Question:

How do I know if a company is a pyramid scheme?

Breakaway Compensation Plan

A Breakaway Compensation Plan allows for:
*Unlimited first-level width
*Finite depth (determined by the individual company)
*Generational commissions
*When certain levels are reached (based on various qualifications often including personal and team volume) the distributor and his team "breaks away" from the upline sponsor.
*Commissions can still be earned by the sponsor, but the "break-away" teams's sales volumes will no longer count toward the sponsor's qualifications.

Downline

In Network Marketing, your downline are all of the distributors who are in your personal organization. Those you personally recruit, those they recruit, and on down the line.

What to look for

When looking at a Network Marketing company, there are two fundamental items to look at to help you determine if it is legit or a pyramid (or other) scheme:

a) The product/service-if there is a tangible product or useful service that could be sold to the general public on it's own (without any recruiting) then you probably have a valid business.

b) Can the "last" person make money? If the there were to be no more recruiting, could the last person recruited still make money (via sales)-some scams only pay for recruiting, which goes back to the first point about having a valid product or service to sell.

Binary Compensation Plan

The Binary compensation plan offers:
*First Level width limited to two
*Infinite depth
*Generational commissions
*Commissions are determined on the accumulated sales volume in each of the two "legs". The more volume, the higher the commission.
*Most binary plans pay based on the leg with the least volume

Matrix Compensation Plan

A Matrix Compensation Plan offers:
*Limited first level width
*Finite depth
*Linear commissions
*Usually all the volume that falls within the pay-level matrix counts toward qualifications.
*The matrix is defined by the first-level width limit and the number of levels, for example a 2 x 12 matrix allows for a first level of two distributors and pays 12 levels deep.

Unilevel Compensation Plan

A Unilevel Compensation Plan allows for:
*Unlimited first level width
*Finite depth
*Linear commissions
*There is no breakaway in this plan and any number of distributors can be placed on any of the levels.

Australian Compensation Plan

The Australian Compensation Plan (also known as the Two-Up plan) allows for:
*Unlimited first level width
*Infinite depth
*Linear commissions
*The commissions earned on your first two distributors on your first level are passed up to your sponsor and the commissions from the first two distributors recruited by your third recruit are passed up to you.

Compensation Plans

Often the most confusing part about deciding on which Network Marketing company to associated with is in trying to decipher the compensations plans. When deciding on compensation plans, find one that fits your preferences and lifestyle.

*If you are a hot recruiter, then you may not want a Binary Plan which limits your first level to two distributors. Something like a Unilevel or Breakaway Plan might suit you better.
*If you are great at selling, but not a great team builder, then you'll want to look into a plan that pays a high commission on your personal sales with not so much emphasis placed on your downline's sales.

There are only a few basic types of compensation plans, and most companies use some hybrid of the basics, tailoring them to their own unique niche.

Do lots of research, ask lots of questions, and don't sign on the dotted line until you are satisfied with the answers you've received.

Upline

In Network Marketing, your upline are all those who came before you and are above you in the hierarchy, including your sponsor and his sponsor and her sponsor.

Stair-Step Compensation Plan

A Stair-Step plan is any type of plan that has multiple ranks of advancement such as Member, Leader, and Director.
This term is usually only found with Breakaway Plans.

Small Businesses Frequently Asked Questions

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