Binary Compensation Plans – A Practical Guide

Binary compensation plans are characterized by having two legs, and only two legs.  Most binary comp plans will pay you commissions on your weak leg – or whichever has less volume.  Some say they pay on both legs up to the balance point.  But – whether it’s $10 per person on the strong leg, or $5 per person in both legs to the balance point, the final commission number is the same, and the plan functions the same way – you are limited by the size of the smaller leg.

Advantages of Binary Compensation Plans

The key advantage of a binary compensation plan is it pays based on volume.  If you bring in orders, you get paid on them.  There is no automatic cutoff beyond a certain number of levels as is the case in a unilevel plan or a forced matrix plan.  While no plan pays unlimited depth (even though some claim to) the binary comp plan comes the closest.  At first glance you might think so, but “binary creep” starts to erode commission payments as you go deeper and deeper into the plan (you did read the policies and procedures, right?)

Disadvantages of Binary Compensation Plans

The main disadvantage of a binary comp plan is that because it only pays on the weak leg, it tends to favor super recruiters and heavy hitters.  Here’s why: Since binary comp plans only allow 2 legs, anyone sponsored beyond the first 2 people must be placed under other people.  A super recruiter will start building power legs – each one goes straight down with no branching.  Everybody knows that you must – absolutely must – be in the power leg.  That way you only need to build one leg (your “weak” leg) rather than both legs.  If you join a heavy hitter, you are guaranteed to be in the power leg.  If you join an average or above average person, they are building their weak leg in the binary plan, so you will likely not end up in the power leg.  You’ll have to do twice the work (or earn half the commissions.)

To Succeed in a Binary Compensation Plan

Join a heavy hitter, super recruiter, or other strong builder.  Find the person running the meeting with the cool car and expensive suit.  Tell them who your original sponsor was so they can place you under that person – but in the power leg.  Otherwise your sponsor will place you in their weak leg.  Now you’ve got a shortcut to success in any binary compensation plan.  Even with their drawbacks, binary compensation plans have become very popular.