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Understanding the Binary Plan

Binary plan

Binary Compensation Plan

Despite the fact the binary plan is relatively new (90’s) to the network marketing industry it is already very popular among network marketing companies and members within the industry. As well as the simplicity of the design that the binary compensation structure offers there are a number of advantages that make it attractive to all network marketers including those new to the industry, part-timers, average networkers, and your more experienced gun recruiters.

How Does the Binary Compensation Plan Work?

The Binary Plan as the name suggests is based around the number 2, which represents the maximum number of frontline associates that any business centre can have. Any additional distributors must then be placed under one of your existing frontline members. This creates a very supportive environment for new members as the easiest way for associates to achieve success is by assisting their new members to build their organisations. This team approach makes the binary plan very attractive as there is a lot of support (both initial and ongoing) as all associates within your organisation work towards achieving a common goal.

The main earning objective of the binary compensation plan is to balance the amount of leg volume flowing through either side of your business centre. For example if you had 800 sales points flowing through the left leg of your business but only 500 points flowing through the right, you are paid out on the highest common denominator which in this instance is 500 points. When the Binary Plan was first introduced any additional volume (ie the extra 300 points on the left) would be lost making it difficult for part timers however more recently most binary plans now allow any additional volume to be carried over to the following commission period. This “carry over” feature has proven to be very popular for part-timers as it means that you don’t ever lose any of the sales volume that you have acquired.

Because the goal is to balance the volume flowing through your organisation this encourages associates to help their weaker downline members to build their organisation (promoting teamwork) to achieve a better volume balance and a more consistent (and higher) commission cheque.

There are normally no depth restrictions to the binary structure and each level of your organisation is paid out on a consistent commission percentage making it easy to understand. One of the main distinctions of the of the Binary Plan is that it is volume driven as opposed to level driven which means you do not have to have a large organisation to be successful. This also means there is an incentive to help new associates in your organisation no matter how deep they are.

In the fairness of good maths because there are no depth restrictions to the Binary Plan, each business centre has a limited earning potential which maxes out to ensure that both distributors and the company earn a profit.

If each business centre has a limit to how much it can earn, how is it possible to earn millions of dollars through a network marketing business using the Binary Plan?

For your serious network marketers the profitable part of Binary Plan is that although each business centre can only earn so much (normally up to a few thousand dollars a week, which is still very nice), there is generally no limit as to how many business centres each distributor can operate. Think of a business centre like a shop, if you currently own a shop that is doing really well but no longer has the potential to grow, what do you do? Open a second shop, as this now allows you to earn profits on both businesses. Well it is exactly the same with the Binary Plan. Once you have achieve a certain level with your network marketing business where your organisation has maxed out or has limited potential to earn you more money, the company rewards the distributor with a new business centre.

The company is happy because they have an experienced, successful distributor opening another business center and the distributor is happy because now they have a higher earning potential. The more business centres the distributor has the greater the earning potential of the distributor.

Binary Compensation Plan Helps Even The Average Network Marketer

Studies conducted into the network marketing industry have shown that the average network marketing distributor sponsors between 2-3 new distributors into their business. These findings meant that it would be hard for the ‘average distributor’ to be successful using some of the older compensation models that required distributors to recruit at least 6 or more frontline distributors to see a return. These older plans started to give the industry a bad reputation as being "too hard", however fortunately most of these plans have since been modified.

After these studies started to appear in the 1980’s the Binary Plan was create to give everybody a fair chance of success. Because the Binary Compensation Structure only allows the sponsoring of 2 frontline distributors it meant that even your less than average network marketer still has the potential to achieve financial freedom using this compensation model. Additionally the binary compensation plan was developed such that as a new recruit if you’re really struggling to build your downline it is in the interest of your upline distributors to give you as much help as they can.

The Best Compensation Plan as voted by you.

The MLM insider publication each year publishes the annual distributor’s choice award as to what people working in the industry believe to be the best company and best compensation plan. Obviously there is some potential biasing that can occur as naturally the large companies with the highest number of distributers are likely to feature the most.

In particular a large well known company (definitely not the biggest) has won the distributors choice award for the last 10 years in a row. One of the stand out features of this company is that it was one of the first to implement the Binary Compensation Plan and whilst it is definitely not the most lucrative compensation plan it is believed to be one of the fairest.

Although the Binary Compensation Plan is not the most lucrative, just like all other compensation structures this model does offer the potential to earn a very high income if you are willing to put in the work. When combined with the supportive teamwork that is generally found within companies using this compensation model, there is a lot to like about the Binary Plan.

Whilst we are generally supportive of this compensation structure, as discussed in each of the different compensations models throughout this chapter, before choosing a company we strongly recommend that you also consider the products, the practicality of the business model and whether the company has a proven track record.

Learn how to understand compensation plans

Is the binary plan the best compensation plan?

Learn more about the Matrix Compensation Plan

Learn more about the Unilevel Plan

Learn more about the Stair Step Breakaway Plan


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