Multi level marketing (MLM) is a specific business model that involves sales teams selling products directly to consumers and recruiting additional company sales representatives. Here we explain the multi level marketing matrix which is the organisational structure of an MLM business.

Compensation Plan

Every multilevel marketing brand has a compensation plan. This plan includes all the  different ways in which the company is going to pay a sales representative or someone who invests in its products or services. While every company will have its own custom plan, there are key concepts that will be relative to most MLM company’s structure.

MLM Matrix

The structure of how your sales representative interacts is in the form of matrices, or multiple matrix. A matrix is essentially a series of points with each point having one parent point and many children points. This is the case for every point in the matrix. Every point will be the parent point for some matrices and the same point will also be the child of one parent matrix. In a multi level marketing matrix these points are your sales representatives. 

Upline

When you initially join a multi level marketing matrix, you will be a child point in the matrix, with one parent member above you. That parent member could have several more members above them. This ascending chain is known as your upline. 

Downline 

Anyone you recruit enters the matrix below you and are therefore referred to as your downline. Each member in your downline can recruit new sales representatives and start a new line. This cycle can go on indefinitely. Every time a member of your downline recruits a new member to their downline, that new member automatically becomes a member in your downline. So if you recruit 10 people and they collectively recruit 100 people, your total downline is 110 members. You then earn a small percentage from the sales of all the members in your downline. The more people who join your downline, the higher your chances are of building a steady, residual income, on top of your own sales. Likewise the people in your upline receive a similar commission from your sales. 

Spill Over

In theory the number of members you can have one level below you in the multi level marketing matrix is unlimited – this is the section of your downline that you personally have recruited. However most MLM brands place a cap on how many members you can have per level and how many levels deep your downline can go. The reason for this is to help the brand manage its organisation structure, since their sales force can be based anywhere worldwide and transactions take place in non-traditional retail spaces. For this reason when the number of sales representatives in your downline has reached this limit, any new members will be placed into the next free position available in the downline of any other member currently in your downline. This means that you do not lose new members as they are still going into your downline. Plus it helps to populate the downline of your downline members, which reduces the number of people they must recruit whilst generating more commission for you. True income from MLM doesn’t actually come from your personally recruited downline, it comes from how quickly you can fill up the grid below you. This is what makes your MLM success a team effort. 

Cycles

Additionally to filling up the upline and downline matrix, it’s usual for an MLM brand to assign quotas that it should be meeting. Once the quota is achieved, payment is made to the entire line, at the applicable rate for members on each level. This is known as completing the cycle.

Expandable Depth Commission

As stated earlier, theoretically, there is no limit as to how deep a downline can go, but due to economic and management reasons, most MLMs will have some kind of predefined limit. This limit can sometimes be overcome if the MLM employs the Expandable Depth Commission model. Basically, this model allows a limited MLM to operate as an infinite-depth MLM.

At MLM Accountants We Know How to Help You 

At MLM Accountants we can help you understand the best solutions for the success of your business. All you need to do is get in contact with us at MLM Accountants. Call us today 0203 237 2927 for help and guidance.