Glossary
MLM & direct selling glossary
81 terms every founder, leader and distributor should know, from BV and spillover to compression, autoship, KYC and TDS, explained in plain English.
A
- Active Status
- Active status indicates that a distributor has met the minimum activity requirement, such as a monthly personal volume, to qualify for commissions in a period. Inactive members may be skipped by compression until they requalify. More on Active Status
- Admin Charge
- An admin charge is a service or processing deduction a company may apply to commissions or withdrawals, usually as a percentage or fixed amount. It should be disclosed clearly in the plan and shown on each member's payout statement. More on Admin Charge
- API
- An API, or application programming interface, is a defined way for software systems to exchange data. MLM software uses APIs to connect payment gateways, recharge providers, SMS services, accounting tools and mobile apps. More on API
- Autoship
- Autoship is a recurring order that is processed automatically at a set interval, usually monthly, for a distributor or customer. It simplifies repeat purchases and helps maintain active status, but should always be voluntary and easy to cancel. More on Autoship
B
- Back Office
- A back office is the secure member dashboard in MLM software where distributors view their genealogy, orders, commissions, e-wallet, ranks and reports. A separate admin back office lets the company configure plans and manage operations. More on Back Office
- Binary Plan
- A binary plan is a compensation structure in which every distributor has only two frontline positions, a left leg and a right leg. Commissions are usually paid on matched volume between the two legs, which encourages teamwork and spillover from uplines. More on Binary Plan
- Board Plan
- A board plan, sometimes called a cycler, places members on a small board of fixed size. When the board fills, it splits or cycles, the member at the top earns a bonus, and moves to a higher board with new positions and rewards. More on Board Plan
- Breakaway Plan
- A breakaway plan is a stair-step variant in which a distributor who reaches a set volume or rank breaks away from the sponsor's group. The upline no longer earns differential commission on that group but receives an override, often across several breakaway generations. More on Breakaway Plan
- Business Volume (BV)
- Business volume, or BV, is the value assigned to a product for commission purposes, which may differ from its selling price. Commission percentages are applied to BV, letting companies set payouts per product according to margin. More on Business Volume (BV)
- Buy-Back Policy
- A buy-back policy commits a direct selling company to repurchase unused, saleable products from a direct seller on reasonable terms, typically within a set period. It protects distributors from being left with unsold inventory and is required under India's rules. More on Buy-Back Policy
C
- Capping
- Capping is a maximum limit on how much a member can earn from a particular bonus within a set period, such as a daily pairing cap. Caps protect the company's payout ratio and stop a single bonus type from becoming unsustainable. More on Capping
- Carry Forward
- Carry forward is the unmatched volume left on the stronger leg of a binary plan after pairs are calculated. Depending on plan rules, it carries into the next payout cycle for future matching, sometimes with limits on how long it can remain. More on Carry Forward
- Commission Engine
- A commission engine is the core component of MLM software that applies compensation plan rules to orders and network data to calculate bonuses, ranks and payouts. Accuracy, speed and configurability are its most important qualities. More on Commission Engine
- Consumer Protection (Direct Selling) Rules 2021
- The Consumer Protection (Direct Selling) Rules, 2021 are Indian regulations governing direct selling entities and direct sellers. They prohibit pyramid and money circulation schemes and set obligations covering grievance redressal, cooling-off, buy-back, disclosures and record keeping. More on Consumer Protection (Direct Selling) Rules 2021
- Cooling-Off Period
- A cooling-off period is the window after joining or purchasing during which a direct seller or consumer can cancel and receive a refund. India's Direct Selling Rules require companies to offer a cooling-off period on reasonable terms. More on Cooling-Off Period
- Cycle Bonus
- A cycle bonus is paid each time a member completes a defined set of positions or volume, such as filling a board or matrix. After cycling, the member may re-enter or move to a higher level with new earning opportunities. More on Cycle Bonus
D
- Decentralised MLM
- A decentralised MLM runs its compensation logic through smart contracts on a blockchain, so member funds move peer-to-peer between wallets rather than through a company account. Its legal treatment varies widely by jurisdiction and requires specialist advice. More on Decentralised MLM
- Depth
- Depth is the number of levels below a distributor in the genealogy. Many compensation plans limit how many levels deep commissions are paid, while others use compression or generations to extend payouts further down the organisation. More on Depth
- Direct Referral Bonus
- A direct referral bonus is a one-time payment to a sponsor when someone they personally introduce makes a qualifying purchase. To stay product-led and compliant, it should be linked to genuine product sales rather than to joining fees alone. More on Direct Referral Bonus
- Direct Selling
- Direct selling is the marketing and sale of goods or services directly to consumers away from a fixed retail location, usually through independent sellers. Multi-level direct selling adds commissions on sales made by a seller's recruited team. More on Direct Selling
- Distributor ID
- A distributor ID is the unique identifier assigned to each member when they join. It links orders, volume, commissions, e-wallet transactions and KYC records to the right person, and it is used for sponsorship and placement. More on Distributor ID
- Downline
- Downline refers to all distributors and customers below a member in the genealogy, including those personally sponsored and those placed through spillover. Commissions are typically calculated on downline volume according to plan rules. More on Downline
- Dynamic Compression
- Dynamic compression skips inactive or unqualified members when calculating level commissions, so the payout rolls up to the next qualified person in the upline. It keeps commissions flowing to active participants and makes level-based plans fairer to productive teams. More on Dynamic Compression
E
- E-Pin
- An e-pin is a unique electronic code that represents a prepaid product package or registration value. Members or stockists can purchase e-pins and use them to activate an account or place an order, simplifying offline and assisted sign-ups. More on E-Pin
- E-Wallet
- An e-wallet is a virtual account inside MLM software where a member's commissions are credited and from which they can request withdrawals, transfer funds or pay for orders. It provides a clear statement of every credit, debit and deduction. More on E-Wallet
F
- Fast Start Bonus
- A fast start bonus rewards a new distributor, or their sponsor, for achieving early sales or volume targets within a short period after joining. It encourages quick, product-focused activity and helps new members understand how the plan works. More on Fast Start Bonus
- Flush Out
- Flush out is the removal of unmatched or excess volume once a binary capping limit is reached or a carry-forward period expires. Flushed volume is not paid, which helps companies control their total payout ratio and protect plan sustainability. More on Flush Out
- Frontline
- Frontline refers to the members placed directly beneath a distributor on the first level of the genealogy. In a binary plan the frontline is limited to two, in a matrix to a fixed width, and in a unilevel plan it is unlimited. More on Frontline
G
- Gas Fee
- A gas fee is the transaction cost paid to a blockchain network for processing an operation, such as a smart contract call or token transfer. Fees vary by network and congestion and are usually paid in the chain's native coin. More on Gas Fee
- Genealogy Tree
- A genealogy tree is a visual representation of a distributor's network, showing sponsors, placements, legs and levels. MLM software uses it to display team structure, volumes and ranks, and to support placement and commission calculations. More on Genealogy Tree
- Generation Plan
- A generation plan pays commissions by generation rather than by level. A generation usually begins when a downline member reaches a qualifying rank, so payouts can extend through several qualified leaders, rewarding distributors who develop strong leaders beneath them. More on Generation Plan
- Grievance Officer
- A grievance officer is the person a direct selling company appoints to receive and resolve complaints from consumers and direct sellers. Indian rules expect the company to display the officer's details and acknowledge and address complaints within set timelines. More on Grievance Officer
- Group Volume (GV)
- Group volume, or GV, is the combined volume of a distributor and their downline, or of a defined part of it, within a period. It is used to determine rank qualification, bonus eligibility and, in stair-step plans, the applicable commission percentage. More on Group Volume (GV)
- GST
- GST, or Goods and Services Tax, is India's indirect tax on the supply of goods and services. Direct selling companies issue GST-compliant invoices for product sales, and MLM software can generate these automatically for each order. More on GST
H
- Hybrid Plan
- A hybrid plan combines elements of two or more compensation structures, such as binary pairing income with unilevel repurchase commissions. Companies use hybrids to balance fast early rewards with long-term residual income, though they require careful payout modelling. More on Hybrid Plan
I
- Income Disclosure Statement
- An income disclosure statement is a document published by a direct selling company showing the typical earnings of its distributors, often by rank or percentile. It gives prospective members a realistic picture of income rather than relying on success stories. More on Income Disclosure Statement
- Infinity Bonus
- An infinity bonus pays a qualified leader a percentage on volume throughout their organisation without a fixed depth limit, usually until another leader of equal or higher rank is reached. It rewards developing deep, productive organisations rather than only frontline recruits. More on Infinity Bonus
K
- KYC
- KYC, or Know Your Customer, is the process of verifying a member's identity and bank details using documents such as PAN, Aadhaar or a passport. MLM software usually requires approved KYC before commissions can be withdrawn. More on KYC
L
- Leadership Pool
- A leadership pool is a bonus fund created from a percentage of company-wide sales and shared among distributors who hold qualifying ranks. Each eligible leader receives shares in the pool, often weighted by rank or by contribution during the period. More on Leadership Pool
- Level Income
- Level income is commission earned from the purchases or activity of members on specific levels of a distributor's downline. Each level carries its own percentage or fixed amount, and the number of payable levels is set by the compensation plan. More on Level Income
M
- Matching Bonus
- A matching bonus pays a distributor a percentage of the commissions earned by personally sponsored members, and sometimes their downlines, across defined generations. It encourages leaders to help their teams succeed rather than focusing only on personal sales. More on Matching Bonus
- Matrix Plan
- A matrix plan limits both the width and depth of a network, for example 3x9, meaning three frontline positions and nine paid levels. Once the frontline is full, new members spill into lower levels, and commissions are paid on volume within the matrix. More on Matrix Plan
- Money Circulation Scheme
- A money circulation scheme is an arrangement for making quick or easy money in which payments depend on enrolling more members, without real sale of goods or services. In India, such schemes are banned under the Prize Chits and Money Circulation Schemes (Banning) Act. More on Money Circulation Scheme
- Monoline Plan
- A monoline plan places every member in a single line in order of joining, so each new person sits below everyone who joined earlier. Commissions or bonuses are usually triggered by the number of people placed beneath a position, sometimes combined with direct referral income. More on Monoline Plan
N
- Nodal Officer
- A nodal officer is a senior person designated by a direct selling company as its point of contact for regulators and authorities. Under India's Direct Selling Rules, companies are expected to appoint one and publish the relevant contact details. More on Nodal Officer
O
- Override
- An override is a commission a leader earns on the sales or volume of downline members, often on top of their own personal earnings. In stair-step and breakaway plans, overrides typically apply to groups that have broken away from the leader. More on Override
P
- Pairing Bonus
- A pairing bonus is paid in a binary plan when volume or members on the left leg are matched with equal volume or members on the right leg. Ratios such as 1:1 or 2:1 define a pair, and daily or weekly caps often apply. More on Pairing Bonus
- Party Plan
- A party plan is a direct selling model built around hosted events, in person or online. A host invites guests, a consultant demonstrates products, and guest orders earn the host rewards while the consultant receives commissions and, in many plans, team bonuses. More on Party Plan
- Payout Cycle
- A payout cycle is the schedule on which commissions are calculated and released, such as daily, weekly or monthly. Different bonuses in the same plan can follow different cycles, for example daily pairing income and monthly repurchase commissions. More on Payout Cycle
- Personal Volume (PV)
- Personal volume, or PV, is the total volume generated by a distributor's own purchases and, in many plans, sales to their personal customers within a period. PV commonly decides whether a member is active and eligible for commissions. More on Personal Volume (PV)
- Placement
- Placement is the position a new member occupies in the genealogy tree, which may be under the sponsor or elsewhere in the sponsor's downline. In binary and matrix plans, placement determines which leg receives the member's volume. More on Placement
- Plan Simulator
- A plan simulator is a tool that models how a compensation plan will pay out using sample network sizes, order values and growth assumptions. It helps companies test payout ratios and spot unsustainable bonuses before launching or changing a plan. More on Plan Simulator
- Power Leg
- The power leg is the strongest leg in a distributor's organisation, generating the most volume. In binary plans it is the leg with higher volume, and many rank rules limit how much volume from the power leg counts toward qualification. More on Power Leg
- Preferred Customer
- A preferred customer is someone who buys products at a discounted price, often through recurring orders, without joining the business opportunity. Their purchases are usually credited to a referring distributor, demonstrating genuine end-customer demand for the products. More on Preferred Customer
- Pyramid Scheme
- A pyramid scheme is an arrangement in which participants earn mainly from recruiting others rather than from genuine sales of goods or services. Such schemes are prohibited in India and many other countries because most participants inevitably lose money. More on Pyramid Scheme
Q
- Qualification Period
- A qualification period is the time window, such as a week, month or quarter, during which volume and activity are measured to determine ranks, bonuses and active status. Volume usually resets or rolls over at the end of each period. More on Qualification Period
- Qualifying Volume (QV)
- Qualifying volume, or QV, is the volume counted toward rank and bonus qualification, as distinct from the volume on which commissions are paid. Separating QV from BV lets companies control promotions without affecting payout calculations. More on Qualifying Volume (QV)
R
- Rank Advancement
- Rank advancement is the process by which a distributor moves to a higher title after meeting qualification criteria such as personal volume, group volume and the number of qualified legs. Higher ranks usually unlock larger percentages, bonuses or recognition. More on Rank Advancement
- Real-Time Commission
- Real-time commission means bonuses are calculated and credited as soon as a qualifying transaction occurs, rather than in a batch at the end of a period. It gives distributors immediate visibility of earnings and reduces month-end processing load. More on Real-Time Commission
- Recharge MLM Plan
- A recharge MLM plan pays members a commission on mobile recharges, DTH top-ups, bill payments and similar digital transactions made by themselves and their network. Earnings depend on transaction volume and the margin available on each service. More on Recharge MLM Plan
- Replicated Website
- A replicated website is a personalised copy of the company's website or shop provided to each distributor, usually on a unique link. Visitors who join or order through it are automatically credited to that distributor. More on Replicated Website
- Repurchase
- Repurchase refers to any product order placed after a member's first purchase. In MLM software, repurchase orders generate business volume for ongoing commissions, rank qualification and active status, making them central to product-led compensation plans. More on Repurchase
- Repurchase Plan
- A repurchase plan pays commissions on repeat product purchases made by distributors and their teams after the first order. It rewards ongoing consumption rather than recruitment and is often combined with level, generation or unilevel structures for sustainable income. More on Repurchase Plan
- Retail Profit
- Retail profit is the difference between the distributor price and the price a retail customer pays. It is earned directly by the selling distributor on each sale, is separate from network commissions, and is widely viewed as a hallmark of a genuine product business. More on Retail Profit
- Roll-Up
- Roll-up is the movement of a commission or of a downline position to the next eligible upline member when the original recipient is inactive, unqualified or has left the business. It prevents earnings from being lost when gaps appear in the network. More on Roll-Up
- Royalty Bonus
- A royalty bonus is an ongoing reward paid to senior ranks, typically as a percentage of company turnover or of a large group's volume. It recognises long-term leadership and is usually subject to monthly maintenance or activity conditions. More on Royalty Bonus
S
- Smart Contract
- A smart contract is self-executing code deployed on a blockchain that automatically carries out agreed actions, such as distributing payments, when conditions are met. In crypto MLM, smart contracts can handle registrations and commission transfers on-chain. More on Smart Contract
- Spillover
- Spillover occurs when an upline sponsors new members who are placed below someone else in the downline because the upline's own frontline positions are full. It is common in binary and matrix plans and can help newer distributors build volume. More on Spillover
- Sponsor
- A sponsor is the distributor who introduces a new member to the business, also called the enroller or referrer. Sponsorship determines who receives direct referral or sponsor-related bonuses, and it may differ from the member's placement in the genealogy tree. More on Sponsor
- Stair-Step Plan
- A stair-step plan rewards distributors with higher commission percentages as they climb ranks based on personal and group volume. Leaders typically earn the difference between their percentage and that of downline members, and some plans let qualified leaders break away into separate groups. More on Stair-Step Plan
- Staking
- Staking is the act of locking cryptocurrency tokens in a network or smart contract for a period, typically in return for rewards. Staking-based plans can carry significant financial and regulatory risk, so legal advice is essential before launch. More on Staking
- Stockist
- A stockist, or franchise, is an authorised partner who holds company inventory locally, sells to members and customers, and often handles e-pins and order pickups. MLM software gives stockists their own panel for stock and billing. More on Stockist
T
- TDS
- TDS, or Tax Deducted at Source, is an Indian tax mechanism under which a company deducts a prescribed percentage from commissions before paying them and deposits it with the government. Rates and thresholds should be confirmed with a tax adviser. More on TDS
U
- Unilevel Plan
- A unilevel plan lets a distributor sponsor an unlimited number of people on the first level, while commissions are paid to a fixed number of levels deep. Its simple structure makes it popular for product-led businesses built on repeat consumption. More on Unilevel Plan
- Upline
- Upline refers to the chain of distributors above a member in the genealogy, starting with the sponsor or placement parent and continuing to the top of the network. Upline members often earn commissions on the member's volume. More on Upline
- USDT
- USDT, or Tether, is a stablecoin designed to track the value of the US dollar and issued on several blockchains, including Tron, Ethereum and BNB Smart Chain. Crypto MLM platforms often use it to reduce exposure to price volatility. More on USDT
W
- Wallet Address
- A wallet address is a public identifier on a blockchain, made up of letters and numbers, used to send and receive digital assets. In crypto MLM software, members register a wallet address to receive payouts or interact with smart contracts. More on Wallet Address
- Weaker Leg
- The weaker leg, or pay leg, is the leg with lower volume in a binary structure. Because pairing bonuses are calculated on matched volume, the weaker leg usually determines how much a distributor earns in a given cycle. More on Weaker Leg
- White-Label App
- A white-label app is a mobile application built on an existing platform but branded with a company's own name, logo and colours. In MLM, white-label Android and iOS apps give members a branded back office on their phones. More on White-Label App
- Width
- Width is the number of members placed on a distributor's first level. Binary plans restrict width to two and matrix plans to a fixed number, while unilevel plans allow unlimited width on the frontline. More on Width
- Withdrawal
- A withdrawal is a member's request to transfer earnings from their e-wallet to a bank account or another payout method. Withdrawals are typically subject to minimum amounts, approved KYC, applicable deductions and the company's processing schedule. More on Withdrawal
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