Binary Compensation Plan

There are many types of compensation plans in network marketing right now. One of the most common with newer companies right now is the binary compensation plan.

In a binary network marketing plan, you build your team by powers of 2. You have 2 people in your front line, then they each have 2 in their front line, and so on to an unlimited depth. You will generally get paid based on the volume of your weaker leg, so your goal is to try to keep the sales volume between your two legs balanced to maximize your compensation.

Some companies have added a twist to their binary plan. Each position in the tree is called a “business center” and some companies allow a distributor to have multiple business centers so that they effectively occupy more than one position in their own organization. For example, in the picture to the left, say that is you at the top and you are allowed to start off with 2 additional business centers that are your personal left and right legs so that you occupy the top two rows. You now effectively have 4 legs instead of 2 and the potential to make a lot more money.

One of the benefits that people in companies with a binary plan talk about is that it encourages more cooperation among the people that you recruit because they are upline/downline to each other instead of cross-line. That argument only goes so far because the 2 people in any given front-line are still cross-line to each other.

Another benefit of the binary compensation plan is that  it encourages you, the sponsor, to work with your downline more to help them build their teams. That is true, because if you sponsor more than 2 people, you will have to place the additional people below someone else already on your team. One way that people do that is to build what they call a “power leg”, where you place each new person you sponsor under the last person you sponsored, making one long leg. It’s then up to the motivated people to build their other leg. The less motivated people will either end up as placeholders and eventually get frustrated and leave or they will see what other people are accomplishing and get motivated themselves.

I keep seeing mention of a study that was done several years ago that showed that the average network marketer sponsors between 2 and 3 people. That’s it.  And one of the things that the binary plan was created to do was make it possible for those average people to build their front-line and generate an income. That’s all well and good, but if you are only going to sponsor 2 or 3 people then why bother to start a business that’s all about sponsoring new people and selling product? It seems a waste of time to me.

There is one unfortunate side-effect to binary plans, and matrix plans too. I see a lot of ads online telling people that they can get started in network marketing, never have to sponsor anybody, and make a lot of money. They say that they will build your downline for you. A lot of times these are either binary plans or matrix plans and less than honest sponsor will put them in a position and there is no guarantee that anyone else will get placed under them. I think it is sad because the person thinks they are joining something legitimate, which the company may be even though the sponsor isn’t, and it could ruin network marketing for that person.

I personally don’t like the binary plan because it is open to be abused by the scammers I was just talking about and because it caters to lazy network marketers. I want more control of who is on my team. While it sounds good to have someone in your upline adding people, you don’t know what kind of people they are. They might not be someone you want to work with. Also, I don’t want people below me, whether I sponsored them or someone else did, to complain to me because I’m not building their team for them.

The bottom line is that the binary compensation plan can be a very good plan depending on the company, your sponsor, and your desire to build your own team. As with any new business venture you join, make sure you know what you are getting into. Is it a reputable company with a good product that you can believe in? Check out your sponsor and the team your are joining to make sure they are being honest with you. And of course, any time you hear that you can make money without having to do anything, run away.