The MLM Home Business Opportunity Blog

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I said in Part 7 of this series on the compensation plans of MLM that I would discuss some more particulars of the Stairstep-Breakaway plan. So here goes.

You’ve broken away from your sponsor’s group and now have the possibility for limitless vertical growth in your own group. That’s great. But what happens when one of your recruits breaks away from you? Remember Louise? Let’s say Louise breaks away. Do you lose her and everybody beneath her? It doesn’t seem terribly motivating to know that you’ll eventually lose your best recruits, does it?

The answer though is that you won’t lose her. You’ll just earn a lesser percent on the sales of her entire group. This is not a bad thing, however.

For one you’ll get that percent no matter how large she builds her group. Also, and this is more important than it sounds, you will no longer be responsible for all those people who are now in her group rather than yours. Learning to train, motivate and guide a large group is one of the challenges that’ll come with your success, and you’ll welcome the relief when someone takes over some of those people. You’re also likely to get a nice bonus when one of your recruits breaks away. It’s a good thing for everybody.

Now, what about breakaways two or three or four levels down? Will you continue to earn a percent from those groups, too? Well, that depends on the company. But at some level you will not. It’s the problem of unlimited vertical growth again. The company can’t keep adding commissions every time someone breaks away.

However, you yourself will continue to have opportunities to promote to higher levels – supervisor, manager, director, or whatever the names are for your company. This is the stairstep side of things. And with each promotion, your pay structure will become more advantageous. Perhaps you’ll earn a higher percentage from sales of your own group. You’re very likely to earn higher percentages from breakaway groups that continue to pay you. And you’re also likely to be able to dip farther down and keep breakaway groups at lower levels. MLM companies want you to stay motivated, and the good companies give you strong incentives to do so.

Okay, that should give you a pretty good picture of the Stairstep-Breakaway. Here are some red flags, though. You’ll want to avoid companies that have unrealistic sales requirements for you or your group in order for you to earn commissions from breakaway groups. You’ll end up losing your own recruits under that scenario. You don’t want a situation where you can fully lose your own personal recruits. Also, some companies with this MLM plan give guaranteed income to new recruits. Sounds good until you realize that this income has to come from somewhere. It comes from less attractive rewards for good performance.

To my way of thinking, the only reason to get into MLM is to make a lot of money from your own success, not from handouts. If you’re intent on being a star and finding that pot of gold at the end of the rainbow, the Stairstep-Breakaway plan is the one I’d recommend.

If you’re more of an MLM socialist, then you may incline to one of the two plans that I have left to discuss. See you for Part 9.

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Here’s a brief article by Jennifer Allen with some more good advice on how to choose your MLM home business opportunity. A couple things about it.

She mentions the binary compensation plan and alludes to its inherent problems. We’ll be getting to the binary plan later in our series here on compensation plans. Jennifer and I apparently share serious reservations about it.

Also, she warns about MLM companies with very high priced products. I’ve given you the same warning. It’s a big one. There are a lot of people out there floundering in their MLM home businesses simply because the product is overpriced. Even excellent products have a ceiling beyond which almost no one will buy them.

MLM companies with overpriced products, just like those with questionable products, don’t have a legitimate retail side to them. Beware if you can’t make decent money just selling the product.

Here’s the link to Jennifer’s article.

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Here is a fact of life that I’ve heard and read many times, phrased in a variety of ways. If you continue to do exactly what you’re doing now, your life will continue unchanged. You will simply get more of the same. If you want your life to change, you have to do something you currently aren’t doing.

This looks easy enough to comprehend, but it actually runs against common wisdom and contains more than meets the eye.

Notice the implication that you yourself are the reason why your life is the way it is, and that you are the only one who can do something about it. Most people believe that their external circumstances dictate their lives. They resign themselves to their “lot in life” and do a lot of criticizing of other people, especially those who are willing to pursue something better.

But what about the people – and perhaps you fall into this group – who really are willing to take their lives into their own hands and strive to bring about desired changes. Why does it remain so hard, even after you’ve taken the crucial step of taking responsibility for your own circumstances?

It’s that little problem of doing something you currently aren’t doing, isn’t it? In the first place, you’re not quite sure what that something is. Maybe you’ve decided it’s an MLM home business. Now you’re not sure which one. Or maybe you’ve picked one, but you’re not sure how to get started. Then your sponsor gives you a plan of attack. You look at it and promptly say to yourself, “I can’t do that.”

Uncertainty, more uncertainty, and finally just plain fear. Fear of other people. Fear of inadequacy. Fear of failure.

What do many people revert to at this point? More of the same, of course, because it’s easier on the surface than facing all those fears, especially failure. Then they tell themselves that they don’t have the right personality for it, don’t come from the right family, don’t have the right schooling, etc. That is to say, they go back to blaming their circumstances. It’s a vicious cycle, leading round and round to what Thoreau calls a life of quiet desperation.

Is there a way out? We’ll have to dig a bit deeper into the reality of fear to give ourselves an honest answer to that question. I promise a sequel to this post.

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In an article I just came across, Amy Howard spells out some realities about the MLM network marketing business. These could be either heartening or disheartening, depending on your perspective.

The following are her main points.

It’s going to be harder than you think to recruit others into your MLM opportunity. You yourself may have jumped at the offer, or thought you did. But don’t expect your business to grow without some real work on your part.

Here’s the awful truth. You’re actually going to have to talk to people. And you’re not going to be able to hide behind your computer. She warns that the computer can be a great way to market your business if you have skills, money, and time. And even then, you’ll still have to talk to someone eventually.

Her simple but important conclusion is this. The telephone is still your best tool. Perhaps you didn’t want to hear that. But the good news is, since so many people try to avoid using the phone, it represents an excellent opportunity for you to set yourself apart.

This is interesting advice given that it’s hard to find anyone online telling you to do something other than market your MLM home business opportunity online. I guess it goes with the territory.

You can find Amy’s article here.

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As I promised in Part 6, I’ll now discuss Stairstep-Breakaway as an alternative to the Unilevel plan. Remember, with Unilevel you keep all your recruits, but your vertical growth gets stopped pretty quickly as a result.

Here’s the variation to that. All your personal recruits go into the first level under you, and you earn commissions from their sales. However, you do not earn commissions from sales made by the people recruited by your own recruits, or their recruits, that is by anyone in the second level or lower.

That sounds worse than Unilevel on the surface, but here’s the twist. If you meet certain performance criteria, which will vary by company, you will “break away” from your sponsor’s group and will now earn a commission from sales made by anybody below you, to an unlimited depth.

How can that be? Let’s go back to the group we gave you earlier. You recruit Louise, who recruits Alan, who recruits Susie, who recruits Nathan, who recruits Laurie, who recruits Carl, who recruits Ashley, who recruits Victor, who recruits Olivia, who recruits Oliver, who recruits Mary, who recruits Darcy, who recruits Elizabeth.

Until you break away, you will only earn a commission when Louise or you yourself make a sale. Meanwhile, assuming none of those people has broken away either, each will only earn commissions from their own sales and those of the person one level down. As it turns out, the company is paying commissions to only two people per sale under this scenario.

But then you break away and suddenly the company starts to pay you a commission on sales made by everybody down to Elizabeth and beyond. This becomes possible because nobody in between you and Elizabeth, except Darcy, will get a commission on her sale. Now the commission is going to three people, still a comfortable number from the company’s perspective.

You could potentially earn commissions from an infinitely deep downline, while the company would still pay only three commissions per sale, disregarding for the moment the people above you. Do you see how that works?

Get your mind around that much of it, and we’ll discuss some more particulars of the Stairstep-Breakaway plan in Part 8.

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I have emphasized and will continue to emphasize how important the product is to the success of your MLM business.

I came across an article by Rayven Perkins that makes the same point. It’s often useful to hear a similar message from a different source, so I’ll allow Rayven’s article to speak for itself.

Hope you enjoy it.

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Time to put horizontal and vertical together, and get to both the side and the bottom of your MLM business.

In Part 4 of this series, I said that the first question you can ask is, do all the people that I myself recruit get placed in the first level beneath me? There are four major types of plans out there. Two of them do put all your personal recruits in your first level or tier, two of them don’t.

The two that do are called Stairstep-Breakaway and Unilevel. We’ll get to the two that don’t later.

The second question I suggested is this: Does the plan allow your first level to grow indefinitely, or do you eventually lose some of your recruits? With the Unilevel plan, your first level grows indefinitely. With Stairstep-Breakaway, you will “lose” some of your first level recruits. I put the word lose in parentheses for a reason I’ll get to.

Let’s look at the Unilevel plan. The main selling point is that you will never lose any of your recruits. That sounds good, doesn’t it? But as we’ll see, there’s a cost.

The plan allows unlimited horizontal growth. It’s never checked. But we know, after reading Part 5 of this series, the plan’s not going to be able to allow unlimited vertical growth along with it. As soon as you find out that the plan is Unilevel, you can ask, “How many levels down does it go?” There has to be a limit. Math insists upon it.

Look for something between five and nine levels. And then cast from your mind the beautiful image of circles going on forever down the page and beyond. It can’t happen. In my mind, that’s a big cost to pay for unlimited horizontal growth, because you’re limiting the leverage you get from others. Instead of just steady, moderate growth down the page, you’re betting on superstar recruiters being somewhere in your first few levels down.

Note that if the plan goes down as far as nine levels, they’ll have to pay ten commissions per sale. That’s a lot. Unilevel plans will vary based on the percentages they pay at each level. Also, you may have the opportunity to promote to a higher rank and earn a better percentage after promotion.

If you think limitless horizontal growth is the end all and be all of MLM, then Unilevel is for you. But before you reach that conclusion, come back for Part 7 and check out the variation that Stairstep-Breakaway gives to it.

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Is saturation something you need to worry about as you look into various MLM network marketing opportunities?

Maybe. We have to ask ourselves this: Can local markets sustain an indefinitely growing number of distributors for a single MLM company? Intuitively speaking the answer would seem to be no. How big could your downline get before you were tripping all over each other, after all?

Matt Dillard, however, calls the idea of saturation in network marketing a myth. As Matt points out, some companies have been around for over 30 years. And we all know that these big companies are still recruiting. Are all these fresh recruits failing in the business?

Why is it, Matt asks, that companies still sell microwaves every day, when everybody we know already has one in the house? It’s an interesting question, although I’m not sure it corresponds very well with MLM. The thing is, MLM distributors usually get exclusive rights to their clients. This makes the potential for saturation in any market greater. If every one of those people who owned a microwave had to buy a second one or a replacement from the same person, it would be a different situation.

Matt’s most insightful observation is that saturation would actually occur if there were no attrition in the MLM industry. Attrition represents the people who join an MLM home business opportunity only to do nothing and quit. Or it represents the people who eventually slow down and stop growing their businesses.

Because of attrition, Matt insists, the number of active distributors, the ones actually working the business, remains relatively static, no matter how many people sign up.

That’s fascinating to think about. It gets back to some inescapable facts about human nature. The reality is, the great majority of people who get into an MLM business opportunity will not get it off the ground. It’s the 80/20 principle. And for various reasons, the numbers are actually more skewed than 80/20 for MLM.

That should actually be good news for anyone who has the persistence and motivation to succeed in this business.

A couple other things to think about.

All else equal, a company with fewer distributors already in place is the better opportunity. All else equal though. Don’t get sucked into a fly-by-night offer with a goofy product. It’ll disappear out from under you.

Also, the internet represents a market for MLM that some would call saturation resistant. If you hunt around online, you will undoubtedly encounter the modern message (with some strong hype about “lies”), which tells you to get off the street and get behind your computer. I don’t happen to agree with this message, but that’s a topic that’ll require some time to deal with.

See Matt’s article here.

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As I promised in Part 4, I’ll start to talk about the vertical growth of your MLM home business now.

Horizontal growth in MLM goes from side to side across the paper. Vertical growth goes down. Think about just one of your personal recruits, who is in the first level beneath you. Call her Louise.

If Louise recruits somebody else, Alan let’s say, he will go into the first level beneath her. That’s the second level down from you, right? And after Alan recruits Susie and she goes one level under Alan, you’ll have a third level or tier beneath you. Do you see that?

Okay, let’s stretch this out. Susie recruits Nathan, who recruits Laurie, who recruits Carl, who recruits Ashley, who recruits Victor, who recruits Olivia, who recruits Oliver, who recruits Mary, who recruits Darcy, who recruits Elizabeth.

Pop quiz. How many levels down does your group go now? All you have to do is count the names. Your group has twelve levels or tiers. That’s beginning to get pretty deep.

Bear in mind that starting from you, there’s a line connecting each circle to the one below it. As I said in Part 4, commissions flow along lines. To put that more properly, they flow up lines. If Alan makes a sale, Louise is likely to get a commission. And so are you depending on the plan. But Susie isn’t going to get anything from that sale, nor is anybody below her.

What happens when Elizabeth makes a sale? Will Darcy get a commission from that? Probably. How about Mary? Maybe. How about Oliver and Olivia and Victor? How about you?

Are you beginning to see the problem from the company’s point of view? How many commissions can it squeeze out of a single sale?

Vertical growth, not horizontal growth, poses the threat of infinite commissions in MLM or network marketing. Both you and the company are hoping that the recruiting continues indefinitely, well off the bottom of the page and into eternity. But the company can’t pay eternal commissions back up that line on individual sales, can it?

I pointed out in Part 4 that the company is not mathematically bound to limiting horizontal growth. But the laws of math are going to get them when it comes to vertical growth. They’re going to have to do something about it.

This is where the creativity of MLM compensation plans begins. In Part 6 we’ll put horizontal and vertical together and start seeing the plans take shape.

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