Understanding MLM Binary Compensation Plans

The binary compensation plan model is very popular in MLM. I was told by a very successful person in my former company that their plan was the best one out there. I had stars in my eyes at the time because she was so successful, so I believed her. Now I know the truth!For the purposes of this article, I am only covering team volume commissions because that is the only true residual income. Start-up money is only earned when new people are sponsored. Bonus pools are only earned by a few people at the top and vary over time. Matching check bonuses are only earned by a small percentage of the distributors.With a binary plan, you build 2 teams or "legs." While your sponsor might place some people on one of your teams, in most (if not all) companies you are required to personally sponsor at least one person on each team. So let's say you put Mary on the left and Suzy on the right.In order to earn commissions, you must have a certain minimum amount of sales volume on each side. You are actually paid based on the volume on the weak side. Some companies will hold over unused volume for the next pay cycle, but the reality is that there will always be some volume you are not paid for. So if your right team is the strong team, you never get paid on what Suzy brings in even though you sponsored her. The only exception might be a matching check bonus if you achieve a particular level, but in reality very few people ever reach, or can maintain, that level.Normally, your upline will help you build one leg for a time. They never bother to mention however that this will not last forever. If your sponsor is very successful, they will put lots of volume on one side and it will always be your strong side, and you will not be paid on that volume. Eventually, either they will quit or they will max out the team you are on and will start building another team. They will stop putting people on your team because it doesn't pay them to do so.Once your sponsor stops helping you (or if they never do to begin with, which does happen), you will eventually need to start putting people on both sides to "balance" the legs so you keep earning money. Every person you put on the strong side is someone you are not likely to get paid on.Now, your sponsor and the company will never explain it this way. They will tell you that you are earning 5 or 6% on everyone. In truth, you never get paid on all volume from both teams because there is always some "left over" volume in each pay period. There will always be not enough on one side to earn another "cycle" and your strong side will be way, way ahead of your weak side if your sponsor is very good at signing people up.There are compensation plans in existence that DO pay higher than 6% on ALL volume, with no balancing between legs required. The best way to illustrate, is to ask the "$10K question." This means we crunch the numbers and find out how many people you need on your team to earn $10,000 per month on team volume.In every binary plan I have seen, this number comes out to be around 1,700 (or more) people needed on your team. The company will never come out and admit this, but if you do the math you'll see it is true. Some compensation plans require as many as 27,000 people! But some plans only require 400 people total on your team (not just those you personally sponsor) to earn $10K.Do you really want to work 4 times as hard as you need to?One last tip: if you cannot even imagine yourself earning $10K per month, you can always do your comparison based on $5K or $2K or whatever number sounds reasonable. But if you can't imagine earning $10K per month or even more, I suggest you read "Secrets of a Millionaire Mind" by T. Harv Eker to figure out what your limiting beliefs are, and then read "Think and Grow Rich" by Napoleon Hill and follow the steps to your dream life!