How MLMs Work

MLM (Multi Level Marketing) compensation plans reward members for bringing new sales into the company.

Unlike a traditional affiliate program, which pays only on direct sales, MLMs pay commissions on multiple levels, allowing the recruiting members to leverage their downline team members, by earning a commission on sales they make as well. MLMs may be straight line or a forced matrix.
In a straight line MLM, you can refer new members infinitely wide on your first level, and it pays down “X” levels deep.

Example of a 3 level straight line MLM compensation plan, paying $5 per level.

Level 1) I refer Joe. I make $5

Level 2) Joe refers Dean. I also make $5

Level 3) Dean refers Rhonda. I also make $5

This straight line MLM plan is also known as unilevel, and has unlimited width, which means each member can refer an infinite number of direct sales, and be compensated on each one.

I will now earn $5 on every sale Joe makes, and every sale Rhonda makes. This pattern repeats for all members I bring into the company. As you can see, this is very powerful. MLM has been responsible for creating thousands of millionaires, in varied companies, around the world. Perhaps the most famous MLM company is Amway. Others include Avon and Mary Kay.

Below is an example of a 5 tier MLM commission structure, which shows how many members would be paying you, if everyone referred only 5 people. Now imagine if you got paid $5 per tier, per month. If you total it up, that’s 3905 people paying you $5 each, for a total of $19,525/mo..

Levels Under You

Number of Members
Level 1 5
Level 2 25
Level 3 125
Level 4 625
Level 5 3125