Understanding a Binary Compensation Plan
What is a Binary Compensation Plan?
Being relatively new with regards to the other compensation plans in the Network Marketing industry, the Binary Compensation plan is one of the most popular amongst companies as well as members in the industry. There are many advantages to the binary compensation plan, the first of which is the simplicity of the plan. It is attractive to both seasoned veterans as well as new comers to the industry as it's simplicity allows for an easy understanding of the pay scale that a member will receive.
How Does the Binary Compensation Plan Work?
The Binary Compensation plan as the name indicates works off the power of 2. The number 2 of coarse represents the maximum number of frontline distributors / associates that any business center can have. Additional distributors / associates who are introduced to the business are then placed under one of the existing frontline distributors / associates, as shown in the image above.
The Binary Compensation plan promotes a very supportive and cooperation oriented environment for all members as everyone benefits. New members are supported by existing members as the the way for them to increase their success is to mentor and help new members. This is not just initial support, but on going as the cooperation is beneficial to all involved as they are working towards a common goal.
As in any compensation plan, the main objective of the Binary Compensation plan is to generate business volume through both legs / sales teams of the organization. Most successful Binary Compensation plans work on a 1/3 - 2/3 split between the organizational legs. When the legs have a 1/3 - 2/3 amount of volume, a pay scale is awarded to the distributor / associate.
When Binary Compensation plans first emerged in the Network Marketing industry, they had two major draw backs that made it difficult for the new member or part-time member succeed. As there had to be some balance between the legs of the organization, the business that was left over after a cycle pay was lost. As well, there were also versions of the Binary Compensation plan that had a depth restriction.
The successful Network Marketing companies of today realize that this was an unfair advantage to the company, and one that made it very difficult for new distributors / associates to get established. For this reason the successful Network Marketing companies have instituted "carry-over" which allows unused business volume to be accumulated and used in the next pay cycle. Along with this, the truly thriving Network Marketing companies have also eliminated any depth restriction on the Binary Compensation plan. This now means that a distributor / associate gets paid on all the volume in their organization.
The goal in a Binary Compensation plan it have the proper volume balance in your organization. This is not difficult to do and one that again promotes the cooperation environment as weaker downlines are built-up by more experienced network marketers, mentoring less experienced distributors / associates along the way.
Helping the Average Network Marketer
There have been numerous studies conducted that measure the number of distributors / associates the average member sponsors. Some may be shocked to find out that the average network marketer sponsors only 2 -3 distributors / associates. These findings proved why so many struggled with the older compensation plans that required members to sponsor 6 or more distributors / associates.
The Binary Compensation plan allows the average network marketer to succeed as sponsoring 2 distributors / associates allows you to be eligible to start receiving a pay check from the company. It also again promotes the more experienced network marketers to support, teach and mentor those less experienced so that collectively the entire team earns more money.
The Best Compensation Plan as Voted by You
Every year the Network Marketing industry polls its members to gather information about this thriving industry. Each year one of the questions is what is the best type of compensation plan. While members are usually biased to the compensation plan that they are in, the one key indicator about what compensation plan is best is the number of companies using it.
Year after year the Binary Compensation plan is one that wins this distinction. The ease of understanding, the support culture that is created and the level of success are 3 main reasons why the Binary Compensation plan is a winner.
Hybrid Binary Compensation Plan
This type of plan is not very well known. There are very few companies that have the ability to have this type of compensation plan. The company must be stable, have positive cash flow, growing both in sales numbers as well as markets globally, and have the distributor / associate base to year after year be able safely grow.
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