In order to generate residual income, an MLM home based business is the perfect business as it does not require a lot of money to start. But make sure you understand the compensation plans.

1. MLM Home Based Business and their Compensation Plans
Multilevel Marketing (MLM) or Network Marketing is attractive because of their compensation plans.
The compensation plans allow its ordinary distributors to be paid residual income at different levels of
achievement specified in the compensation plans. Just like there are many MLM companies out there,
there are also many compensation plans designed to attract prospects. If two companies are selling
similar products same, definitely the compensation plan becomes a key factor, though not the only one,
in attracting distributors. If there are two companies with the same compensation plan but different
products, then you look at the product and the value it would offer to customers. This is because
creating a huge customer base is essential to the sustainability of your MLM business. It is much easier
to convert customers into signups as they are already aware of the value of the product.
Although there are many different types of compensation plans, they are all actually variations of a few
fundamental plans. These fundamental plans are;
1. The Break Away Plan
2. Matrix compensation plan
3. Binary compensation plan
4. Unilevel Plan
Compensations plans may sound lucrative but you have to work hard to reach different levels that
qualify you for different levels of residual income. The good thing is that initially you can work hard and
when you reach those levels you can relax your efforts and still get paid residual income. That is the
essence of an MLM home based business. So really, it is the one time effort that you should try to
overcome in order to earn a lifetime of residual income. And the beauty of the MLM business is that,
you do not need a lot of capital to start.
The Break Away Plan
This is an old compensation plan structure that made a lot of millionaires. In the Break Away Plan, you
recruit a lot of distributors as you wish and put all of them in your front line. There are several ranks you
have to achieve and at each rank you earn a higher commission. Upon reaching a certain cut off rank
with a certain sales volume, you break away from your upline and form a separate group. Your
commission rate increases upon breaking away. Just like you can break away, your downline distributors
can also break away when they reach the required sales volume and you need to replace them. You still
get paid an override commission from them though with lesser commission rate.
Usually the Break Away Plan is harder to explain to prospect as it is quite complex. It is also good for
people for who can aggressively recruit for new distributors. This plan is not preferred by many new
networkers as competition for distributors has become fiercer than before.
The Unilevel Plan
This plan is similar to the Break Away plan in which you recruit many distributors and place them all in
your front line. The only difference is that you do not advance in rank and break away. Rather everyone
is paid the same commission rates at all levels to certain levels deep. There can be variations with some

2. plans requiring you to qualify for certain rank before you can earn on all the levels, Since there is no
breakaway, you have to work closely with your downline to earn more commissions. This plan is easier
to understand and that is one reason why it is still being used by some companies.
Since, everyone is you recruit is placed in your front line, the whole idea would be to train and
encourage your front line distributors to do the same to build the depth. The main disadvantage is that
everyone you recruit becomes crossline to the others in your front line and they have to work in
competition with the others. Also, you will have the responsibility of training a huge front line if you are
recruiting more.
Binary Compensation Plan
The plan is called Binary as there are only two legs in this structure and only two people are allowed in
your front line. This means any other recruits have to be placed further down usually under someone
else in your downline and of course in your own downline. This is called the spill over effect that your
upline will help you build one leg of your downline. While this spill over effect is true in binary, you
actually have to be under an active upline to benefit from a fast growing team. If you are place under a
weak upline, you will have to work hard yourself.
In the binary plan, you have limited width growth but unlimited depth. That means you can be paid as
further down as you can depending on the size of your downline. Usually there is a sales volume you
have to reach for the commission to be paid. The sales volume must be balanced at both legs before the
you can be entitled to the commission.
Unlike in the Unilevel Plan, in theory you can train only two people well in your front line and they will
build the legs for you. You do not have to train as many frontline distributors as you would have to in
the Unilevel plan. When you have your two front line distributors, any new sponsors are put under one
of your downlines and this can be an encouragement to them.
The Matrix Compensation Plan
The matrix compensation plan is a plan that has a specified width unlike in unilevel where you can place
as many people as you want on your frontline. Usually it is two to four on the front line with several
levels deep. Unlike Binary it has specified depth levels, usually 6-12 levels deep. There is also a spill over
effect because of the restricted width like in the Binary Plan. The problem with this plan is that usually,
larger commissions are placed at the lower level and many people do not make it to those levels. It is
important to choose one that pays out good commissions at the top level to enable you to break even
and continue.
There is however one very unique matrix plan that I believe so far has been the best modification of a
compensation structure. It is the called the REVERSE 2 UP Matrix compensation plan. In this plan, your
distributors literally give you back two of their own distributors. This is extremely powerful than the spill
over effect. This unique and powerful matrix structure was created by the well known Internet Guru,
Ewen Chia. You can CHECK IT OUT here.