The MLM Binary Compensation Plan: What You Should Know

Today, I want to educate you about binary compensation plans in the network marketing industry.  There are many types of compensation plans in our industry to include the uni-level, break away, forced matrix, hyrbrid plans, and the binary compensation plan.

The binary compensation plan is a fairly new concept, probably around 10-20 years old.  Very few, if any of the top 20 biggest companies in the industry use this form of compensation plan, but it is a growing trend.

The binary compensation plan is designed for you to build TWO teams in your network marketing business, a right team and a left team. The whole concept revolves around you recruiting two people, who recruit two, who recruit two, etc.  This is much different than the uni-level compensation plan, where you can recruit as many people as you want on your first level.

With a binary plan, you normally get paid off your smaller leg in your organization.  So if one leg is doing $20,000 per month in volume and the other leg is doing just $1,000 per month in volume, you would earn your commission from the $1,000 leg.  For example, you might earn a 10% commission from your smaller leg.

On the other hand, some companies do a ratio, instead of paying you off the smaller leg only. For example, once you do 200 points in one leg and 100 points of volume in the other leg, you have a cycle and earn a commission (this is just an example).  These ratios do vary by company and can range from a 1:2 or 1:3 or even 1:5 ratio.

Listed below I want to talk about the pros and cons of a binary compensation plan.

Pros of a Binary Compensation Plan

There are a few good things about a binary compensation plan that I can think of.  First and foremost, you only have to build TWO legs.  If you are in someone’s power leg, you really only have to build ONE LEG.  That is a lot easier than building 15-20 legs (or more) in a uni-level or breakaway compensation plan.

Another good thing is the spill-over.  Spill-over is when your sponsor or people in your upline add people to your team.  Since they have to add people to the bottom most point of the leg, you benefit.  Essentially they are putting people on your team for you.  If you are in a power leg, you could have THOUSANDS of new people each month put on your team.

Furthermore, some companies that use the binary compensation plan let you have multiple business centers.  This lets you rejoin the company several different times and re-enter the company in your own downline.  In most cases, this means that you can get paid off the same volume more than once.

Some companies offer matching bonuses.  In other words, when you sponsor someone and they are placed in your power leg, you can earn matching bonuses for helping them become successful and advance through the company’s ranks.  In most binary plans you don’t get paid off your power leg, so this gives you an added incentive to help people you sponsor on your power leg.

Another pro for binary compensation plans is the power legs.  If you team up with someone successful in the company and they place you in their power leg, you essentially only have to build one leg, or one team in your group.

These are the pros as I see it.  Listed below I will talk about the cons.

Cons of a Binary Compensation Plan

Here are a few things I don’t like about binary compensation plans.

First of all, binary compensation plans typically create a welfare mentality with your team.  Most people who have any experience whatsoever in the network marketing industry will DEMAND to be part of your power leg or they won’t join your team (and rightfully so).

In addition, many of your team members will sit back, do nothing and expect you to build their team for them. This welfare mentality is downright annoying and I personally want nothing to do with it.

Another problem with the binary compensation plan is that you have to balance your two legs to make a nice income.  For example, if you have 10,000 people in one leg and only 10 in the other leg, you won’t get paid off any of the 10,000 people.  Each company does it a little bit differently, but you normally only get paid off the smaller of your two legs.

My final problem with the binary compensation plan is the caps that companies make on their payout.  Obviously, they cap “how much volume” they pay on, so you don’t really get paid on infinite levels deep like so many people talk about.  There is always a catch.  Besides, the company can’t afford to pay thousands of people on the same volume, so they have to make rules to protect themselves.  I hope that makes sense to you.

Tips for Success with a Binary Compensation Plan

My best tip for success is to get on someone’s power leg, preferably at the bottom where there are HUNDREDS of leaders above you putting people onto your power leg team.

Put your first three people that you sponsor in your power leg and then focus ALL of your efforts on building your own power leg.  Just like a uni-level, you are going to have to sponsor A LOT of people to build your own power leg.  Most of the top earners sponsor at least 100 people personally, even if they are doing a binary plan.

Whenever you sponsor someone they ALWAYS get place at the bottom most point of your leg. For your left leg, you stack people on the outside left leg.  You do the opposite for your right leg. You never put anyone you sponsor anywhere else in your group.  Just focus on placing people at the bottom of the team.

As you build your own team, help each of them do the same thing!

Companies That Use the Binary Compensation Plan

There are tons of MLM Companies that use a binary compensation plan.  Here are a few of the more popular companies.

  • ASEA
  • Vemma
  • USANA
  • Market America
  • World Ventures
  • Mona Vie
  • Total Life Changes

Why I Would Never Join a MLM Company with a Binary Compensation Plan

As I mentioned earlier, I am not a huge fan of the binary compensation plans.  I don’t hate them or think they are bad.  They’re just not for me.  The biggest issue I have with them is the welfare mentality that it creates with your team.  People EXPECT you to place them on your team and help them succeed.  I just don’t personally like the idea of that. I’d rather work with people who are willing to work hard and will go out and put in the work rather than sit around and wait for me to do it for them.

Final Thoughts

There you have it folks.  This is my overview of binary compensation plans in the network marketing industry.  I think the binary plan will reward someone who goes out and puts in the work.  I don’t necessarily think it’s the best compensation plan, but I do know that they are extremely popular and some people swear by them.

What do you think?  Do you like binary compensation plans?  If so, why?  If not, why not?  Leave a comment below to share your thoughts.  I look forward to hearing from you.

 

What do you think?  Do you like binary compensation plans?  If so, WHY?  And if not, why not? Leave a comment below to share your thoughts.

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6 thoughts on “The MLM Binary Compensation Plan: What You Should Know

  1. John

    Chuck you could give us
    the diagrams of the basic
    Comp plans that exist today
    in the industry
    I really have no clue of the plans
    and how we use them
    There is a big ignorance in this sector
    However I believe every distributor wanting
    To succeed must know perfectly and
    Follow his comp plan to build the business
    avoiding failures .

    Reply
  2. chuckholmes Post author

    The binary pay plan is one of the most common MLM Compensation plans in existence. Lots of different network marketing companies adopt this compensation plan because of its simplicity. In this short article, I want to discuss three great things that I like about a binary pay plan. Here they are:

    1. The Power of 2: What I like most about the binary pay plan is the power of 2 concept. This means that people need to simply sponsor two new distributors to take advantage of the plan. After that, they need to help those people sponsor 2, and keep repeating that process for infinite levels in their organization.

    2. Simplicity: The binary pay plan is really simple to understand and easy to explain to others. Many compensation plans are very complex and difficult to explain. Although there are different types of binary pay plans, most of them follow a similar concept. And most are really easy to understand.

    3. Payout: If you structure your organization the right way, you can make a lot of money with the binary pay plan. Typically, companies pay commissions off the smaller leg in your organization. That means if you have one leg with 1500 volume points and your other leg has 2000 volume points, you would earn commissions off the 1500 volume points. Does that make sense? Your key to success with the binary pay plan is to “balance” your organization, so both legs have approximately the same amount of volume.

    Obviously, the binary pay plan isn’t the perfect compensation plan. In my opinion, there is no perfect compensation plan. But this pay plan is pretty good.

    Please know that most distributors won’t earn much money at all with this pay plan. That’s because they don’t follow the steps to success and structure their organization the right way. Or they don’t sponsor anyone into their organization. However, the distributors that do the work and build a large organization earn a nice income with the binary pay plan.

    What are your thoughts?

    Reply
  3. Ty Ross

    While in theory, it sounds like it COULD work. You are helping your downline so that can be a motivating factor for them to keep going, but it could backfire. The whole point of multi-level marketing is to build a business, build YOUR business enabling you to become financially independent. The binary compensation plan stagnates that. If you build your distributors downline for them, what are they doing. They won’t be doing what’s necessary and will not have what it takes to motivate their downline, so on and so forth.

    Reply

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