Network Marketing Compensation Plans
The Breakaway Plan

The breakaway plan, also called the stairstep breakaway compensation plan is the oldest of all network marketing compensation plans.

Long established network marketing companies have used this plan successfully for decades. Rarely will you find this plan being used by newly established network marketing companies today.

How The Plan Works

The plan derives its name from its main characteristic, namely that...

When a distributor achieves a predefined personal and group volume, he/she will move up a step until he/she reaches the top most step, at which point he/she will break away from his/her sponsor's group.

Performance measurement in the stairstep breakaway plan is therefore based on a combination of personal volume and group volume. You need to meet both criteria to be entitled to earn commission. Your commission will be a percentage of the commissionable volume.

Imagine a staircase. Each step on that staircase would represent a commission level. The first step will have the lowest commission rate. On the other hand, the highest step on that staircase would represent the highest commission rate possible.

When you start up, assuming that you meet both the personal and group volume requirements, you will be on the first step. Let's say at this step the commission rate is 3%. You will then be paid a commission equal to 3% of your commissionable volume.

Now as you recruit new members into your organisation, your group volume will of necessity increase. The increased group volume will qualify you for commission at a higher rate.

Let's say you are now on the second step, and that at this level the commission rate is 6%. You will qualify for this 6%. But you will only be paid the difference between what you qualify for (6% in our example) and what your frontline distributors qualify for, say 3%. This is known as differential commission.

The idea behind the differential commission is that you share a commission pool of your group volume with your downline. Each distributor will share according to how he/she contributed to the group volume.

A little history may come in handy here.

Back in the 1950's, when the network marketing business concept was still taking roots, it was almost impossible for network marketing companies to track down every distributor. So the top performing distributors were responsible for, among others, paying distributors in their downlines.

So the company would work out how much commission should be paid to a particular top performer based on his/her total group volume. This top performer would then pay distributors in his/her downline their share of what the company paid out and retain the differential.

With the advent of computers, this practice fell away. Today network marketing companies take care of everything, from processing, shipping, to paying commissions to every distributor.

However, even with this new technology, older companies still retained the breakaway plan.

So where or when does the breakaway come into the picture?

As soon as you reach the highest or top most step on the imaginary staircase, you 'break away' from your upline and form a new group. You are the leader of that group. In the past you would have to start writing out commission checks to people in this group. Fortunately that's been done away with - thanks to computer technology.

Once you break away, your group volume will no longer count towards your sponsor's group volume. It simply falls off. Not only that...your sponsor will loose all the commission that was based on your group volume.

Needless to say, this will have serious adverse consequences on your sponsor's earnings.

To soften the blow, companies pay what is called an override commission for each breakaway team you have in your organization. The override commission is a flat rate. It is calculated on the breakaway group's group volume. The rate used is less than the rate that was used prior to the breakaway.

Many people consider this to be unfair. Before you make your own judgment, consider this...

The breakaway plan pays a differential commission. If you are currently paid at the highest rate, and one of your distributors also moves up to the highest step, you will both earn at the same percentage, won't you? So what does that mean to you, the sponsor? Only one will earn nothing because your rates are equal.

I don't know about you, but I would say the override commission, though smaller compared to the rate paid before the break away, is better than nothing. In fact I consider it wise to build as many breakaway legs as possible because...

In the breakaway plan a breakaway leg almost guarantees you a sustainable residual income better than a group in your direct downline.

Here's why. In network marketing, leaders don't quit. You need these kind of people to contribute to your long term residual or passive income.

Each breakaway organization is referred to as a generation. So as more distributors break away from your organization you will have a number of breakaway generations. The more, the merrier because...

As I mentioned, this has the benefit of gradually building a stream of sustainable residual income, a benefit not found in other network marketing compensation plans.

Most stairstep breakaway plans also have additional commissions like a pool commission and sometimes an infinity commission. These are commissions paid in addition to the stairstep commission and the override commissions. The percentages for these commissions are usually small compared to other commission types.

There is limited incentive for teamwork within any distributor organization because each distributor wants to build wide.

What are the Advantages?

The breakaway plan has good track record

The oldest and largest network marketing companies used the breakaway plan successfully over many decades.

The benefit to you is that if you are considering joining a network marketing company that is new, and if it uses the stairstep breakaway compensation plan, all things being equal, you may be dealing with a company that is here to stay.

There is no limit as to how wide you can sponsor

This is particularly beneficial if you are confident in your ability to recruit new distributors and have good management skills.

So if you are good at recruiting but lack management skills, the stairstep breakaway plan may not be suitable for you. You need both recruiting ability and management skills to succeed  with this plan.

As the number of your breakaway generations increase, you build a more sustainable passive income.

Your passive income is almost guaranteed because leaders don’t quit, and your breakaway distributors are all leaders of their respective organizations.

The Disadvantages

The breakaway plan creates competition between cross-line distributors

This makes it difficult for distributors to recruit close friends and family into their organization. Fortunately, the days of focusing on recruiting friends and family are almost over. Click here to learn more about this.

When any of the distributors advances to the same level as you, the differential commission for you becomes zero.

You will earn nothing from that distributor’s group volume.

It is difficult and may take some time before you are able to replace the group volume you lost to a breakaway distributor.

The breakaway plan almost forces distributors to keep on sponsoring new ones. Theoretically, if you are not good at recruiting, you may end up remaining alone in your organization should the few distributors that you sponsored reach breakaway status.

There is usually a lack of support from your upline distributors once you are established

The need to keep on sposoring frontline distributors contributes heavily to this. As a result new distributors are left to fend for themselves too early in their careers.

It is hard for many to understand and even harder to try and explain it to prospects

The breakaway plan is probably the most most complex of network marketing compensation plans, making it difficult for many distributors to explain to new prospects.