Why BREAKAGE is the biggest risk YOU face in network marketing... and why nobody in your upline or company ever talks about it!
 Breakage is unclaimable bonus income that distributors (especially
part-time people) fail to earn because of high group volume and downline
rank requirements that stop them from qualifying in almost every pay plan.
It rolls right past you on its way upline to the Heavy Hitters and to the company
itself. It's the hush-hush secret that MLM companies never want to talk about,
for one very good reason... because it's one of their biggest sources of hidden
profits, earned at your expense!
In this warts-and-all report I'll expose how MOST MLM companies use breakage
to fleece their networks — especially their part-time distributors, who make up 90% of all networkers!
Why are Personal
Group Volume and Downline Rank bonus qualification requirements so unfair?
In most plans, the bigger
your personal group bonus pie is, the bigger your percentage share of that
pie will be. This is great when your downline is working. When it's not working,
though, it's not just the size of the pie that shrinks. So does YOUR SHARE... you're
hit by a costly Double Whammy!
In a balanced, fair compensation plan, your personal percentage of the group bonus is determined
by your personal performance... nobody else's. (The size of the bonus
pie will always be determined by your personal group's performance, since that's
the only place it can come from, regardless of the type of compensation plan in use.)
But isn't the
company the #1 risk to every network marketer?
If you visit my web site at www.EvaluateMLM.com you'll learn that the #1 risk for every network marketer is always the company they choose to
work with. But if breakage is created by the compensation plan, and the plan
is #2 on the list of factors for evaluation, why does the headline at the top
of this page say that BREAKAGE is the biggest risk you face?
Because breakage reveals the true motives of the company. The more
breakage it earns in unclaimable bonus income, the bigger the risk to you. Because
not only will YOU be robbed by breakage, so will everyone in your downline
team!
And when your downline distributors find that they can't earn enough to get into
profit, they'll quit... leaving YOU high and dry and even less likely to qualify for those already hard-to-earn bonuses that keep rolling up to
the company.
Here's a useful saying you should always remember, especially in network
marketing...
"Actions
reveal what words conceal."
Regardless of the noble sentiments
expressed in its literature, on its web site or at meetings, if a company adopts
a compensation plan that creates excessive breakage, it does so for one of two reasons...
- The people running the
company don't know what they're doing!
They either copied another company's plan or they were advised to use it by a consultant
they hired. What this really means is that they have little or no exp*rience or understanding
of network marketing. They're ignorant or incompetent, or both — so the entire
operation is constantly at risk from other poorly informed, high-risk management
decisions they make that will directly impact on YOUR business!
- The people running the
company know exactly what they're doing!
They deliberately designed or adopted a compensation plan with breakage in order
to rake off the windfall profits from that breakage... at the expense of their part-time
distributors.
Does knowing this inspire
YOU with confidence in the people running YOUR company?
How
do they get away with it? And how do they keep it so quiet?
Think carefully about
who benefits from breakage... the company and the heavy hitters perched
at the top of their mega-groups. Huge distributor networks with tens of thousands,
even hundreds of thousands, of distributors, most of them part-time and with not
a lot of business experience. So they don't really know what to look for in choosing
a network marketing company to work with, and they're soon blinded by the "smoke-and-mirrors" conjuring tricks that confuse, distract and misdirect them in
exactly the same ways that carnival spruikers and magicians have used to separate
the "rubes" from their money for centuries.
See if any of these practices are familiar to you...
- During business opportunity
presentations, the prospects' attention is focused on the potential of
the pay plan, especially the long-term, residual, "walk-away" income.
(The real-life realities — that 90% of part-time people only sponsor between 3 and
6 new people personally, and rarely build more than two or three levels deep — are
never mentioned. Anyone who asks is discouraged, or dismissed as "negative",
a "dream stealer", a "loser" or worse.)
The heavy hitters are
regularly held up as shining examples of what's possible for everyone to achieve
in this business — despite the cold, hard reality that they represent less
than 1% of all distributors, but earn more than 90% of all the bonus income paid by the company!
To qualify for bonuses you
have to achieve the specified minimum Personal Group Volume totals
in a month. (The justification for this is usually along the lines of "if we
didn't have those high PGV requirements, you couldn't earn such high incomes. It's
all for your benefit!")
- To qualify for bonuses you
have to achieve the specified number of downline (often first level, or personally
sponsored) rank achievers for the month. To achieve those ranks, those distributors
also have to achieve specified Personal Group Volume and Downline Rank achievers.
(The justification for this is usually along the lines of "if we didn't have
those high downline rank requirements, you couldn't earn such high incomes. It's
all for your benefit!")
Very few companies don't have these kinds of qualification requirements. But these are the very features of
compensation plans that create breakage — often in vast amounts. Here are some other
tell-tale signs of a company profiting from breakage...
- It operates a binary
compensation plan, or any other type of forced matrix plan.
- The compensation plan has group volume requirements to qualify for bonuses.
- The compensation plan has downline rank requirements to qualify for bonuses.
- The compensation plan limits
the number of legs you can build (limited width)
- The compensation plan promotes
or requires building deep (the payout is distributed over numerous levels)
A word of warning
It's not possible to have
a compensation plan with no breakage at all. For a start, breakage will always
flow to the company from the people sponsored directly by the company, usually in
the start-up stage. What we're really talking about is excessive breakage
caused by the kinds of compensation plan strategies and structures outlined in this
article. |
Why do most people
fall for it? How come they don't wise up?
I've been a management consultant to network marketing and other direct sales companies
for more than 20 years. My consulting, publishing and training company has carried
out surveys and other research over that time that's been supported or confirmed
by other surveys and research. The results are very revealing...
- The majority of network
marketers are unsure of what type of compensation plan their company
operates.
- The majority of network
marketers have only a limited understanding of the workings of the compensation
plans they work with. They're almost never aware of the principles that drive
them, let alone understand those principles.
- Very few companies educate
their distributors about the inner workings of their compensation plans (now there's a surprise!). Instead, they emphasise the product, the potential of the
plan (as exemplified by the heavy hitters) and the achievements of the company.
Enormous amounts of time, effort, money and resources are poured into presenting
the company, its founders and key personnel in the most favourable and dazzling light,
and into creating powerful emotional bonds to the company, its management and products.
- Most network marketing companies
and distributor organisations over-train their people and devote excessive time,
effort, money and resources on training, tools, rallies and other distractions designed
to keep distributors focused on activity and potential, instead of
the harsh reality that most of them are not making any profit or sponsoring enough
people. There's a cynical description that's been around for many years that says
network marketing is "a room full of people getting very excited about not making
any money." (Or, in too many instances, losing money they really can't afford
to lose.)
So, with all that investment
in activities and events to distract peoples' attention away from the reality of
their situation, it's little wonder that they rarely question their failure or, at
least, their lack of success.
It boils down to a few simple reasons why companies get away with such high levels
of breakage for so long...
- The distributors are so
focused on the company, their heroes in the company and the products to which they're so emotionally bonded, that they never think to question the compensation plan.
The companies rarely discuss
their compensation plans because doing so is fraught with risk — the last thing
they want is people asking questions about the challenges they're facing in making
the plan work for them. The standard response is to turn the focus back onto the
challenger... their weaknesses, frailties, poor attitudes, poor skills, failure to learn or to work harder, etc. (Sound familiar?)
- People don't know any
better. They're so inexperienced in business and they know so little about how
to properly analyse compensation plans that they simply accept what they're offered.
Are there any network marketing companies that don't profit from excessive breakage?
Yes, there are. But not many, because those huge hidden profits are very hard for company
owners and managements to resist. They're few and far between and hard to find, but
the good news is that the others are very easy to recognise... if you see any
- high personal group volume or
- high downline rank requirements
in order to
qualify for bonuses, you know the company is reaping rich rewards at your expense through breakage. They're the tell-tale signs.
If almost-zero
breakage appeals to you, look no further!
 If you're
serious about making worthwhile, GUILT-FREE income in network marketing, with no
risk of ripping anyone off — or being ripped off! — you need to read this FREE 36-page Special Report.
It's a real eye-opener. See behind many of the little-known "tricks of the trade". Click here to learn more and download your copy.
If you like what you read in this Special Report, download these free Special Reports too.
I hope you've found this
report useful. If you're currently involved with a company that
operates a binary plan, the best advice I can offer you is this gem from the Dakota indians of North America...
"If you find yourself riding a dead horse,
the best thing to do is dismount and find a LIVE one."
If you feel it necessary
to write to me to argue the merits of your binary plan, I've probably heard all of
the arguments possible. Visit this report for a summary...
Report: The folly of riding a dead horse
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