Network Marketing: What is Breakage?

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desk for home businessBreakage is the way network marketing companies make their money on the products that they offer for sale. The first way is to buy a product at a very cheap price and then charge a high price for that product. Some companies have even created another handling company that buys the product and then sells it to the company therefore creating a profit for itself in that way.

Another form of breakage is in the compensation plan. They will say they pay out 50% to the distributors but there is such a great volume level one must have to get all the pay levels that no one will ever reach them to earn that extra bonus. Therefore the company gets to keep all that money.

Another way a company get breakage is that say you are in a unilevel compensation plan where they pay like 5 wide and 4 levels deep. If you have people under you on the 5th level and below then they are outside your pay plan so the company gets to keep all that money.

In some binary pay plans you only get paid on the volume in your weak leg, so if you have one leg that does $35,000 but the other leg only does $5,000 then all the commissions from that strong leg would be kept by the company.

As you can see that network marketing companies have many ways that they can make extra money from the work of the representatives. Some companies are worse than others and seem to be against their representatives while others are more inclined to pay out more money.

So this is another thing that a person has to check when deciding if you want to start your home business with a network marketing company or not.

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One Response to Network Marketing: What is Breakage?

  1. Darius Bausch August 17, 2011 at 3:17 am #

    Nice post. I learn something more challenging on different blogs everyday. It will always be stimulating to read content from other writers and practice a little something from their store. I’d prefer to use some with the content on my blog whether you don’t mind. Natually I’ll give you a link on your web blog. Thanks for sharing.

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