So what is an Aussie two up compensation plan? That is where you have to give the first two people you sponsor to your upline. It’s usually with something that has a big signup fee.

In the network marketing business it is reported that the average person without a system in place will only sponsor 2.7 people so you see that not many people can make money with this sort of compensation plan. And most of the time there is no real residual income so after the initial sale that’s all there is to be made.

So why do people join this kind of a program? Well they tell you how you can get all these people to join you and then they will all have to give you their first two people. So the only people that can really make money in this type of program is that sponsor monster that can sell anything to anyone.

Breakage 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.

A matrix plan is any plan where you can only go so wide and so deep such as a 3 by 9 or 5 by 7. In some matrix plans you must balance out all your legs, in other words you have to have a certain amount of volume in each leg to get paid.

So this creates another way for breakage to occur for the company. Because if you have a large volume in one or two legs but not the others you don’t get paid on all that volume so it goes to the company. And in order to make any money you will have to go sponsor people under those people in the weak legs that aren’t doing anything.

A lot of matrix plans promote  joining them and getting all the spillover from the big guys that have joined the company. So people join and think they are going to make a lot of money without doing anything when in reality they never see any spillover and if they do it’s never enough to brag about.