Sorcery In MLM Comp Plans

I've said it again and again, “If you want to build a network marketing business that’ll pay your children’s children, then you must know what’s in your Policies & Procedures (the contract between you and your company).

Richard Dennis didn’t read the P&Ps, and if you repeat his mistake what happened to him could also happen to you.

Author of the tape, “Dead Doctors Don’t Lie”, Richard learned the value of reading the P&Ps the hard way. He built a very lucrative customer base to the pinnacle of the compensation plan in a particular MLM company.

That business Richard built was so lucrative that the company he represented decided one day to review their contract with him (the Policies & Procedures).

"Oh now Richard, you don't really need all that money."

It seems the company lawyers found a clause that gave the company the power to finagle the compensation plan to a completely different structure, AND eliminate all those pesky distributors … including their highest paid rep, Richard Dennis.

This one little clause caused Richard's $40,000 +monthly income to flat-line.

So, is it important to read your company's Policies & Procedures? According to Richard Dennis it is absolutely critical to read the Policies & Procedures before you put your blood, sweat, & tears into building a MLM business.

Failing to do this one simple thing gives the company the advantage. According to Richard, "They will use it if they think they need to."

I appreciate you,

Bill Tessore

MLM Comp Plans - Aussie Two-Up Breakage

In MLM Comp Plans - The Beloved Aussie Two-Up we saw why this compensation plan is so popular with some network marketing companies. Now let's bounce on over and take a look at how they create breakage down under.

I tell ya kid that Joie is a wreckin' machine!

The two forms of breakage in the Aussie two-up makes this comp plan as brutal as boxing with a kangaroo.

The First Two Rounds
Your first two recruits automatically go to your up-line sponsor who talked you into getting into the ring. Oy! Score two rounds for the 'Roo!

The High Entry Fee
Naturally you have to buy the product to qualify to get a check. So besides going the distance with that slap happy marsupial you get to pay really big bucks for a product or service that can often be found elsewhere for much less … if not for free.

What are your chances of going the distance?

Most folks who choose a company with an Aussie two-up comp plan hear about the big commission checks and jump right into the ring. They don't know that kangaroo is the champion because 97% of all contenders rarely go that third round and get a personal downline recruit of their own.

The would-be entrepreneur who finds herself facing this brute from the Out Back now must try to get to that coveted third round because that's the only way for her to make a profit.

There are many network marketers out there who faced Joie and have only scars, empty wallets, and broken dreams to show for it. For those who survive this mlm nightmare with big Joie it's still a tough fight because now they have to find another hungry kid eager enough to face him in order to get a check.

Are you a network marketing Muhammad Ali? Then good luck kid, you'll need it. If you'd rather avoid a beating, get all the credit (and money) for your efforts, and not pay a fortune, then look for a company that will treat you right and help you go the distance for that long-term residual income you deserve.

I appreciate you,

Bill Tessore

MLM Comp Plans - The Beloved Aussie Two-Up

In MLM Comp Plans - The Stair Step Love Affair we saw what MLM companies find so attractive about the stair step breakaway compensation plan. Now let's see why some network marketing companies wish they could all be Aussie Two-Ups.

How an Aussie Two-Up works.

Let's say Bob is building his team with this comp plan and he recruits Sue. Sue's first two recruits go directly to Bob along with the commissions earned by Sue's sponsoring efforts. From there on Sue can start to earn a check and fill her own downline group in the same way.

So why are companies wall-eyed over the Aussie Two-Up?

The Big Ticket
Generally there is only one product or service with an extremely bloated price tag. (ex.: a marketing course sold for $2,000, and the company keeps half of that)

One-Time Sales
There's no pesky residual income to pay out.

Companies using an Aussie comp plan lure prospects in with large sales commissions, but they usually offer only one very high ticket, one-time purchase product. And since few people recruit more than 2.7 team members in their network marketing career it's easy to get upside down trying to work with this type of comp plan.

Do you live to recruit? No worries mate. Go beat the bush and have fun!

But if the Aussie Two-Up comp plan is too Out Back for you, then look for a company with a comp plan that won't kick you in the face and expect you to come back for more.

I appreciate you,

Bill Tessore

MLM Comp Plans - Uni-Level Breakage

In "MLM Comp Plans - Why Companies Love Uni-Levels" I revealed why companies find uni-level compensation plans so attractive. Now let's move on to the breakage in a uni-level compensation plan.

Basic uni-levels have two forms of breakage.

• Limited depth.
• Product price.

Here's how limited depth creates breakage.

Let’s say you’re in a company with a 3-deep Uni-Level pay plan. You sponsor Betty, Betty sponsors Jim, Jim sponsors Darla, and Darla sponsors George. In this case you get nothing for Darla's sponsoring efforts because breakage occurs with George (on level 4).

How about the price related breakage?

Most of the products marketed through a uni-level are either intellectuals (e-books), or some other one-time purchase item with little to no cost to the company offering them. These products offer the company a gigantic profit margin. Let's take a closer look at what this means.

Most MLM companies claim they need to maintain between a 55% to 65% profit margin to pay the bills and pay commissions. But is that really necessary? Take a look at the chart below for a $20 product to see where the money goes.

Your	% to	% to	Your	Co.
Team	You	Co.	Profit	Profit
Betty	20%	80%	$4	$16
Joe	10%	90%	$2	$18
Darla	5%	95%	$1	$19
Fred	0%	100%	$0	$20
Totals	8.75%	91.25%	$7	$80

As you can see from the example above the company is making an average of 91.25% profit from your team efforts compared to your 8.75%. Wow, they must have a lot of overhead! Oh, and check out how much the company values your contribution.

Network marketing companies like Uni-Level comp plans because they’re easy to explain and they're highly profitable (to the company). Plus there are plenty of folks out there who think they are in that 0.01% of MLMers that can recruit at will to keep making money.

Most networkers are in MLM to build a large, stable, and profitable income so they can retire. If you’re a super sales person or a sponsor monster that probably doesn't matter to you. You’ll do well with a Uni-Level, because you’ll just go wide.

However, if maintaining communication with your team and building depth for strength of long-term stability are important to you, then a uni-level plan will be the kiss of death to your financial independence.

Your dreams should not be limited by your company's comp plan. So look for a company that rewards well for building enough width to be able to keep up with your front line, while building maximum depth for team strength.

I appreciate you,

Bill Tessore

In "MLM Comp Plans - Why Companies Love Uni-Levels" I revealed why companies find uni-level compensation plans so attractive. Now let's move on to the breakage in a uni-level compensation plan.

Basic uni-levels have two forms of breakage.

• Limited depth.


• Product price.

Here's how limited depth creates breakage.

Let’s say you’re in a company with a 3-deep Uni-Level pay plan. You sponsor Betty, Betty sponsors Jim, Jim sponsors Darla, and Darla sponsors George. In this case you get nothing for Darla's sponsoring efforts because breakage occurs with George (on level 4).

How about the price related breakage?

Most of the products marketed through a uni-level are either intellectuals (e-books), or some other one-time purchase item with little to no cost to the company offering them. These products offer the company a gigantic profit margin. Let's take a closer look at what this means.

Most MLM companies claim they need to maintain between a 55% to 65% profit margin to pay the bills and pay commissions. But is that really necessary? Take a look at the chart below for a $20 product to see where the money goes.

==========================

Your % to % to Your Co.

Team You Co. Profit Profit

------------------------------------

Betty 20% 80% $4 $16

Joe 10% 90% $2 $18

Darla 5% 95% $1 $19

Fred 0% 100% $0 $20

------------------------------------

Totals avg. avg. $7 $80

7.75% 91.25%

============================

As you can see from the example above the company is making an average of 91.25% profit from your team efforts compared to your 8.75%. Wow, they must have a lot of overhead! Oh, and check out how much the company values your contribution.

Network marketing companies like Uni-Level comp plans because they’re easy to explain and they're highly profitable .. to the company. Plus there are plenty of folks out there who think they are in that 0.01% of MLMers that can recruit at will to keep making money.

Most networkers are in MLM to build a large, stable, and profitable income so they can retire. If you’re a super sales person or a sponsor monster that probably doesn't matter to you. You’ll do well with a Uni-Level, because you’ll just go wide.

However, if maintaining communication with your team and building depth for strength of long-term stability are important to you, then a uni-level plan will be the kiss of death to your

financial independence.

Your dreams should not be limited by your company's comp plan. So look for a company that rewards well for building enough width to be able to keep up with your front line, while building maximum depth for team strength.

Bill Tessore

MLM Comp Plans - Why Companies Love Uni-Levels.

In "MLM Comp Plans - How Companies Hide Binary Breakage" I revealed where breakage is in a Binary compensation plan. Now let's move on to the Uni-Level compensation plan.

What's to love about a uni-level?

• Unlimited Width: The downline structure is set up so there is rarely more than 3 levels of depth.
• Simplicity: Commission qualifications are very easy to understand and predict.
• Residuals-Free: Basic uni-level comp plans only pay for one-time product sales.
• Ideal For Non-Renewables: The uni-level works best for products that are durable (books), intellectual (software), and other one-time order products.
• Affiliate Format Friendly: The low depth typically pays nothing beyond the 2nd or 3rd sponsorship level.
• Promotes Regular Sales: Affiliates must constantly find new customers to make money.

“Want more income? Recruit more prospects!”

Uni-level comp plans are great for those who are in love with the product and think others will love it as much as they do. They can't "sell", but they can refer what they like. Unfortunately, this type of comp plan does not offer residual income, so most people lose interest quickly.

Most networkers are in MLM to build a large, stable, & profitable income so they can retire. If you’re a super recruiter that’s less important to you, so, you’ll do well with a uni-level, because you’ll just go wide.

On the other hand, if communicating with your team, building deep and stable, and walk-away income are important to you, then a uni-level plan won’t suit your needs.

So, go find a company with a comp plan that will reward you for building manageable width and powerful depth.

Bill Tessore
Get the right skills … work hard and smart.

MLM Comp Plans - How Companies Hide Binary Breakage

In "MLM Comp Plans - Why Companies Love The Binary" I revealed the scandalous features that attract MLM companies to binaries like teenage boys to girls. Today we'll see how breakage is hidden from reps and their prospects working this type of comp plan.

Here's what a basic binary looks like.

A binary comp plan has two downline legs of sponsorship. One leg is "weak" while the other is "strong". A classic binary requires ⅓ of all sponsored recruits be placed in the weak leg While ⅔ must go into the strong leg.

Here's where the breakage occurs in a binary.

• The Strong Leg
• Unbalanced Growth
• Imperfect Timing
• Viperous Up-Line
• Run Away Strong Leg Growth

The most obvious place breakage occurs in the binary is in the strong leg. Absolutely every single penny of company-wide strong leg earnings go directly to the company.

Nothing less than perfect growth and timing relative to the pay cycle qualifies for payout.

Some naïve prospects have accepted offers of a "pre-built downline" only to discover this downline is their strong leg. Most of these folks never catch up to achieve that coveted ⅓ - ⅔ balance. Meanwhile the upline sponsor that offered this "deal" cashes his fat commission check while saying, "Thanks sucker!"

Even if everything else goes according to the ideal scenario, all it takes to disqualify a business builder is a sponsor monster in the strong leg to strangle the dream of financial independence.

Here are my thoughts on the binary comp plan.

Some compensation plans have much simpler and easier qualification requirements, and actually pay out 50% or more of total earnings to the distributor base. So why would anyone want to settle for maybe just 33%?

This is probably the hardest plan to earn a check from because it requires total perfection. Perfect balance, perfect timing, and perfect upline cooperation … oh, and then there's that wild card run away super recruiter thing.

I am not perfect and I doubt you are either. And even if you are you still can't control what others do. So, unless you are part big-time gambler and part super analyst, then I suggest you look for a company with a comp plan that doesn't stack the deck against you like this one does.

I appreciate you,

Bill Tessore

MLM Comp Plans - Why Companies Love The Binary

In "MLM Comp Plans - Why MLM Companies Love The Matrix" I revealed the dirty MLM secrets behind companies' love affair with the matrix compensation plan. Today I'm throwing back the covers off of the Binary and its network marketing lovers.

Here's what a basic binary looks like.

A binary comp plan has two down-line legs of sponsorship. One leg is "weak" while the other is "strong". A classic binary requires ⅓ of all sponsored recruits be placed in the weak leg and the rest must go into the strong leg.

To get a check a perfect ⅓ - ⅔ balance between the two legs must occur when the comp plan "cycles". A cycle is a production bonus pay period.

Here's what companies love so much about binaries.

• Production bonuses are only paid out on a perfectly balanced ⅓ - ⅔ structure … at the end of the pay cycle.
• No money is paid out without that all-important perfectly balanced ⅓ - ⅔ structure.
• No monies are paid out on activity in the strong leg.
• The company keeps a minimum of ⅔ of all monies generated by the entire distributor base.
• The ⅓ - ⅔ structural balance requirement makes payout of residual income virtually impossible.
• Very few network marketers, especially beginners, understand how this comp plan really works so droves of people join and spend lots of money only to learn the hard way.

Most people never make any money with a binary plan because it’s too hard to balance both legs.

Sometimes a rep desperate for a check finds an opportunity seeker and then "gift" excess strong leg members to her saying "I'll put all these people beneath you so all you have to do is build the other leg."

The reality is the newbie is least likely to ever build the weak leg enough to achieve the ⅓ - ⅔ balance so critical to getting paid.

All the while the company sits back and watches the carnage while counting the 66 ⅔% of unpaid money the distributor base spilled their blood, sweat, and tears to earn.

What's my advice?

Unless you’re into astrophysics or rocket science you should find a company with a compensation plan that pays you for all the hard work you do.

I appreciate you,

Bill Tessore

MLM Comp Plans - Why MLM Companies Love The Matrix

In my previous post, "What Is Breakage In A MLM Comp Plan?" I explained what breakage is and how companies use it to pay reps less than what they claim … often a lot less. Now let's take a look at the Matrix compensation plan to see why it is so popular with some companies.

Here are the basics of a matrix.

Let’s say you’re in a company with a 3 x 5 matrix comp plan. In this plan you have 3 recruits on the 1st level, 9 on the 2nd level, and so on down 5 levels. A 3 x 5 matrix pay-line is complete at rep number 363.

Here's why network marketing companies love matrix type plans.

• They're easily understood so lots of people join.
• "Big money" claims attract new prspects regularly.
• "Spill-over" appeals to impulse buyers.
• 90% of network marketers are blue personality types, so the matrix plan plays well to a huge number of prospects.
• Reps who receive "spilled positions" are paid fewer recruiting bonuses on a full matrix.
• Drop out rates are high, so fewer residual income is paid out.
• Earnings "outside the pay-line" go to the company, so residual earnings are limited.
• Though some matrix plans offer unlimited one-time bonuses for sponsoring outside the pay-line, very few reps ever earn them because most reps sponsor an average of 2.7 people in their network marketing career.
• Since a matrix can have any number of "first level positions" and "levels of depth" the company can determine if they want to attract mostly recruiters, or average networkers.

MLM companies like the matrix comp plan because there are many structural variables they can use to their advantage. Pay out caps and the ability to choose to attract sponsor monsters or average Joes are just a couple things in the company's favor.

The built in income limits of a matrix attracts fewer networkers capable of building stable team growth. Most of the folks who join a company with this type of comp plan never do anything with it because they expect spill-over to do the work for them.

If you are a sponsor monster, then a matrix comp plan is perfect for you. However, if you are like the vast majority of networkers who want to build a team with real residual income potential, then you might want to keep looking.

I appreciate you,

Bill Tessore

MLM Comp Plans - How Companies Hide Matrix Breakage

In my previous post, "What Is Breakage In A MLM Comp Plan?" I explained what breakage is and how companies use it to pay reps less than what they claim … often a lot less. Now let's take a look at a practical application of this phenomenon in the form of a Matrix comp plan.

For illustration purposes let’s say you’re in a company with a 3 x 5 matrix comp plan. In this plan you have 3 recruits on the 1st level, 9 on the 2nd level, and so on down 5 levels. A full 3 x 5 matrix has 363 positions down-line of the original sponsor.

So where's the breakage, and how is it hidden?

• One-time infinity bonuses: "These are in place to reward top producers.
• Compensation outside the pay-line: "The infinity bonuses take care of that.
• Spill-over: "This helps you fill your matrix.
• Direct sponsoring: When it occurs the company keeps that to itself. This happens when someone joins without a sponsor code, or their sponsor is terminated and no up-line rep takes the terminated sponsor's place as direct up-line (this is called "orphaning").

Here's the problem with these three forms of breakage.

• One-time infinity bonuses sound good … until you fill the matrix. At that point the only way to make more money is to continue sponsoring for a one-time check. It's like being an employee only you still have to pay Social Security and earned income self-employment taxes.
• Compensation outside the pay-line is that residual income limit I mentioned earlier. If you sponsor prospect #364 and beyond, then you now have a commission-only job. Your residual check stops growing.
• Spill-over actually robs reps who receive it. Every position spilled from an upline rep's activity takes one point of residual earning power away from that down-line rep that receives it.
• Direct Sponsoring This puts the corporate entity, the company, in the place of an active rep. The company earns commissions and bonuses just like everyone in the distributor base. So the company's entire distributor base is in competition with the company and all its resources.

MLM companies use breakage to pay the bills, make a profit, and reward producers. It’s an inescapable fact of life in network marketing that companies don’t advertise.

Some companies do all they can to reduce breakage to the advantage of their distributor base. Others see breakage as a way to pay for luxuries, live a lavish life style, and squeeze as much production out of their reps as possible.

My best advice is to always look for what’s not mentioned about the comp plan. That’s usually where breakage is found and your real income potential lies.

I appreciate you,

Bill Tessore