There are many MLM compensation plans and each of them has its advantage and disadvantage. But there is one compensation plan that I believe is bad and you should try to avoid such plan if possible. The plan is the breakaway plan.

The Breakaway

This plan has been said to have become somewhat unpopular in the industry, as you could lose the business you build, once it gets to a certain level of success, and it “breaks away” to no longer be a part of what you get paid on. It usually appears in stairstep. Lets use the example above in the stairstep illustration.

If I am a Champion and my downline builds his organization faster than me, and qualifies as an Emperor before me, 2 things might happen.

Depending on the company’s pay structure, I will not be eligible to receive overriding commissions from my downline Emperor’s group. Hence the ‘breakaway’ his bonuses will be ‘passed up’ to MY upline Emperor or Grand Emperor. In some cases, the ENTIRE group breaks away and join MY upline so even if I do qualify as an Emperor later on, I will not receive bonuses from his group! Selfish people might even involve in SABOTAGE as in trying to slow down his downline from breaking away or overtaking him.

Today, more and more companies are acknowledging the breakaway problem and will start awarding leadership development bonuses (such as a fixed bonus percentage over that entire group even those they have broken away). This system has still worked out well in the past though, because it gets people working harder to prevent the breakaway from happening.

In MLM (just like in life), companies reward PEOPLE who work hard to build their groups. If a downline works harder than his upline, he should get paid more - hence it is more fair to them. So in this case if an upline doesn’t work hard enough, he shouldn’t blame the company if the downline breaks away.

Other MLM compensation plans

Besides breakaway plan, there are many other plans you can consider. Some of them are:

1) The Stairstep
2) The Unilevel
3) The Binary
4) The Matrix
5) The Australian Two Up
6) The Hybrid

Going into the details of each of these plans will take me a book. You can google for these plans and read about their pros and cons.

Many MLM companies are moving away from breakaway plan. However, some old companies are still using such plan. As a savvy business owner, you should be prudent in your selection.