MLM Binary Pay Plans Analysis

Starting five years ago I saw the way that the FTC and State AG’s policies were heading in reference to having customers.  After studying the court casses and talking with three of top MLM Attorneys,  I went to the drawing board and started designing new pay plans for the Binary and Unilevel that would make AGs and the FTC happy if they saw them.  Just as important was:

Prime Rule 1: Distributors had to be rewarded for getting customers so that they loved it and it was not a punishment.  It took months and in some cases a year of testing to come up with good models for both the Binary and Unilevel MLM – Network Marketing pay plans.  How could I do that?  Hey I have been out on the street selling MLM products and know how a distributor thinks, expecially aggresive hungry ones like me!
Prime Rule 2: Using the new Internet business patent rules…. file patents on these radical money producing new MLM compensation pay plans.  Why?  Because the business patents did not exist when I did the first LEGAL fast start bonuses based on sales volume.  The idea was stolen and is widely used today.  The same goes for Gross Volume bonus pools that get results for recruiters.  The same went for the Binary plan innovation to keep the law off the Binary’s back and increase sales for distributors and also their MLM – Network Marketing company.

In order to receive an income, two (binary) different legs have to “balance” or “match” in set dollar amounts (normally in $1000 increments). You have to have two matching income amounts (read this as legs) at one described lateral (read this as horizontal) point to get paid. Sounds simple, right? It is, except it requires work with downlines to keep the legs generating equal volumes of sales. The key is “equal volumes.” You might have 2 people in one leg generating the same sales volume as 20 people do in the opposite leg! Working the Binary requires thinking! Normally, there are two or four starting points to sign up distributors in the Binary. They do not include automatic balancing placement (if they did they’d be a matrix). Leg building is controlled by the brain of the sponsors. There isn’t any “lottery effect” with a BBL. The term “TANSTAAFL” (There Ain’t No Such Thing As A Free Lunch) applies to the BBL. It takes work to create a strong structure in these type programs. Old time MLMers have nervous breakdowns from worrying about vertical income streams, and now adding lateral (read horizontal) calculations. Some young MLMers are beating out “big hitters” because of the different focus! Things may have gotten hazy, let’s look at some payouts.


In this example if you went through all four steps in one week you’d receive a bonus of $200. You’d receive a re-entry certificate the first time you went through all four steps.


If it is a weekly pay plan (most Binary daily plans don’t make it) this is a very attractive compensation plan! All levels can tap the income stream. Several different levels use the same amount to calculate the volume for payout. You ask “how can this work?” The laws of “probability” say that a number of people won’t match amounts, so they won’t qualify to receive a check. Odd dollar amounts (say $600) don’t get paid until the next period when the leg accumulates $400 more to come out to an even $1000.  The word chance does not apply to the Binary operation because if a person works hard the money flow keeps going up.
The first flushing. Some plans drop the extra $600 mentioned in the paragraph above. You have to start over at $0. These plans payout a higher percentage. There doesn’t seem to be much income difference in plans that flush the residual and those that don’t. The second type of flushing is on total volumes of money flowing up the leg. You have two legs running to infinity. Each is generating big bucks up the legs. What happens after you get paid on the maximum number of steps in a pay period? The excess money flushes (flows) past you! Is this fair, the novice asks? It sure is. If it didn’t, the binary would pay out too much then collapse -along with your company! The third type of flushing is if you don’t qualify (make a monthly order). The money you accumulated under your business centers flushes (disappears). This is standard practice in 99% of MLM companies no matter what the comp plan is.

The miracle of re-entry certificates! How do I keep going if my initial centers are maximized with income? Most of the companies give maximized distributors re-entry certificates. You put your re-entry certificate in your downline and build under it. The re-entry certificates then generate money the same as one of the initial income centers. Your downline becomes your upline and vice versa! This provides for contact, training and recruiting far down in your organization. In general, it is the best of all worlds in terms of compensation plans! It is like building wide and deep at the same time in a uni-level or breakaway with the exception that you keep running deep! Some companies have given re-entry certificates every time a center is maximized. Most companies have found this is impractical since it generates more re-entry certificates than distributors can put to good use. The standard seems to be one certificate per center when it maximizes out. Why? The distributor has to concentrate more on recruiting and training in specific downlines. In the following illustration, the company pays $100 every time there is an income match of $l 000 at a given income center. When that happens 5 times in a week, the income center generates a re-entry certificate. Generally the MLM distributor places it in his “shortest” slow growing leg.
This is the most popular Binary that survives.  Most of the exploding Binary MLM companies today are using some form of the 1/3 – 2/3 Binary.  This Binary makes it easier for the new person to make money faster, thus it increases retention, which increases sales volume and payouts.   Just take the figure you see above and deduct the amount to collect money on the short leg and reduce the Binary payout some.   Presto you have a 1/3 – 2/3 Binary!

This is the newest of Binary modifications and hybrids.  A certain amount is paid on the short leg of the Binary (usually 10%) until it reaches a point the sales volume is bigger than the starting leg.  Then they flip – flop.  A certain percentage (matching bonus) is paid on the personally sponsored folks on the long leg.  This is probably the most tactically (for a distributor) difficult for a distributor to maintain a grasp and controll on money flows.  Synergy Worldwide pioneered it and flopped.  Agel started with it in a big boom…. but according to Alexa they have slowed down.  The jury is out, but new companies are rushing in!

The Binary turns into sheer dynamite when combined with a hot product. How does this apply to you? When looking at compensation plans you have to set up your own personal model of the plan. Don’t lie to yourself! Plug in how much product you can reasonably sell, how many distributors you can reasonably sign up, and then how much product you think they can sell. Don’t forget how much it takes you to qualify each month. Figures don’t have to be accurate; gut feeling will work NOT work to give you a ball park figure with the Binary Pay Plan. Some of the biggest diasters came from people starting a Binary Pay Plan MLM company with  “guesstimates.”  This turns into a sheer disaster and usually the MLM – Network Marketing company fails and sadly falls.

Various law enforcement (FTC, AG, DA’s) don’t like the Binary plan because it looks like….errr guess what?  A pyramid.  So if you are going to use the Binary you have to “keep it squeaky” clean and watch your product and sales wording very carefully.  And your Binary needs to work and pay well to save complaints that can draw the attention of the law.  The Binary is a great plan that drives building and promotes hard work, but you have to be very carefull in controlling all elements of marketing.  In past years the FTC has done “sweeps” that wiped out dozens of Binary pay plan MLM – Network Marketing companies.


I have been around since the Binary was born and was in the very first Binary when it was born.  It is a great plan and working through the years with some growing Binaries has given me a deep sense of appreciation for the Binary and how to keep them alive on two major fronts:

1. Keeping all types of Binary Pay Plans from paying out too much and having the MLM company go bankrupt!

2. Keeping the Binary “clean” so that law enforcement leaves the MLM company alone.  This isn’t as easy as it sounds, it takes strategic and tactical planning TOGETHER to channel sales volumes in the Binary correctly to keep the MLM company from being shut down.  Go back to paragraph 2 at the start of this article.  Each and every one of those Binary companies was shut down by Federal or State regulators.
3 years ago

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