I remember when the binary compensation plan was first introduced to the network marketing community. This was back in the 1980’s and caught a lot of attention back then as it does today. This was before the Internet and companies were still easily able to fill hotel rooms with 300 people in any given city. The binary was a new concept and at that time most people did not understand it. I immediately recognized and opportunity and ceased the moment, mind you, not from joining the company using this plan but by printing a booklet that explained it. Within a week I was standing in the back of these hotel meetings selling these booklets for one dollar each and yes, I sold a lot!
The binary over the years has become even more popular, especially after the Internet where compensation software was no longer needed at the company office. Instead it ran from a server where instant tracking was made available.
Just what is a binary compensation plan? Wikipedia defines it as an organizational plan using a right and left leg structure. One is defined as the “Power Leg” and the other is called the “Profit Leg” The Power Leg structure has automatic placement of new members, even by members previously enrolled, or ancestors, to the current member. This causes what is typically known as a “run-away leg” where hundreds and eventfully thousands end up under an enrollee. This can cause a lot of excitement for the newbie who has no understanding about a binary compensation plan.
The enrollee is told that in order to profit from this growing organization that they have to personally recruit/sponsor one person in his Power Leg and recruit/sponsor another person in their Pay Leg. The enrollee is told that as the person they introduced into their Pay Leg goes out and get’s their two people and they each get their two people the Pay Leg grows. That is when they start earning money in the binary compensation plan! Why? Because as their Pay Leg grows it begins to match the growth in that is already taking place in the other Power Leg. This matching volume is calculated typically on a one thirds, two thirds basis, meaning you get paid a specific amount every time you generate thirty percent volume on your Pay Leg as long as you have at least sixty percent volume in your Power Leg.
The bad part of a binary compensation plan. When a person is sponsored and not place in the Power Leg but instead gets stuck in a Pay Leg that is not growing. This happens because your sponsor is not a strong producer who can help build that weaker leg to help create momentum and eventually turn it into another growing Power Leg. The truth is that most people are not able to duplicate themselves and sponsor their two people. How do you turn a Pay Leg into a thriving growing Power Leg? Typically it takes thirty five personally sponsored people in order to create any kind of growing momentum. The obvious reason is because you are looking for a person who will duplicate themselves.
The ugly part of a binary compensation plan. Most are attracted into a binary compensation plan because of the promise of fast growth from spill over. Spill over is the growth that takes place from your up line. This of course creates a lot of excitement. Again the problem is that most are not able to get their two people. You might be a person who has no problems or issues of recruiting two people but you need to keep in mind that others typically are not able to accomplish this.
The question may be, then how are some companies using a binary compensation plan able to succeed. There seems to always be a Power Leg that is growing, right? Companies initially before they launch to the public they do a lot of recruiting for what are called “heavy hitters”. These are individuals who have a lot of influence and are willing to bring their core teams into the mix. Companies often pay these people on the side for doing this, sometimes as much as $10,000 a month. This initial activity creates a lot of excitement that seems to work at least in the short run but eventually loses steam.
My suggestion is to stay away from the binary compensation plan. You are better off in a hybrid Unilevel plan with matching commissions that offers good up front commissions as well as a long term residual income on the back end.