Binary Vs Unilevel MLM Compensation Plans

November 18th, 2008 | by Chris |

Lake District Hills The MLM compensation plan is very important when you are evaluating a network marketing opportunity for joining. It can make the difference between becoming financially free or just making an income for the same amount of work and effort put in. It can also indicate the best strategy for building your business because the way the company compensates its distributors may favor a certain way of building it that would give you more money.

In such cases if that strategy doesn’t suit you or it would be hard for you to implement it, maybe that company is not the right one for you and would be better for you to start looking for another one. Of course you have to bear in mind that the compensation plan is only an aspect of what you should be looking for when evaluating an MLM company and nothing can substitute the time and effort you put into building your home business when it comes to succeeding, but can only facilitate it.

Two popular plans among multilevel marketing companies are the Binary and the unilevel. Each one has its advantages and disadvantages, like everything else in life, and you should learn how each one works in order to draw conclusions on which one is better suited for your needs, your personality, and they way you prefer to work.

How to Evaluate a Network Marketing Compensation Plan by Wes Hudson

Network Marketing Companies have different types of Compensation plans. All tout them as the “Best One” for the home based business entrepreneur.

And since so many will be entering Networking for the first time due to our souring economy, and the need to earn extra income, many go blindly into a Company without understanding the compensation plan. Only after entering the program and working it for months do they realize what they need to do to earn a substantial income, or possibly how difficult earning that income may be. Compensation plans are written to entice distributors to enroll but to protect the profitability of the Company. Having a clear understanding of the Compensation plan will help you devise a strategy and pick the one that is right for you.

The primary ones are Binaries, or often called “Binary”, and Uni-level plans, and variations thereof. There are different versions of the Uni-level Plans, some are called a “Forced Matrix”. But both are entirely different. And can greatly affect your income and potential income, depending on the structure of the plan.

“Binaries” or Binary plans, generally offer the greatest chance at a significant income, but with limitations. Binaries traditionally offer the largest income potential, but can be more difficult to implement, as it requires you to build 2 teams. Remember, bi means “2″. So a binary requires you to build 2 distribution teams, one on your left, and one on your right, which are called “legs”. The IBO’s (Independent Business Owners)or Distributors you recruit, or if you have a good upline, place beneath you, will build legs on the left and right as well. So you get a “tree effect” with you at the top of the tree, and all the branches or legs below you.

Products that are purchased by your “down line” are generally assigned a Point value, depending on the quantity purchased. A typical binary might assign point values ranging from 20 PV to 600 PV. These points are then put on each leg to the corresponding purchases.

For instance, your left leg may 20 distributors. And on a given week, that leg purchases enough product to give it a PV lets say 900 points.

On the right leg, you have 60 distributors. And their point total 2500 points. Provided you are qualified to receive commissions, which usually means you have made a qualifying purchase in the previous cycle( most are 30 days, some are 28) and have personally enrolled at least one IBO on your right and left legs.

In this example, you would receive a percentage amount of the points on your lesser leg. In this example, lets say it is 10%. You would receive 10% commission of the left leg, or $90. The 900 PV is deducted from your right leg, so now, for the “new week” you have 1600 points “carried over” to your right leg. And the process starts over. many binaries have bonus structures built in to them also based on how successful your downline has been at building their network.

This has been the basis of criticism of Binaries, or Binary Compensation.

Noticed I used 20 on the left and 60 on the right for illustration purposes. The reason is, despite your best efforts, it is difficult to maintain leg equality and thereby receive the maximum compensation. The best situation in a binary is to have your up line place people below you on the one leg, and then you only have to “build out” the one side. This can only be accomplished if you have a good up line, and are placed on an “outside leg” which enables you to receive spillover on the leg. To do that, I would investigate the Company, its distributors, and who your up line is or would be. Find out their track record of recruiting and spillover that you can benefit from. make sure you are put on a power leg.

Otherwise, you could be left trying to build 2 teams, and despite your best efforts end up with minimal compensation.

This is why many who have been in Networking will not participate or do not like a binary situation. They may have been in one of the situations where there is no spillover, and couldn’t grow both legs. Those that make the largest incomes generally do so in a binary. Professional networkers that are looking at making 4,5, and 6 digit monthly incomes will only do Binaries, as these offer a greater income potential.

Recently, some network companies have implemented a new binary compensation program that pays on Both legs. This overcomes the objection that many have to the binary structure. For instance, in a compensation plan like this with a binary, and using the same 20/60 description above, you would be paid to 20 deep on your left, and 20 deep on your right.

Or, you would be paid on 1800 points, the 900 on your left, and 900 on your right. If you were being compensated at the 10% rate, your commission would now be $180.

These new Binary programs make a larger residual income within the grasp of more IBO’s.

The other plan, the uni-level, insures that more IBO’s will make something, but not to the extent of a binary. You will hear many touting uni-levels as the best way to get that money for a car payment, or that the difference in a household making it and going under is about $300 extra income per month. Uni level plans offer more the opportunity to make a smaller income, while binaries of the past generally offered fewer a larger income potential.

A Uni-level plan would work something like this; You recruit the 1st person, who is placed directly below you. You would earn a percentage commission off of their purchases, and all your other personally enrolled or sponsored, at a rate of as much as 50%. However, those placed below you by someone else, would only pay you about 1-2%. So if you are in a Uni-level, and someone placed below you by your up-line is placed below you.

And they make a $50 purchase. Your commission on that would be generally around .50 - $1.00. So, if you wanted to make $1000 extra per month, you would have to enroll lots of people, because you would need 1000-2000 distributors placed below you to make that $1000.

By the same example, lets say you had a binary that paid on both legs.

And you had the same amount of distributors making a similar purchase.

With 1000 distributors, lets say there are 300 on your left, and 700 on your right. And the 300 on your left make a $50 purchase, and the 700 on your right make a $50 purchase. And the PV assigned to that purchase is a conservative 20 PV. You would make, at a 10 % rate, $600 on your left, and $600 off your right, for a total of $1200 before bonuses. That’s a 20% increase. In this example, if we use 2000 distributors, 600 on the left, and 1400 on the right, your income would be $2400.

That’s why serious network marketers look carefully at the compensation plans, and what they are, and how they are going to be successful with them. You should too, get all the information you can and ask questions before making a decision. By doing this, you can greatly reduce the length of the “learning curve”, and you are on your way to being a successful network marketer.

Wes Hudson is an Network Marketer with over 27 years of Sales & Marketing Experience. He currently only markets 1 product. You can view it at http://www.Chews4Living.com Chews4Living@yahoo.com Phone number 910-262-4083 You can also visit him on you tube http://www.youtube.com/watch?v=ytoY56HF71M

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