3 Different Types of MLM Business Models You Should Know

Tired of your regular day job? Lucky for you, more and more money-earning options are hitting the job market. Particularly popular is the MLM.

Multi-level marketing setups may get a bad rap, but they do offer pathways to significant income — for those who are willing to put in the work, anyway.

Millions of Americans participate in some form of MLM, contributing to a multi-billion dollar industry.

MLM business models aren’t for the faint of heart. If you’re looking for a quick way to earn lazy money, this isn’t the new position for you.

Those who treat MLMs as hobbies will never reach their full potential within the model. But if you’re willing to treat your MLM as a business, we’ve got great news for you. Six-figure incomes are completely possible, but they won’t happen overnight.

Several types of MLMs exist, which can make entrance into this form of work confusing. Compensation plans differ from company to company.

So how do you choose an MLM company to join up with?

It’s important to understand each MLM model before joining up since each of them will require different types of work, recruitment, and commitment.

Read on to learn about three of the most common types of MLM business models.

MLM Basics

Before getting into the various types, let’s discuss what an MLM actually is.

MLMs, or multi-level marketing companies, are companies that participate in network marketing. Those involved participate in direct sales, and the companies’ success and growth depend on distributors.

Most MLM setups are at least two tiers deep, with participants working on different levels. Some can be five or more tiers deep.

If you think you haven’t heard of any specific MLM companies, think again. Amway, LuLaRoe, and Nu Skin all use MLM business models.

As people join as distributors they have the chance to move up from level to level. Each level pays a certain amount of commission and that amount grows as you advance within the company.

While there are different models within the MLM world, each type follows this basic structure and relies heavily on participants at every level.

Breakaway MLM Business Models

The breakaway model is the most common of the MLM business models. It is built solely on a team of distributors who “break away” to form their own teams when they reach a certain level of success.

Almost every large MLM company uses some form of the breakaway model. Its reliable structure is highly successful for dedicated distributors.

Within the breakaway model, there are two groups of distributors: salespeople and sales leaders. Each is paid different types of bonuses and different levels of commission.

Beginning as a salesperson you can move your way up, and as you do you can earn more. Once you’ve reached the point where you’d qualify for the entire differential bonus, you can “break away” and start your own team.

Once you’ve reached the breakaway point, your only way to make more money is to become a sales leader.

You can have as many people as you want on level one of your business, otherwise known as your baseline. This will help beef up your commission.

This model is complex, so you’ll likely need to employ some marketing strategies to help you be successful. You’ll want to add to your baseline so you can bring in more income. Sell the position and help your invitees see the benefits of joining.

Marketing will also help you be more successful in sales.

Advantages of the Breakaway Model

This model is stable, having been around for more than 50 years. This reliability provides peace of mind, as well as the highest potential earnings of all the MLM business models available.

This model is also guaranteed to be safe and not a scam. It has been watched by regulators at both state and national levels.

Disadvantages of the Breakaway Model

While it is a successful model, the breakaway model does have its downsides. Payment method is one of them.

Payments are typically sent on a monthly basis and often take weeks to get to you. This means you’ll go for long periods of time without seeing any income, which can make it hard to stay motivated.

This model tends to carry monthly volume requirements, and if they aren’t met you don’t get paid. It’s also harder to convince others to join this type of model. Its complexity makes it difficult to explain to people who are interested in joining.

Unilevel MLM Business Models

Within unilevel MLM business models, a large number of people work on the first level. You can add as many people as you want to your first level.

These models typically have multiple types of commission. Different ranks may be held, but within each one, you’ll receive the same percentage level of commission.

This model only works well if you have a substantial organization set up. New distributors often don’t stick around, because the pay isn’t high enough to keep them interested.

Though, this model utilizes a series of bonuses to help distributors bring in more income.

The unilevel model shares some similarities with the breakaway model. There’s no limit to the number of people you can have on your frontline, but there are limitations as to who you can make commissions from.

However, this model includes an infinity bonus. This gets you between 1% and 4% in extra commissions from everyone within your organization. But you’ll need a substantial organization in order to earn this bonus.

In compressed unilevel MLM business models, the first three levels receive a high commission percentage. But until you reach a leadership position you won’t be able to earn commissions from your fourth level and below.

This option is great for part times, or anyone who’s looking to get into MLM but not spend a ton of time working on it. This model is not a great option for those who plan to work hard to build a large network.

Advantages of Unilevel Models

One major benefit that comes with the unilevel model is simplicity. Much easier to describe, this model is easier for newcomers and invitees to understand. This will increase your chances of getting others to join, which will also grow your income.

Typically these models don’t have the same requirements that breakaway models have, so they’re easier to plan.

Disadvantages to Unilevel Models

The main disadvantage of this model involves the infinity bonus. While that part of the deal can be a great feature, it also causes setbacks.

Usually, you’ll have to develop ten or more frontline leaders before you can earn that sought-for bonus. Due to this requirement, many members will never become eligible for this bonus.

Binary MLM Business Models

The most recently-created of the MLM business models, the binary model stands out from the others. Uniquely, this model doesn’t include levels. Instead, it’s based on two “legs:” the right and the left.

A “leg” refers to a lineup of distributors.

Within this model, you receive payment based on the volume of each of the two legs.

Fast start bonuses are available for salespeople, and pool bonuses help to compensate distributors who are at the top.

Though this model has changed the most since its creation it may be one of the easiest to understand. It is also easier to explain, which could help amp your level of success.

In this model, distributors work to build up the volume of both their legs, but they are only paid for one of them. The leg with the lowest volume is where that pay comes from. This is a huge point to consider when comparing MLM business models.

Balance is the goal here since you want to bring in as much income as possible. If one leg is worth $50,000 and the other only $10,000, the commission you receive will be based on the $10,000 leg. So the time you spent on the growth of the other leg is essentially lost.

The commission you’ll receive is a percentage of that lower-volume leg.

Throughout the entire organization, commissions are capped. This ensures that the company will never pay out more than what is sustainable.

Advantages of the Binary Model

This model is much less complicated than the others, which can make it more attractive to newbies since it’s easier to understand. Instead of dealing with all sorts of levels you only have to worry about two legs.

While other models require you to add and oversee multiple distributors, the binary model will typically have you only sponsoring two to four other people.

Usually, this model pays weekly, which leads to higher loyalty. This frequent pay can make it much easier to stay motivated, so people are willing to stick around.

And teamwork is more natural in this model, due to the way it’s set up.

Disadvantages of the Binary Model

While payments usually come in weekly, they are often low when you’re first starting out. This can be frustrating, especially to newcomers with high hopes. But distributors will see payment quicker this way, even if it is low.

The two leg system has its perks, but it does come with a major drawback. If one leg is really successful, you have to work hard to make sure the other one is too. Otherwise, the most successful leg is essentially worthless.

Your focus must be placed on building up both legs equally, or as close to equally as possible. You won’t find any success in focusing on only one leg.

MLM Business Models for Everyone

They may seem complicated, but all MLM business models are options for bringing in income.

While those working in MLMs tend to be women, the field is open to anyone who is interested. You just need to be willing to welcome others into your home, share products and invite others to join.

It’s important to understand how each model works before jumping into an MLM. If you skip this step you may very well end up confused and frustrated. Understanding the inner workings of the model you choose will help you figure your way around once you’re in.

Consider each model and determine which setup fits you best. What would match your goals? And importantly, how much time are you able and willing to put into this?

Don’t get into an MLM that requires a lot of effort if you’re not going to give it the time required to be successful. Remember, it’s a business, not a hobby.

Participating in MLM business models isn’t for you if you’re not willing to put in the work. Direct sales and constant recruiting will be your daily norm. If not daily, these things need to happen often if you want to be successful.

Bring Your Friends

As you consider joining an MLM, look around for others who are also excited about this type of opportunity. You’ll likely need to find some others to tag along in order to get your business going, so look for people who are enthusiastic to join you.

If you recruit excited people, they’ll recruit more excited people. And that’s a big part of what you’ll need to succeed in an MLM.

Conveniently, most MLMs don’t cost much to join. But this may contribute to the thought that they also don’t require much work.

Most people making the big bucks from an MLM position didn’t get to where they are overnight. In order to reach your full potential, you have to treat your MLM as a business.

It’s likely you won’t reach the level of income you’re hoping for until you’ve been involved for at least a couple of years. Patience is a must if you plan to be successful. And you definitely can be successful if you put your heart into it.

As you consider various MLM companies to join up with, research which type of business model each company employs. If it looks like something you’re interested in trying out, then go for it! But don’t forget to put your all into it if you really want to succeed.

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