An MLM Breakaway Commission Plan is one that allows distributors to break away from sponsors and form their own groups as sales leaders when they advance to a certain level. The Plan then pays these sales leaders, called breakaways, a new, different type of commission. The additional compensation breakaways/sales leaders are entitled to is usually referred to as a sales leader override. Their group volume is no longer included in their sponsor’s group volume. This requires the sponsors to go out and replace these people in their organization.

For example, last month, you had ten people in your personal group helping you qualify. This month two of them broke away, so now you don’t receive group commission on those two and you have to replace them. If you’re a breakaway/sales leader, you’re always going to make more money on your group volume or on the distributors in your downline than you are on your breakaways/sales leaders. In your group volume, you may earn as much as 15-25%, and on your breakaway volume, you may earn as little as 3-6%.

Figure 1. Breakaway Commission.

A Breakaway Plan includes very defined relationships or classifications. A distributor gets paid very differently on each of these classifications. In other words, Breakaway Commission Plan payout is based on the sales force classifications. If, as a distributor, you sponsor someone, that individual is either:

1) a customer, 2) a distributor who is part of your group, or 3) a sales leader. As a distributor, you are basically a pre-sales leader. When someone in your organization becomes a sales leader, then you can no longer count that person in your group volume. Distributors make more money on their distributors than they do on their sales leaders because of the differential. A differential commission is one whereby a distributor receives the difference between the amount for which he qualifies and the amount for which his first-level distributor qualifies.

1. A level commission or a Stairstep Commission Plan as shown in Figure 1 paid on group volume to non-breakaways or to the sales leader on his/her non-breakaway group.
2. A breakaway/sales leader commission as shown in Figure 2 paid on the group volume of downline breakaways/sales leaders.

Many of these plans also have some small pool or infinity commissions; however, these commissions typically make up a very small percentage of the overall payout.

Breakaway and the 5% Theory

MLM companies build commission plans by dividing up their downline and deciding how much to pay each division. The purpose of the 5% Theory is to provide a standard for companies to allocate commission money. Most commissions today are built on the theory of the 5% plus curve. This theory says each upline distributor that receives commissions will receive at least 5% in order for the commission plan to be viable. [For further explanation of the 5% Theory, see “Determining MLM Compensation,” Mark Rawlins.]

How does a Breakaway Commission Plan create a 5% Plus Commission? The way the Breakaway Plan implements this methodology is based on the Plan’s sales force classification. You receive a different type of commission based on what kind of distributor your downline is. On distributors, you receive group commissions and on sales leaders, you receive sales leader commissions. The Breakaway Plan allows the breakaway/sales leader in the Figure 2 example to earn up to 20% on the group volume or on that individual’s non-breakaways in his/her downline, but only 5% on his/her generation on his/her breakaway/sales leader volume.

For example, if Mark sponsors Ray and Ray is not a breakaway/sales leader, but is newly sponsored and Ray buys a $100 worth of product, Mark earns 20% or $20. It’s worth it to Mark to deliver the product and personally answer Ray’s questions as a retail customer. However, if Mark sponsors Linda and she goes out and sells a lot of products and becomes a breakaway/sales leader on her own, then she may be selling as much as $2,000 worth of product on her own. She doesn’t require a lot of management or hand holding, so she makes the 20% on all the product she sells. Mark makes 5% sales leader commission, so instead of making 20% or $400 on her $2,000, he makes 5% or $100. And, his management responsibilities are not nearly as great.

Strengths of Breakaways

• Breakaway Commission Plans are very predictable.
• One of the real advantages of this Plan is that because you have two commission types specifically set aside for paying salespeople and one commission specifically set aside for paying sales management, it’s much easier to set the percentages and qualifications to achieve desired results. As a result, professional distributors can be better taken care of.
• The Plan does a great job of paying salespeople; of all of the standard commission plans, this one has the strongest potential in this area. Once you become a sales leader, it allows you to make a lot more money on your customers and brand new distributors--those who need your help. Consequently, you have a lot more incentive to work with them. On the people who have advanced to breakaway/sales leader, you’re now earning 5%. However, since you get paid down numerous levels of sales leaders—successful people—this means you get paid on a lot of group volume.
• The Plan uses level commissions on group volume for paying sales leaders. This is the most successful method for paying sales management commissions.
• The fact that this Plan has defined certain commission types to pay salespeople and another commission type to pay sales management simplifies design and the creation of qualifications.
• This Plan encourages the registration of every consumer with the company, which has been made possible with the Internet. This is something many companies desire.
• This is an easy Plan on which to pay a worldwide, integrated, seamless commission.
• The two commission types used are easy to understand.

  Weaknesses of Breakaways

• This Plan is sometimes viewed as a compromise plan.
• People who don’t build an organization—probably 90%—stay in other distributors’ personal groups.
• When you get two people on the same step, the differential is zero.
• Treadmill effect: When you bring individuals in, you have to qualify those group volumes, and as people break away, you have to replace that volume.

Summary

Overall, in specific circumstances, the Breakaway Commission Plan has a lot to offer a company. It’s reasonably simple, but can be designed to create focus on getting commissions to either salespeople or sales leaders, based on the needs of the company.

1502