The MLM Binary Compensation Plan . . . and How It Works


Unlike the matrix compensation plan, the mlm binary compensation plan is a two-leg structure. There is a right side and a left side where members are placed. In addition, one leg is known as a strong leg, pay leg or profit leg while the other one is known as the weak leg.

Instead of having three or more members on your frontline you only have two on your front line (even though some MLM companies may reward you for sponsoring more than two).

MLM Binary Compensation Plan - Two Legs


If you DO sponsor more than two the additional members will be added to the next available spot in one of the legs.

MLM Binary Compensation Plan - Spillover


Often the company will allow you to choose which leg your new sponsor goes on. Usually, an upline will encourage this sponsor on which leg to put their new sponsor on.

For example, if your upline put you on their left leg they will encourage you to put your sponsor also on your left leg.  The reason for this is that this allows the current representatives to benefit from the new members being added to the power leg.

The same thing goes for the right side. If you put a sponsor on your right side and you know that you're going to try to build your right side you may tell your sponsor to put their new members on the right side also so everyone can benefit from that side



How The MLM Binary Compensation Plan Works

In the binary compensation plan commissions are measured by volume . . . not levels. For example in the matrix compensation plan when a representative builds their team to the fifth, sixth or seventh level they get paid a percentage of customers at that level.

In the binary plan when a representative reaches a certain number of product sales they're paid a percentage of the volume.

A company may have it set up where if you have 20 customers on your right side and 20 customers on your left side they may pay you the percentage of the volume.

In the example above

So on your right leg if you have 10 reps that have two customers each (20 customers total) that bought a product for $50 that would equal $1000

And on your left leg if you have 10 reps that's have two customers each (20 customers total) that but the same product $50 dollars that would equal $1000

  1. This equals $2000 in your volume

If the company decided to give you get 9% residual income of the volume that would equal $180


In another example is on your right leg if you have 10 reps that have two customers each (20 customers total) that bought a product for $70 that would equal

And on your left leg if you have 10 reps that's have two customers each (20 customers total) that but the same product $60 dollars that would equal $1300 in volume

If the company decided to give you get 15% residual income of the volume that would equal $195.


Advantages and Disadvantages

The Binary compensation plan makes it convenient for the company to give out bonuses to the representatives who qualify.  Also there are a few advantages to working with a binary sructured plan.

Advantages

The following adantages are:

  • Spillover - This isn't necessarily a bonus, however, a bonus can be obtained by getting spillover. An example of this is when you're upline sponsors more than two people and the extra person falls to the next available spot which could be under you, therefore, you would get the credit for it and receive any qualifying bonuses for obtaining a new person in your lineage
  • Unlimited depth - Unlike the matrix compensation plan, the Binary plan pays you through unlimited depth due to the fact that you get paid for the volume. This ensures that every member in your upline (and possibly downline) benefits from this.

MLM Binary Compensation Plan - Unlimited Depth

  • Faster Growth - Starting with two in the binary system you can build deeper faster since representatives get paid on depth. You don't have to acquire five or three in order to start building deeper into your lineage.

Disadvantages

  • Seldom Pass Uplines - It is harder for newer reps to get paid as much as the uplines do. Due to the fact that representatives are paid on depth, the more than the newer representative produces, the more chance the upline has to get paid.  (Unless the uplines other leg isn't producing as much)
  • Equal Legs - In most cases in order for representatives to be paid bonuses or residual income their left leg has to be equal to the right leg.

For example, if you will get 3 levels of residual income:

  1. 9% when you get 20 in each leg
  2. 15% at 30 in each leg
  3. 25% with 50 in each leg.

If you have 150 in the left leg (also with the help of spillover) and 23 in the right leg you will be paid residual income on 20 in each leg.  In other words, you'll get no credit for having extra 130 in that leg.

MLM Binary Compensation Plan - Limited on the shorter leg


. . . Company Has Final Say

These examples of compensation and residual income are not written in stone. Remember that this is the format for a binary structure. Multilevel marketing companies can make the rules on how much they pay and what the qualifications for payments are.

You will see MLM companies change the compensation plans and payouts all the time. It is your responsibility to keep updated with the company you choose.


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