A continual surprise to me (I’m a sloooow learner) is the number of network marketers who talk endlessly about compensation plans without having a clue about what makes them better or worse than others.

There are NO perfect plans, by the way… just better or worse. But some are decidedly worse — and most are just plain bad for part-time distributors, who make up 90% of network marketers.

So I thought I’d post a few articles here on the board to lift the veil on some of the behind-the-scenes skullduggery that’s never talked about in front of the troops.

(How do I know? Because I’ve been a professional management consultant and compensation plan designer for direct selling companies for more than 20 years. You get to learn a few things in that kind of insider role.)

It makes sense to start with the single biggest threat to your income in most plans:

BREAKAGE!

Never heard of breakage?

There are very good reasons why you haven’t, as you’ll soon see.

Heard of it, but your company execs dismiss it, saying that there’s no breakage in their plan?

They’re lying to you, for the exact same reasons. There are NO plans without some degree of breakage.

So what IS breakage? And why is it so dangerous?

But let me put it into a more familiar context for you, so it’s easier to understand.

When you buy food at McDonalds, there’s one thing that happens, repeatedly, that McDonalds acknowledges earns them up to 40% of their annual profits, every year.

Forty percent of annual profits from a single item! How important is that item to the company, do you think?

And do you think that McDonalds will ever give it up voluntarily?

Not a chance!

That critical profit factor is this: “Would you like fries (a drink/an apple pie/etc) with that?”

It’s called a suggestive sell and it costs McDonalds next-to-nothing to provide… but it produces almost HALF of the company’s annual profits!

So no matter how irritating that question may be to you, there’s not a snowball’s chance in hell that McDonalds will stop asking it.

It’s the same with network marketing companies and breakage. Some MLM companies attribute up to HALF of their annual net earnings to these hidden, “windfall” profits.

The big difference here, though, is that YOU get nothing in exchange. You LOSE money YOU rightfully earn, in fact!

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 M|L|M 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 network marketing 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 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 always the #1 risk to every network marketer?

If you visit my web site at http://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 above say that BREAKAGE is the biggest risk you face?

Because breakage reveals the true motivation and character 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, but 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…

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 experience 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.

Discover how to recognise compensation plans designed to create excessive breakage, and the “smoke-and-mirrors” tricks and “spin” used by company management teams and network “heavy hitters” to distract your attention away from what’s really going on…

Right click here to download the complete article on Breakage in Network Marketing right now, with no sign-up required. (100% safe, printable PDF document.)

Author Profile  Consults to managements of direct selling companies, small business and home business owners. Writes regular columns and feature articles for various business media, online and offline. Author of several best-selling business books. Presents seminars and workshops, webinars and other training programs. Creator of Fourth Generation Thinking, Selling, Business Systems. Read more from this author