In this final installment of Understanding MLM Compensation we will look at the positives and negatives of binary MLM compensation. A binary plan operates on similar principle of restriction, to that of a 2 x 2 matrix plan , in that the first generation of your MLM downline is limited to two people. This limitation creates an organization that is made up of two separate legs, which are commonly referred to as the “right” and “left.” In binary compensation, commissions are generally paid out on the weaker leg, determined by the lower sales volume of the two legs, during a set production period. Commissions are rarely paid on the strong leg of the organization.
Advantages of Binary MLM Compensation
Whereas most MLM pay plans pay commissions once a month, many binary plans pay bi-monthly or even weekly. The appeal of a more frequent payout can be a big draw for many network marketers, especially those needing to realize profit quickly.
Another advantage of this type of MLM plan is the ability to earn commission from deeper generational levels. In fact, a binary plan offers the greatest potential generational earnings depth of any of the four basic compensation plans. Although you are only getting paid on the strong leg, you are eligible to receive commissions for the group volume of the entire leg, with no generational limitations. This means that you will benefit from a strong producer, even if they are 12 levels down. There is no one in your strong leg who will fall below your “eligible” pay range.
Disadvantages of Binary MLM Compensation
This type of plan works best when both downline legs are growing at a similar pace. In some cases one leg will radically outproduce the other, making it possible that your company would earn a large amount of money, while you as the distributor earned nothing. Once a leg begins to outrun the other leg it will generally continue that course, making it nearly impossible for the distributor to get paid. In an effort alleviate this type of scenario, some binary plans now pay a matching bonus on the group volume of the strong leg.
Some binary MLM plans pay commissions at set levels, instead of as a percentage of sales volume. Supposing your volume fell between two predetermined levels, your volume would be rounded down to the lower of the two levels for commission payout purposes and the remainder of the volume carried over into the next pay period. To combat this problem a number of companies have begun to pay straight commission on actual volume on the weaker leg.
As with any model of MLM compensation, there is money to be made in binary plans. The key to your success in these types of plans is your execution of sound business building practices.
