then i would only pay out up to 24% more. so maybe something like this

Weekly payout to frontline of 25% retail sales with a $350 minimum to be considered active, or a PV.. personal volume

monthly payout of personal volume bonuses at
1000 + PV for 5%
1500 + PV for 5%
2000 + PV for 5%

giving front line members up to 40% commission from sales

if i were to go say 15 levels deep... i really dont even know how to put a number to this and this is why i find my self confused. I keep looking at this image of a competitors comp plan and trying to tweek it to make it just slightly more beneficial to members to work for us rather than them as they are in the same niche

Click to expand...

OK, just check laws in countries where you want to run. In the UK it's illegal under the pyramid selling act.

blogzandstuff said:

OK, just check laws in countries where you want to run. In the UK it's illegal under the pyramid selling act.

Click to expand...

Yeah so here in the US we can do MLM companies but we have to make our money from selling product to the company and not off of selling product to each other. but yeah i wanna make sure everything is legit

So, as an affiliate, I have to purcahse inventory from you in order to become affiliate for your company? Wow, MLM is really stupid, I'm glad it's illegal in the UK.

Can't you have normal affiliates who are paid 30% commissions or something and then offer affiliates a referral system where they make additional 5% or whatever from whatever amount their referrals make to your company?

mzonas said:

So, as an affiliate, I have to purcahse inventory from you in order to become affiliate for your company? Wow, MLM is really stupid, I'm glad it's illegal in the UK.

Can't you have normal affiliates who are paid 30% commissions or something and then offer affiliates a referral system where they make additional 5% or whatever from whatever amount their referrals make to your company?

Click to expand...

Maybe we aren't on the same level and maybe i am describing this wrong.

Let say you want to join my company and sell my product.

to get started you have to buy a starter kit valued at lets say $259. for that price you get 15 units of product and some accessories needed to sell the product as well as access to the back office, a replicated website with personalized check out.
selling the 15 units will gross you $300 and you net $41 from the transaction.

Once you are established and you make your 15 sales to continue selling for the company you need to buy refill kits. call it at 25% discount of retail.

25 units of product at $375 that you can sell for $500 netting you $125
50 units of product at 700 that you can sell for 1000 netting you 300 profit
100 units of product at 1300 that you can sell for 2000 and net you 700 in profit

then you add downline commissions off of affiliates that you recruite paying out at 5% of their total volume as a monthly bonus
10 affiliates selling 100 units per month at 2000 each nets you 5% of 20,000 or 1000 in downline commission
100 affiliates under you... it has its advantages.

the law here is that you cannot make your money selling product to each other, you must make the money selling product to the public. thats mlm... selling product to new affiliates to be affiliates and not to the public is a pyramid scheme and illegal