A binary compensation plan, as its name suggests is based on the number 2. A distributor in a company that operates a binary compensation plan can only build a downline consisting of two legs. A left leg and a right leg.
That’s correct, a binary compensation plan only allows you to have a maximum of two frontline distributors. Any more that you personally sponsor would have to placed underneath one of your two personally sponsored frontline distributors. This is another case of spillover.
The width restriction, however, is not as bad as it sounds as the average network marketer will only sponsor between 2 to 3 people in their entire career. The only way to build a binary is to go deep. Depth cultivates leadership and a team spirit.
The spillover and volume driven nature of the binary compensation plan fosters teamwork. This is advantageous to newer, lesser experienced distributors who can expect to get good support from their upline leaders. Another advantage is distributors are paid weekly in most companies that operate binary plans.
Unlike the matrix or unilevel plans, your commissions are not dependent on the volumes generated by each individual level in your downline, but on the overall volume generated by each of your two legs. This means you’re paid on the efforts of every single distributor in your downline.
However, there’s a limit to how much volume you can generate in a leg. Once you reach this limit, you must “re-enter”, as a distributor in your own downline. While on first impressions, a binary plan appears simple in concept, it is infact, a very controversial pay plan.
This is in large part due to its beginnings in the early 1990s in gold coin scams, and other shady products such as high-ticket one-time travel certificates and overpriced prepaid phone cards. This is also in large part because companies that operate binary plans make it very difficult for their distributors to generate commissions.
Binary plans are very “gimmicky”. Companies that operate binary plans require you to “balance” your two legs in order to maximise your payout. If your legs are not balanced, that is generating the same amount of volume, then you are only paid on based on the volume of the weaker leg.
For instance, say that you have a left leg that’s generating 700 points and a right leg that’s generating 500 points. In this case, you’ll only be paid the commission based on the lowest common denominator, which is 500 points. Can you say breakage? Hmmm…
Some companies will carry over the remainder 200 points over to the next pay period, but this only makes balancing both legs more difficult because you have the extra carry over points to account for.
Another unusual aspect of a binary plan is many companies allow you to start with three “business centers”. This essentially means you start with yourself at the top, and then you sponsor yourself on your left leg and your right leg. This effectively allows you to have three downlines, a left downline, a right downline and an overall downline and it allows you to get paid on each of these three downlines.
What will ultimately limit the binary plan’s acceptance is they are notorious for unrewarding commissions. In a very well known company that uses a binary, you must generate a personal volume of $125 and have both legs producing at least $310 – that’s a total of $745 of volume that you’re responsible for bringing in to the company – to earn a commission of $40, a commission rate of just over 5%.
To your MLM success,
Wayne Wu
Founder, The Profitable Networker
P.S. I would love your input! If you have an opinion that would contribute to this discussion, please leave me a comment below.
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- Which MLM Compensation Plan Is The Right One For You?
- Understanding the Unilevel Compensation Plan – The Good and The Bad
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