It has a Binary Tree Structure or a left and a right subtree.
Promotes recruitment in a down-line of both the legs
One subtree is called Power Leg and the second is called Profit Leg.
Provides an opportunity of earning income to several levels down the line.
What is Binary MLM Compensation Plan and Pros and Cons of Binary MLM Compensation
The one fact about MLM that is universally acknowledged is, this is a business which is based on expanding your network by getting more and more recruits and earning income. Enter MLM compensation plans which have been around for almost the last 4 decades. MLM compensation are implemented so as to calculate the payouts and different plans have a way of calculating these pay cycles based on commission.
It becomes important for a company or a distributor to understand the commission and the compensation plans so that they can optimize earnings. It is always a good idea to understand and learn how these various MLM plans work so as to associate with the plan that best suits your MLM business needs.
Decoding the Binary plan
The Binary plan is one such compensation structure. While they are unanimously popular with some companies or distributors, some others shun them. So how does a binary plan work exactly? A binary compensation plan is a plan that employs a network marketing structure, wherein the company pays a fixed amount or percentage based on a specific sales volume, irrespective of the number of levels needed to achieve it. Distributors are placed in a binary or dual tree structure, such as a left side and a right side in the organization, which is why the name binary.
Now, each distributor is allowed to have only two distributors on the first level, but there is no limit on how deep a distributor can build. This makes it crucial that your downline needs to be active, in order for the profit margin to really rise. Simultaneously as the width of your organization is restricted to only two members on the frontline, any new recruits that you sign will ‘spillover’ to the next available spaces in your downline’s leg. This is also called as the ‘spill network’. That said it is extremely crucial that your downline stays active, as you can sign only two people at the first level, the profit margin depends entirely on your downline. In a situation where one of your sides is inactive, you will not be making a whole lot of money. So, the strength of a Binary plan lies in its downline.
Income options aplenty
One of the reasons why MLM businesses all over the globe, adopt the Binary plan is because of its lucrative income possibilities. Commissions & payouts are distributed in a defined ration as per the pairs placed in the network. That apart, there are various awards, rewards offered on achieving targets that expand the network.
Royalty commissions are premium rewards offered to those distributors who perform a vital role in the growth of the network and are usually based on the company turnover. Along with this, there are many other schemes and bonuses such as the referral income, direct sponsoring income, spill network income & binary /pair matching income.
And it’s not just the incomes, the Binary MLM plan comes with a whole lot of other benefits, which are:
Easy to understand – is an extremely straightforward plan among the others & this is easily understood by the prospects.
Spill network – Another advantage of this plan, is the spillover, which for many distributors is a great way of attracting new recruits. As part of a spill network, if you are placed under an active and successful upline power leg, you have great chances of working and less load on you to work.
Unlimited depth – This MLM plan has no restrictions on levels and you can build it as deep as you would like. If both your left and right power legs are balanced, the potential for earnings can go very high.
Teamwork and bonding – If you are looking at improving the team culture and bonding then this is the plan for you. As the Binary plan calls for a better balance between the two legs, distributors encourage their downline to work better and achieve volume and results.
With its obvious advantages, it is very popular among a lot of MLM businesses, though it is not without its share of disadvantages. Listed below are two of its distinct drawbacks
Spill Network – This can be a two-edged sword, that is if you are placed under a direct sponsor who is not actively recruiting then you will not be fortunate to earn and will need to work harder to build your weak leg.
Commissions can get complicated – There are certain plans which offer you payment only if both the legs are evenly matched. This can make it complicated if you haven’t understood the plan properly.