I remember when the binary compensation plan was first introduced to the network marketing community. This was in the 1980s and it got as much attention back then as it does today. This was before the internet and companies could still fill hotel rooms with 300 people in any city. The binary was a new concept and at the time most people didn’t understand it. I immediately recognized an opportunity and left the moment, mind you, not to join the company using this plan but to print a brochure explaining it. Within a week I was standing in the back of these hotel meetings selling these brochures for a dollar each and yes, I sold a lot!
Binary over the years has become even more popular, especially after the Internet, where the clearing software was no longer needed in the company’s office. Instead, it was run from a server where instant tracking was available.
What is a binary compensation plan? Wikipedia defines it as an organizational plan that uses a left and right leg structure. One is defined as the “Power Leg” and the other is called the “Benefit Leg”. The Power Leg structure has automatic placement of new members, even by previously enrolled members, or ancestors, of the current member. This causes what is commonly known as a “vanishing leg” where hundreds and eventually thousands end up under one affiliate. This can cause a lot of excitement for the newbie who doesn’t understand a binary compensation plan.
The enrollee is told that to benefit from this growing organization, they must personally recruit/sponsor one person in their Power Leg and recruit/sponsor another person in their Pay Leg. The enrollee is told that as the person they entered into their Payline goes out and gets their two people and each gets their two people, the Payline grows. That’s when they start making money in the binary compensation plan! Because? Because as your Pay Leg grows, it begins to match the growth that’s already taking place in the other Power Leg. This matching volume is typically calculated on a one-third, two-thirds basis, which means that you are paid a specific amount each time you generate thirty percent volume on your Pay Leg, as long as you have at least one sixty percent on his Power Leg.
The bad part of a binary compensation plan. When a person is sponsored and doesn’t get into the Power Leg, but gets stuck in a Pay Leg that isn’t growing. This happens because your backer is not a strong producer who can help build that weaker branch to help build momentum and eventually turn it into another growing powerful branch. The truth is, most people are not capable of duplicating themselves and sponsoring their two personas. How to turn a Pay Leg into a growing and prosperous Power Leg? Typically it takes thirty-five personally sponsored people to create any kind of growing momentum. The obvious reason is because you’re looking for a self-doubling person.
The ugly part of a binary compensation plan. Most are drawn to a binary compensation plan because of the promise of rapid growth from spillover. Spillover is the growth that takes place from your upline. This, of course, creates a lot of excitement. Again, the problem is that most can’t get their two people together. You may be one person who would have no problem hiring two people, but you have to keep in mind that others usually can’t pull it off.
The question may be, then, how can some companies using a binary compensation plan be successful? There always seems to be a Power Leg that’s growing, right? Initially, companies, before going public, recruit a lot of so-called “big fish.” These are people who have a lot of influence and are willing to bring their core teams into the mix. Companies often pay these people to do this, sometimes as much as $10,000 per month. This initial activity creates a lot of excitement that seems to work at least in the short term, but eventually loses steam.
My suggestion is to stay away from the binary comp plan. You’re better off on a hybrid Unilevel plan with matching commissions that offers good upfront commissions as well as long-term residual income on the back-end.