MLM Comp Plans - Revealing Stair Step Break Away Breakage

In "MLM Comp Plans - The Stair Step Love Affair" we examined why some companies adore the stair step break away comp plan. Now we throw back the covers to divulge the nasty secrets MLM companies don't want you to know about the breakage in their comp plan.

As mentioned in my previous post mentioned above there are non-manager and manager type distributors in this form of comp plan, and neither one is left out of the fun when it comes to breakage.

Here's how the company lays out their breakage fun house.

#1 and #2: Product Pricing
Companies make sure they pay as little as possible for materials and manufacturing. So the first form of breakage is in the "wholesale" distributor cost. Then distributors are given a "retail" cost for customers (usually 2 to 4 times higher than for the same product available at traditional stores like Wal-Mart).

#3: Qualification Hoops to Get a Check
I call this the "double work load" approach to breakage. Usually you need a minimum monthly volume (often called personal volume “PV” and group volume “GV”)

#4: Unrealistically High Bonus Qualification Requirements
Also known as "nose bleed" requirements, top recruiters get light headed keeping up with them.

#5. The “Break Away”
This "wife beater" is portrayed as "a good thing" because now the manager gets to continue earning on a whole new group's volume. Never mind the fact that this new override percentage can be as much as 50% to 60% smaller than the override on a non-manager's volume. People who's whole team have broken away simultaneously know the kind of "beating" this can deliver.

Here Is The Bottom Line.

The only one who comes out ahead with a stair step break away comp plan is the company owner. A few sponsor monsters make some money, but that's mostly just bragging rights. Outrageous prices, unrealistic bonus qualification requirements, and the “break away” feature all serve to choke out the rest of the field.

The only way to survive this type of comp plan is constant recruiting. The fatal flaws with constant recruiting are:

A. No one has ever had a team that can duplicate, and
B. Constant recruiting means residual income is impossible.

Can you recruit 3 people or more a day blind folded with your head under water? Great, then have at it.

On the other hand, if you’re one of the 97% of the world that thinks that's nuts, then I suggest you leave the self-abuse to those who like it. After all, there are a few companies out there that look for ways to reduce breakage so you can get a bigger check.

I appreciate you,

Bill Tessore