Overview:

The Stairstep Breakaway Plan (commonly known as the Stairstep Plan) is a popular multi-level marketing (MLM) compensation model. It combines elements of both the Unilevel Plan and Rank Advancement, allowing distributors to move up levels (or “steps”) in the hierarchy based on their sales performance. As distributors advance, they can “break away” from their upline and earn a higher commission rate. This plan is widely used by MLM companies that want to reward high-performing distributors and promote leadership development.

Key Features:

• Rank Advancement: Distributors move up “steps” based on personal and team sales volumes.
• Breakaway Structure: Once a distributor reaches a certain rank, they can “break away” from their original team and form their own team, earning additional commissions.
• Leadership Bonuses: High-ranking distributors earn bonuses on the sales of their breakaway teams.
• Infinite Depth: Commissions are paid on all levels within a breakaway team, promoting long-term growth.

How the Stairstep Plan Works:

1. Ranks or Steps: Distributors start at the lowest rank and can move up to higher ranks (or steps) based on their sales performance and that of their team.
2. Personal and Group Volume Requirements: Each rank has specific sales targets, both for the individual and their team.
3. Breakaway: Once a distributor reaches a certain rank, they “break away” from their upline’s team and become a leader of their own group, earning independent commissions.
4. Override Commissions: Upline distributors earn override commissions on their breakaway teams, even after they have separated.

Example to Illustrate the Stairstep Plan:

Imagine a Stairstep MLM company where ranks are defined as follows:

• Step 1: Distributor
• Step 2: Supervisor
• Step 3: Manager
• Step 4: Director (Breakaway Level)

Scenario:

• John joins as a Distributor (Step 1).
• John recruits Anna, Mark, and Lisa into his team.
• As John and his team generate sales, he advances to Step 2 (Supervisor).
• John continues to grow his team and eventually reaches Step 4 (Director).
• At Step 4, John breaks away from his original upline and forms his own independent team.
• John’s upline still earns override commissions on John’s sales, but John is now responsible for leading his own team.

Tree Structure Example for Stairstep Plan:

                 John (Director - Breakaway)
                     |
     -------------------------------------------
     |                |                  |
    Anna            Mark              Lisa
   (Step 2)        (Step 1)         (Step 3)
     |
     |
   Anna's Team (new recruits)

Explanation:

• John has reached the Director rank and broken away from his original upline.
• John earns a higher commission rate on the sales of his downline.
• John’s upline still receives override commissions from John’s team, even though he has broken away.

Step-by-Step Breakdown of the Stairstep Plan

1. Recruitment and Sales:
   • John recruits Anna, Mark, and Lisa.
   • John earns a 10% commission on his own sales and 5% commission on the sales made by his team.
2. Advancing Ranks:
   • As John’s team grows, he accumulates personal and group sales volume.
   • Once John’s team generates a combined sales volume of $5,000, he moves up to Step 4 (Director).
3. Breakaway and Leadership Bonuses:
   • Upon reaching Step 4, John breaks away and starts his own team.
   • John’s upline earns an override commission of 3% on John’s team’s sales even after John breaks away.
4. Long-Term Earnings:
   • John, now a Director, can earn higher commissions on his own team’s sales and recruit other distributors to advance them to higher ranks.
   • As John’s recruits (e.g., Anna) also move up the ranks, they can eventually break away, creating multiple independent teams.

Advantages of the Stairstep Plan

1. Encourages Leadership Development: The plan rewards distributors for building and leading large teams, promoting leadership skills.
2. Higher Earnings Potential: As distributors move up the ranks, they can break away and earn higher commissions on their own team’s sales.
3. Override Commissions: Uplines continue to earn override commissions even after their downline breaks away, ensuring long-term passive income.
4. Motivational Structure: The rank advancement and breakaway features keep distributors motivated to achieve higher performance.

Example Calculation of Earnings

Consider the following commission rates for different ranks:

Example:

• John (Director) sells $2,000 worth of products himself:
  • Commission = 25% of $2,000 = $500
• John’s team (Anna, Mark, Lisa) generates $5,000 in total sales:
  • Team Commission = 12% of $5,000 = $600
• Anna, who has broken away and formed her own team, generates $4,000 in sales:
  • Override Commission = 3% of $4,000 = $120
• Total Earnings for John:
  • Personal Sales: $500
  • Team Sales: $600
  • Override Commission: $120
  • Total = $1,220

Stairstep Plan Recap

• Dynamic Growth: Encourages both sales performance and recruitment to build a strong network.
• Incentivizes Leadership: Higher ranks offer breakaway options with increased commissions.
• Sustainable Income: Override commissions ensure ongoing income even after breakaway.