of the most important yet least understood aspects
of a network marketing opportunity is the compensation
plan. Believe it or not, sad to say, the majority
of distributors involved in network marketing could
not give you a superficial, let alone intelligent,
in-depth explanation of the various compensation plans
being utilized in the network marketing industry.
Nor could most distributors give an accurate explanation
of the very plan they are involved in with their own
opportunity. For this reason, too many distributors
to count, get involved with opportunities that may
not be right for them or realistic for their efforts.
The purpose of this guide on understanding
compensation plans is to give you the real nuts and
bolts of the various compensation plans in our great
industry as well as some of the basic pros, cons and
nuances of each plan. Following are areas that will
* How each plan works;
* The differences between
* There respective strengths
* Designed for either
full or part-time basis;
* Geared toward personal
consumption, retail sales, or both;
* Why many companies
utilizing difficult plans are so successful;
* Why many companies
utilizing easier more duplicatable plans fail;
* How to see the subtle
nuances and red herrings in plans that can be so enticing,
yet deceiving, but are so successful time and time
again in attracting distributors.
However, what this guide
will not do is tell which plan to choose. Only you
can do that and it must be in conjunction with the
other important elements of the opportunity such as
Management, Products, and Support.
Aside from the basic mathematics
involved, careful consideration must be especially
given to the products that fuel the compensation plan.
There are basically three categories of product lines:
consumable, durable and service related. We cant
tell you how many companies we have seen fail that
had great products, but unfortunately, abysmal compensation
plans specifically due to a poor marriage with these
product categories. While there are aberrations to
this, most of the time this is a because of a lack
of variety, size and/or expensive pricing. For example,
what are the chances for success for a company with
only a couple of products but with high sales volume
requirements. Unless the product is addictive, success
is questionable. Whats really ironic is that
programs like this have no trouble attracting distributors.
Thats the easy part. And its mostly due
to the hype surrounding the perceived high payout
of the compensation plan. The unfortunate outcome
was that once in the program, these distributors had
a very difficult time making any money even with a
good work effort. The fact that these situations keep
happening over and over truly reflects the overall
ignorance of compensation plans by distributors.
Well, wouldnt it
be great if every distributor could understand compensation
plans cold before they got involved with an opportunity.
This would, without question, create a more intelligent
distributor and help to make Network Marketing a more
credible and productive business as a result, and
ultimately put added pressure on companies to design
better and more rewarding compensation plans thereby
providing you, the distributor, the opportunity to
have a more realistic opportunity to make money. This
is the main reason most distributors get into the
Network Marketing business to begin with.
There are numerous compensation
plans being utilized in Network Marketing today. And
we strongly encourage each and every one of you reading
this guide to spend as much time as you can looking
at different plans. Study them until you really grasp
what they represent in a mathematical perspective.
Try to find the nuances and red herrings inherent
in many plans that make them so attractive at superficial
first glance. Really look at the plan you are considering,
rip it apart, and consider how realistic it may be
for you to achieve success as well as its duplicability
for the masses.
Before we get into actually
explaining the different types of plans, take a look
at some basic things most people miss while others
take for granted in the recruitment process;
1. Where in the plan and
what percentage of commissions are being paid. Are
commissions in the plan loaded/higher in the front,
middle or back end? This will certainly determine,
to a large extent, the work effort required to make
a good check, as well as how soon that money will
2. If you have been in
the industry a while, you may have noticed that many
distributors in their prospecting have the habit of
saying that their companys plan pays out a certain
percentage, like 75% for example. Two things to keep
in mind here. One is that you dont earn 75%.
You will earn what the commission is on a given level
and assuming different percentage commissions and
sales volume occurring on different levels, you must
find the % average (commission check divided by total
volume). Most plans will average out between 3-6%
per level or generational group of distributors' total
3. Remember the word BREAKAGE.
Again, the company may say on paper that it pays out
75% on its end, but in reality it may end up only
paying half or 35%. There are a number of reasons
for this happening, all resulting due to breakage.
They are as follows:
a. All companies receive
the benefit of being on top of the compensation plan
ladder. Therefore, even with the maximum number of
pay levels from the company being achieved, there
is usually no way it can ever pay 100% of the paper-stated
pay-out. This is especially true of young companies
where there hasnt been any significant depth
created. Occasionally, a company will pay out all
possible commissions by taking its commissions and
putting them into some bonus pool usually only accessible
to the big distributors.
b. The number of front
line distributors to the company is also important
to this equation. If all the front liners do not build
to maximum commissionable depth, again some or a lot
of the stated payout will flow to the company itself.
c. Many compensation plans
will pay different percentages of commissions depending
on status. Therefore, if most of the distributor force
is at the lower levels, the company will not come
close to paying out what may be claimed on paper.
d. Many companies pay additional
bonuses for performance and these bonuses are figured
into the overall paper-stated payout. Obviously, only
a small percentage of distributors will achieve these
bonuses, thus resulting in a lower overall payout
for the company.
4. Another area of compensation
plans analysis that is causing some confusion, and
one that is being played up now, is the so-called
advantage of getting involved with lower $ volume
personal consumption plans versus those that are more
retail focused with higher $ volume requirement.
We would certainly agree
(assuming the other important criteria of selecting
a company are there) that the low $ volume personal
consumption-type plan companies are more duplicatable
and easier to attract distributors into. But keep
in mind that the majority of those distributors that
come into these opportunities are just going to want
to personally consume and probably not be focused
on building a business. Considering that you earn
commission income based on $ sales volume, it only
makes sense that with these programs, massive on-going
recruitment will be necessary to create the kind of
sales volume needed to make any kind of respectable
On the other side of the
coin, the higher retail $ sales volume plans are generally
going to be more difficult to duplicate efforts in
and will generally have higher attrition rates but,
will nevertheless by nature of the higher $ volume
requirements, invariably create more volume on which
you will be paid. Most of these plans generally, tend
to attract the big hitter business builder types.
The reality is that we
have seen many of both of these compensation oriented-
type plans fail. The bottom line is regardless of
which plan you get involved with, you will have to
develop strategies to continuously attract new distributors
into it in order to create the all important $ sales
volume. This will be facilitated by good company and
upline support, the value and your commitment to the
products, and overall opportunity. But, also remember
that it takes money to build a successful network
marketing business. There is mailing, telephone, and
marketing materials costs involved, and this must
play a part in which company and compensation plans
you should get involved in.
There is no doubt that
you can be successful in any plan out there just as
long as you know what your commitment will be to make
it work for you and your organization.
So, what exactly is a UNILEVEL
plan? For one thing, it is the all-time silliest named
compensation plan we know of. Lets break it
down. Theres "Uni," meaning one, and
theres "level," meaning, well...level.
So its a one-level plan, right? Not quite.
So its called a Unilevel
because there are no stairsteps, or stages, to transcend.
Right? Everybody stays at one stage. Wrong again.
Because theres only one level of volume you
need to achieve? Nope. One level of bonus percentage.
Keep trying. Okay, its called that because your
downline is built...one level below the other!!! Bingo!
We have a winner.
Actually, we're being facetious.
We frankly have no idea who coined this title, or
why. Regardless, Unilevel plans are, in general, the
purest, simplest form of compensation structure. Theres
no width limit (a set number of levels) usually ranging
from three to nine, and varying bonus percentages
on each level. The more volume you, and/or your organization
moves within the defined depth, the more you will
earn. Occasionally, there may be a "number of
active distributor" quota that must also be met
to achieve higher stages of bonuses, like the ever
popular "Infinity Bonus". No one ever breaks
away, no one passes anybody up in the hierarchy, and
everyones volume always counts toward their
uplines monthly volume requirements. And most
Unilevel plans incorporate roll-up and compression
which enables an active distributor volume to reach
deeper, previously uncommissionable, pay levels by
temporarily moving that volume up over levels with
Being such a simple, straightforward
form of compensation plan, it is one that can usually
be explained, and understood, by most people in a
matter of a few minutes. It lends itself well to the
duplication process so key to successful recruiting.
Unilevel plans seldom overwhelm anyone, and are rarely
intimidating to the new, inexperienced distributor.
Some companies trying to
attract business builder types have added additional
perks in the form of bonuses. You can find car bonuses,
quick-start bonuses, monthly profit sharing plans,
prize awards, and so forth. Even still, these plans
are first grade math compared to many Breakaway, and
even some matrix plans out there.
One of the few disadvantages
to this plan is that they usually do have finite depths.
If the plan pays down six levels, then anyone on your
seventh level on down wont earn you a dime,
unless the plan employs a roll-up or compression feature.
Even then, you may only pick up two or three more
levels, and only on certain legs. Of course other
bonuses like the now popular Infinity can change this
equation and has added some spunk to an otherwise
straightforward plan. The Breakaway plan which will
generally pay on the "group volume" of generational
Breakaway distributors, with each group possibly containing
numerous levels of individual distributors. Technically
this means that a traditional Breakaway will generally
pay down many more levels of distributors than your
standard Unilevel. Matrix plans historically have
paid on finite levels as well, but the number of levels
is generally deeper than in the Unilevel, but of course
commissions are usually spread thinner. Of course,
if you ever build an organization to the point where
you have a significant portion of your downline extending
beyond pay level, you have a problem a few thousand
people out there would dearly love to have. So lets
keep things in perspective here.
A few Unilevel plans have
tried to mimic Breakaway depth by paying small percentages
down as many as 20 or 30 levels. One plan we've seen
(some time ago) paid down potentially 49 levels! Unfortunately,
this company didn't have any history of actually paying
full bonuses down the maximum number of levels and
this was with over 30,000 distributors on the books.
Frankly, there is not enough mass in any one downline,
in any of these companies, to really put this type
of pay structure to the test.
One thing that has always
concerned us is that the more levels you spread the
bonuses down, the smaller the bonuses on each level.
Theres only so much out of each wholesale dollar
that can be paid out in commission. If its 50%,
then you can pay down 10% down five levels, or 5%
down ten levels. The former will pay quicker and better
in the beginning, the latter will pay off even bigger,
but weeks, months or years down the line. Ones
a "front-end." heavy plan, the others
superior on the "back-end". MLM purists
will insist these terms only apply to Breakaway plans.
Im using them here, as many do, to simply address
the earnings potential as a distributor begins to
build his/her organization, compared to the point
when the downline has filled to the bottom level of
The economics of MLM dictate
that, regardless of the plan type, the more of each
wholesale dollar a company devotes to bonuses (to
pay greater, or deeper bonuses), the more wholesale
dollars they have to charge for the product to maintain
the same profit margin. The higher the wholesale price,
the higher the retail price. The higher the retail
price, the lower the volume thats moved. Lower
volume, lower bonuses paid out to distributors overall.
Fortunately, Unilevel plans
have unlimited width. Due to the potential loss of
your organization extending beyond the bottom pay
level, many Unilevel enthusiasts will try to go as
wide as possible. Good for them, not so good for all
those front line recruits looking for some individual
attention. And this is becoming even more of a reality
due to "Infinity Bonuses" being paid for
building a large first level of personally sponsored
distributors in order to qualify for these infinity
As an incentive to build
deep, many Unilevel plans will "dog pile"
bonus percentages on the third level (theres
a buzzword that we guarantee wont stick). Dog
piling refers to the old schoolyard practice of kids
piling themselves on top of one another until the
bottom kid passes out. In other words, level one and
two may pay 1%, and sales on level three could earn
you as high as a 40 - 50% commission. Then the other
levels drop way down again. The advantage here is
that distributors will tend to pile (dog pile?) their
recruits on level three. This results in spill-over,
much like a matrix plan. You benefit since your first
and second level are your uplines third, and
theyre dog piling below you.
Although not being a Breakaway
plan, and rarely requiring excessive personal or group
volume requirements, you wont find nearly as
much motivation or incentive in this type of plan.
But then, you wont find as many people motivated
to stockpile or front-end load to meet the criteria
for these lofty incentives either.
Unilevel plans do tend
to lend themselves well to those who just want to
personally consume, who have a fear or aversion to
selling, who wish to take a more passive approach
to their opportunity. Not to say there are not healthy
incentives in some Unilevel plans to retail. There
are. And, of course, many folks pursue their Unilevel
opportunity vigorously, on a full-time basis. But
in general, Unilevel plans do tend to require less
effort and attention, and yes, generally and historically
have paid less than Breakaway plans, and roughly the
same as matrices.
The key word in that last
statement was "historically." Relative to
the age of this industry, Unilevel plans have very
little history. Of the 180 most prominent MLM companies
in the US, 62% of them are some form of Breakaway,
18% are Unilevel, and 12% are Matrix plans and 6%
are Binary. And most revealing of those companies
over seven years old, 86% have Breakaway plans.
Following are some other
things to consider when looking at getting involved
with a Unilevel:
1. Do you get paid on every
commission level or are there volume or active distributor
This varies from one
program to the next. Many pay on every level simply
by meeting you Monthly Product Volume. However, some
Unilevels are trying to attract business builder types
by putting in some additional requirements to get
paid higher or deeper levels of commissions or bonuses.
2. What are the volume
and/or active distributor requirements to get paid
those deeper and/or higher levels of commissions?
This is very important
as it can change a plan that has been more or less
designed for a part-time participation to one that
requires a more full-time approach. Remember that
an active distributor requirement is the same as a
volume requirement and this can be over a $1,000 per
month to qualify for commission beyond perhaps your
4th level of distributors.
compensation plan is without question the most common
of all compensation plans. It is also responsible
for most of the really big money being made in the
network marketing industry. However, this big money
is being earned by a small percentage of those distributors
involved in breakaway opportunities. Curiously though,
the percentages of big earners with any compensation
plan is generally small in comparison with the number
of distributors involved with any given plan and company,
sort of following that famously quoted 80/20 rule-
80% of the money will be earned by 20% of the people.
What does set the breakaway apart from most other
plans is that they are definitely geared to a full
time effort. As a result, attrition is higher with
breakaways as well as the expense involved in working
and building a distributor base with them. Because
of this higher investment and higher attrition, breakaways
have suffered a bad image. Needless to say, most of
this can be traced to a lack of information provided
about the focus and work effort generally required
to be successful with this type of plan.
two sides to them. The (front) stairstep and the (back)
breakaway. The front side of the plan generally has
3 or 4 increasing rank positions that can be achieved
by meeting progressively higher $ sales volume requirements
over a specified period of time. All the distributors
under you are considered part of your personal group
and their and your personal $ sales volume combined
helps you to stairstep to these progressively higher
rank positions at which point you will breakaway.
You will generally earn higher commissions on the
lower rank distributors under you (in your personal
group) and this commission will decrease as they too
move up the stairsteps to the breakaway side. When
you do breakaway, your group comes with you as well
as their $ sales volume which combined is called group
volume. With most breakaways there is a set/defined
personal group volume that has to be met each month
in order to qualify for commissions on other breakaways
There is also a personal $ sales volume requirement
that you as an individual have to do each month. This
personal $ sales volume generally applies to both
the front and back side.
When someone you personally
sponsored in your personal group qualifies as you
did to breakaway, they officially breakaway from your
personal group and take both the distributors and
volume that are underneath them from you. They are
now considered one of your first generation breakaway
groups and you will earn on a monthly commission on
this entire group by meeting the plan's monthly defined
personal group sales volume requirement. With most
breakaway plans, the more first generation breakaway
groups you have the more generations deep of breakaways
you will qualify to be paid on. Keep in mind that
what makes a breakaway more of a full-time work program
is that you have to constantly meet your monthly personal
group sales volume in order to be paid commissions
on your generational breakaways. However, if the goal
is to have as many first generation breakaways as
you can, you will continuously be losing distributors
(as they breakaway) in your personal group whose volume
will have to be made up in order for you to meet the
monthly group volume requirement. This means lots
and lots of recruiting for new distributors. Easier
said than done.
Distributors involved with
breakaway plans seem to have a notorious reputation
for "pumping up the volume" in various ways,
such as front-end loading their new recruits, and
stockpiling product to meet monthly volume quotas.
They artificially try to meet the quotas necessary
to fend off the slow dismantling of their downline.
We cannot iterate enough
that the breakaway plan is a work program, theres
no question about it. It takes diligence, salesmanship,
and an ability to train character traits only a small
percentage of the American population genuinely possess.
Unfortunately, most distributors of these plans take
a shotgun approach to recruiting. They just throw
out the net and haul in anything that swims by the
good fish and the bad.
Many promoters of the breakaway
assert that they also pay down "infinite"
levels. Actually, this assertion is almost correct.
Due to the nature of most breakaway plans, they do
in fact pay deeper levels than most Unilevel and even
Matrix plans, sometimes as deep as 5-10 levels or
more in each breakaway group. So, a six generation
breakaway plan could in actuality pay on upwards of
30-45 levels of distributors. Not too bad.
A more commonly recurring
theme among breakaway critics, seems to be the idea
that companies install such plans for strictly self-serving,
greedy, or even malicious reasons. They are aware
of the wealth they create at the top by volume constantly
rolling up to the first few distributors who came
on board at the beginning, distributors who are, of
course, family members and friends of the corporate
officers, who were installed at the top for just that
purpose, to capture this tremendous up-flow of cash.
First of all, we're not
so sure there is a problem with corporate heads designing
a pay structure that makes them a lot of money. We've
owned (separately) six companies, and we cant
think of one time we designed one to not make us money.
And we've never seen a company go out of business
because their sales force wasnt making enough.
Its when the owners arent making enough
that they decide to fold the tent and move on. Frankly,
we think it would be comforting, especially in this
industry, to know that the owners of our opportunity
were satisfied. It's when companies design
compensation to make themselves money instead of distributors.
But any kind of plan can be designed to do that.
the problem of distributors showing off the checks
of those few "top" distributors, who sometimes
make upwards of half-a-million per month. Incomes,
we agree, that can never realistically be achieved
again in that opportunity. Alas , several years later,
the best one could hope for might be a mere ten- or
twenty-thousand a month. Such disappointment, we hope,
we soon experience. And again, this isnt a flaw
with the plan, its a flaw with the recruiting
tactics of the distributor base, and perhaps the supervision
of the company.
Thirdly, having consulted
with several start-up opportunities, we can assure
you, most companies choose breakaway plans for no
other reason than simply because "everyone else
uses one!" They just assume, since its
the most common form, it must be the best. Believe
us, they rarely have any hidden agenda. Sure, some
do. But these guys are usually easy to spot, dont
hang around long, and do not permeate this entire
industry, such as some breakaway opponents would lead
you to believe.
Breakaway plans are not
for everybody. They usually do not involve passive
approaches, or just spare-time pursuit. The real challenge
that exists with these plans is getting that point
across to those that participate, not how to change
the plan itself. Those that are too lazy dont
have the financial means, are too shy, or whatever,
can always hook up with a more laid-back type of plan,
like a matrix program that involves just personal
consumption of the products.
Lets say you bought
an airplane from a slick airplane salesman, who convinced
you that you could fly this plane, even though youve
never flown a plane before in your life. "Its
easy," he tells you. "Anybody can do it."
It will really get you to where you want to go much
faster. And its a piece-of-cake to operate.
Heres a 30 minute video that will show you how.
Just call if you have any questions. "Trust me."
So the next day, you hop in the plane, taxi it down
the runway, rev up the engines, grab hold of the stick
(its an old plane), and suddenly... you become
overwhelmed by all the gauges, dials, controls, lights,
and buttons. You shut it down, and walk away disgusted
(or God forbid, try to take off anyway!).
Who was at fault here?
The airplane manufacturer? Of course not. The plane
was operating perfectly. How about the airplane salesman?
Definitely. He dramatically overestimated the ability
of his client, or underestimated the complexity of
the vehicle. And how about the poor guy who bought
the plane? How much effort do you think it would have
involved for him to get the real picture here? About
as much effort as it takes to determine the complexity,
and personal workability of a breakaway comp plan.
A few phone calls! This guy could have looked inside
the plane before he actually bought it. In other words,
you dont have to fill your garage full of product
first, then figure out if you can work the program
To say we should abandon
all breakaway plans, or that they are unworkable,
evil things, is tantamount to abolishing all airplanes-because
most of us dont know how to make them fly. Besides,
there are some pretty soft breakaway plans out there
now. Ive seen a plan where the volume of the
breakaway group doesnt stop counting toward
your volume quotas until almost six months later,
giving you a very comfortable cushion to rebuild.
Of course, there are some very hard breakaway plans
too. Some have quotas and qualifications that make
them unworkable for all but a few hearty go-getters.
But again, thats just a matter of changing the
numbers within the plan. Its not a flaw in the
breakaway structure itself.
Breakaway plans, in general,
tend to pay more for those that work them correctly.
And the operative word there was "work."
We believe breakaway compensation structures have
their place in this industry. Its the packaging
of these opportunities that need an overhaul.
Some Things to Consider:
Following are some other
thing to consider when looking at getting involved
with a StairStep/Breakaway.
1. Amount of volume you
must generate versus the time period to accomplish
this volume in order to breakaway: The entire premise
of looking at this key element is can you do it and
can it be duplicated by distributors in your organization?
For example, one plan
may require you to do $10,000 in one month while another
$5,000 in two consecutive months, while a third may
allow to accomplish the $10,000 over any period of
time. While the $10,000 is the same for each plan
there is a very big difference between them. Of course
you have to look at some of the other elements playing
a part in being able to accomplish any of the scenarios.
i.e., unencumbered volume portion, volume based on
bonus, wholesale or retail volume?, product line strength,
marketing strategies, retailing capacity, etc.
2. Amount of personal volume
you must do to qualify for overrides on your personal
This can range between
$50.00 and $300.00. Does you budget allow for this
along with your retailing ability? Again, can it be
3. Amount of personal group
volume you a must accomplish to qualify for generational
This can range between
$-0- to upwards of $5,000. Again, the question is
can you do it coupled with the other elements such
as products and marketing strategies?.
3. The number of generations
of breakaway groups you will be paid on based on the
number of your Frontline Breakaways.
The number can be great
between plans. Most breakaways have at least 5 breakaway
positions or Status Levels. For this example, let's
call them blue, green, red, purple, yellow and gold.
With blue being the first or lowest breakaway level
and gold being the highest position in the company.
Plan one may run like this: BLUE one frontline breakaway
to get paid 2 generations; GREEN 4 to get paid 3;
RED 6 to get paid 4; PURPLE 7 to get paid 5; YELLOW
8 to get paid 6 and GOLD 11 to get paid all 7 generations.
Plan two may require 1 additional frontline breakaway
group to achieve the same generational override levels.
Again you must look at personal group volume requirements,
strength of product line, marketing strategies, retailing
capacity. You must also consider the actual generational
% override % commission itself.
Of course these are very
simplistic ways of looking at a given StairStep/Breakaway
plan. You must also consider everything as one package.
Compare one plan to another with all the variables,
with the strength of the product line and support
being two of the most important elements outside of
the comp plan mathematics. For example, you may have
one plan that allows you to breakaway with only a
couple of thousand dollars, having a very low personal
and personal group volume requirement, small # of
frontline breakaways to qualify for maximum generational
overrides coupled with very high generational overrides
% commission. This plan might look awesome but possibly
one that will keep you in the poor house. While the
second plan, has incredibly high requirements across
the board and this plan could allow you to achieve
millionaire status in one month. To make an analogy,
plan one only has one garbage product while plan two
has a very addictive product.
To have this section make
any sense, we must first attempt to explain in a few
minutes what usually takes most distributors a few
hours to understand. That is: exactly how does a binary
In most Binaries you have
what are called Income or Business Centers numbering
001, 002 and 003. With most Binaries a distributor
can initially purchase up to the 3 business centers
for a fixed amount of money always backed up by product.
The 001 is the top center with the building centers
002 extending down on the left side and 003 extending
down on the right side. From each 001, 002 and 003
center you have two legs. 001 left and 001 right.
002 left and 002 right. 003 left and 003 right.
If you only start with
your 001 center you will have two legs coming off
it. 001 right and 001 left which represent your two
recruits. If you start with all three centers, the
002 and 003 will actually represent two additional
personal legs off your 001 center and from the 002
and 003 you will have two legs each coming off of
each of them which will be filled by 4 possible new
recruits. So in effect, you have two "sides"
and two "legs" per side to start building
your organization from your 002 and 003.
Each side accumulates sales
volume (usually wholesale) and at the end of each
week (not month) the accumulated level of volume in
each leg per side combined is compared. If the "weak"
side legs (the ones with the least volume) have reached
a certain commissionable sales volume level, then
you get a bonus check based on achieving that necessary
sales volume. So the legs on the weaker side is the
key factor to your commission. Think of it as two
cylinders which fill with fluid (which would be the
sales volume). (graph below) displays four legs on
two sides of a binary which paid $200 to $800 on accumulated
volume of $1,000 on each side up to $4,000 on each
Left Side Right Side
$1,000 VOLUME $2,500 VOLUME
002L 002R 003L 003R
So in this example, youve
accumulated, within one week, $1,000 in volume on
one side (002 R&L combined), and $2,500 in the
other (003 L&R combined). You would then be paid
10% or $200 to your 001 center based on the highest
point reached by the weakest leg.
An Important Point: Generally,
regardless of how many centers you might initially
purchase, you will only be paid on your 001 until
you max out the commission for that center. Once you
are able to max out your 001 commissions in a given
pay period with a total of $8,000 ($4,000 per side)
this would automatically activate the 002 and 003
centers thus qualifying you to be paid commissions
on them. This would allow you to focus building symetrically
($4,000 per leg) the two legs in those respective
002 & 003 centers. If you do $4,000 in both 001
L&R, $4,000 in both 002 L&R and $4,000 in
both 003 L&R, you will have reached the enviable
position of maximizing the commissions in the plan
for one week assuming no reentries.
One of the primary considerations,
and differences, is what the company does with the
extra $1,500 on the strong side. Most will carry it
over to the next week. Some "flush" the
excess volume and it is lost. Some will only flush
once the volume reaches a certain level, say $4,000
for example. If a plan is a very liberal flusher,
then there is an opportunity for a great deal of volume
to flow through your organization that you never get
One advantage, although
a potentially confusing one, is that most binary programs
allow reentries into ones own downline. You
see, each income generating position isnt always
a position you hold and maintain by ordering a minimum
personal volume each month, like other MLM plans.
In some binary plans, every time you order a certain
amount of product you might create another income
position below the original. So when figuring volume
and bonuses, notice there isnt much consideration
to levels. Theyre there, but whether a sale
occurs on your first level or your thousandth, it
still counts equally toward your volume for that leg.
The real strategy is building all your legs as symmetrically
as possible, especially in programs that are heavy
One of the most hyped "advantages"
of a binary plan is the claim of getting paid on infinite
depth. Lets dispel this myth first. Lets
say you have a leg that extends 1,000 levels deep
(which is quite possible considering one person could
create many income centers). Lets say a $100
order is placed with the company by someone on your
thousandth level. Okay, that hundred bucks counts
toward your volume in that leg, this is true. But
doesnt it also count toward the volume of one
of your two first-level positions? And isnt
that sale also falling under one of the two first-level
positions under that position? In fact, are there
not a potential one-thousand income positions that
are also entitled to a piece of the commission on
Actually, its very
unlikely that all thousand positions would be eligible
for a bonus. Many may not qualify, and many more may
be "dead" positions in some binaries (income
positions can become dormant once they earn so much
commission). So let's assume only 200 qualify for
a share of the commission portion on that $100 order,
which well optimistically estimate is about
50%, or $50. So even if that fifty bucks is spread
equally among those 200 positions (which it never
is, as youll soon discover), you are going to
earn a whopping 25cents on that $100.00 order on your
thousandth level. But heres the real kicker.
Notice in our example that when you have $1,000 in
each leg, you get a check for $200.00. Isnt
that $2,000 in total volume also falling in one of
the two legs of your upline sponsor? So isnt
half of his/her first $200.00 bonus coming from your
volume as well? If you can follow this (dont
feel bad if you cant were having
trouble ourselves and were the ones writing
it), then youre see that one-fourth of your
sponsors sponsors $200 bonus is also coming
from your volume.
In English, this simply
means that at a certain point the commission portion
of any sale is halved each level up the line. So lets
take another look at our $100 order, on which the
company is paying out $50 commission, that occurred
on your 1,000th level. Again were assuming only
200 positions between you and the sale qualify for
a cut. Even if we assume the first position upline
to the sale earned a generous $25 (thats half
what the company plans to pay out in total), and we
halved that number all the way up to you (200 times),
youd now be earning a staggering well,
actually we cant tell you. We got to .00000001cents
after just 42 splits and my calculator ran out of
room for more zeros.
So does a binary plan actually
"pay" infinitely? Can any number in the
universe, no matter how minuscule, be divided by two?
The answer to the second question is yes, therefore
the answer to the first question is, technically,
also yes. However, for all intents and purposes, assuming
you dont care about fractions of a penny, a
Binary actually pays down around 10-15 levels, just
like any other generationally paying plan, and even
some Unilevels and Matrices.
Another big selling point
of the binary is that your upline can become your
downline. This is certainly possible just as
it would be in any plan that allowed reentrys
into ones own downline.
Lets say you have
a big time heavy hitter seven levels above you. As
he/she continues to buy product and create more income
positions, they are placed downline. Will one fall
under you? Lets take a look. Going 2x2 down
seven levels, that would mean that you would be just
one of 128 possible recipients of that new income
position a less than 1% chance. And if you
happen to be in your uplines strong leg? Forget
it. They would probably place their new positions
in their weak leg to help build it.
Couldnt this reentry
process also work against you? What if youre
first level to a strong recruiter and catching a lot
of spill over. Then one day he/she earns a new position
and places it in the other leg from you. As they build
under that new position, wont there now be less
attention given to the position youre under?
Another misconception is
that binary plans simply pay more. One company even
ran display ads claiming their binary plan paid "six
times" more than a typical Breakaway plan. Think
about that. Most Breakaways, or any type of plan for
that matter, actually pay out somewhere around 30-45cents
of every wholesale dollar in commission. Lets
assume a high average of 40cents. So is this binary
plan paying out $2.40 (6x.40) for every $1.00 received?
I hope not. Thats called a Ponzi scheme.
How about this claim: "Binary
plans have no group volume qualifications." In
our example, how much would you get paid with less
than $2,000 in group volume? Youd get paid nothing,
at least until the first week you exceeded that amount
of group volume. Sounds like a group volume qualification
To this point we really
dont mean to knock the plan itself so much as
the misleading way it is sometimes presented. We do
feel however, that whatever advantages this plan does
offer can be more than outweighed by the complex way
many companies are designing them. Binaries can be
structured much simpler than they are. And its
a type of plan that requires the most understanding
in how they work. Theres a lot of strategy involved
in building a binary organization to its optimum advantage.
Binaries are designed to
create the perception of having certain advantages
that they dont, at least in the real world,
actually have (paying infinitely, paying six times
more than other plans, providing massive spill over,
etc.). Actually, the same 40-45% pay out provided
by most Binaries could just as easily be accomplished
with any other form of plan.
A binary is simply another
type of plan. Its certainly not a scam designed
to dupe starry-eyed distributors out of their money,
like most Australian (2-up) plans for example, but
its also not the revolutionary, Gods gift
to MLM comp plans like its being promoted to
be. However, we think it has potential. Binaries provide
a great deal of breakage. In other words, a lot of
unpaid commissions can be retained by the company.
As more and more companies begin to seal the cracks
that unpaid volume can flow through, Binaries will
continue to increase in popularity and appeal (and
we do see this occurring). About the only thing that
might stop the oncoming Binary juggernaut would be
the regulatory scrutiny it is receiving due to all
the screwy, disreputable, or token product companies
that have chosen this type of plan. It will undoubtedly
suffer from a guilt by association.
Binaries do offer a good
foundation for one of the most simple, duplicable
systems for building a downline: Recruit only two
(one for your 002 and one for your 003 then devote
100% of your efforts on helping them do the same.
If one side is weaker, then sponsor more people in
the weaker leg. Thats it.
Despite its image, Binaries
are a very product volume-based comp plan. And product
volume is what makes people money not levels,
percentages, or fancy titles.
Some Things To Consider:
Following are some other
things to consider when looking to get involved with
the Binary compensation plan.
1. What is the cost of
each Income/Business Center?
This can be a form of
a front load in disguise. At say $200 per center,
if you activate all centers, you are talking about
a $600 investment. Perhaps it might be better to start
with one center and your other centers will automatically
activate when you max out the commissions with the
first center and you will have the money to pay for
those other two.
2. What is the percentage
payout and balanced volume requirement to get paid?
Many of the Binaries
we have seen pay between 5-10% on up to a maximum
of $10,000 balanced volume. Balanced volume break
points to get paid generally go $1000, $2000, $3000,
$4000, and $5000 per side. However, some newer entries
into the Binary are lowering the volume you can get
paid on in the weaker leg/side.
3. Are there any additional
ways to get paid?
Most current binaries
do not have other ways to get paid. However some newer
Binary entries are starting to add matching bonuses
for personally enrolled as well as creating bonus
pools for top producers to share in. This will continue
with more competition.
If the Matrix
compensation plan could talk, it would probably exclaim,
"I get no respect!" Although many opportunities
are embracing matrix style comp plans (or variations
thereof), it still comprises less than 9% of the compensation
plans out there. Despite, at least in theory, a myriad
of advantages over Unilevel and Breakaway plans, the
matrix is still considered the black sheep of the
MLM compensation plan family.
The unique characteristic
of a matrix plan is its limited width. Unlike other
plan types, a matrix limits the number of distributors
you can sponsor on your first level, usually to less
than five. The most common form of matrix is called
the 2x12, meaning two wide and twelve levels deep.
Another way of looking at this is that or you can
have on your first level, a maximum of two distributors,
second level - 4; third - 8; fourth -16; fifth - 32;
sixth - 64; seventh - 128. You get the picture. Of
course this type of geometric growth usually only
occurs on paper and not in the real world. Aside from
the 2 x 12, other common matrices are 4 x 7, 5 x 7,
and 3 x 9.
The most obvious, and
most hyped, benefit to the Matrix plan is the potential
for "spill-over." Meaning, once you sign
up the maximum number of distributors you are allowed
on your first level, everyone else must spill over
into your second level, and possibly even into deeper
levels, depending on the number you personally sponsor.
As those below you recruit, and spill over distributors
below them, the
idea, again in theory,
is that everyone will stay motivated, downlines will
"go deep" faster, and downlines can benefit
from their uplines activity, resulting in motivation
and support coming from both directions (in many other
plans, not only does your uplines activity not
benefit you, but you could even consider them competition),
taking it easy and not working.
Another advantage of
spill-over is that a new distributor could very well
end up with two sponsors. The one who sponsored them,
and the one they fall under in the matrix. However,
there seems to be an unwritten rule in Matrix plans
that you should really only focus on those in your
front line. That way, nobody ever has to defray their
attention, support and training between more than
however many wide the matrix is. A two-wide Matrix
means nobody ever has to support and train more than
two people. We've seen people in Unilevel plans with
over 50 people in their front line, and over 100 in
some Breakaways! Its got to be tough, supporting
and motivating that many people and still have
In a study we performed
not too long ago, we found that once a distributor
had three people in their downline, they became locked
in, almost like magic. Zero to two distributors seem
to have very little effect on the individuals
decision to abandon their MLM opportunity. But once
they obtained number three, by either their own efforts
or from spill-over, they would not (or could not)
quit. Even those who never signed up another person
personally stayed involved, at least on a minimum
level, for several months. Why? Usually because of
fear of loss. Not only did they want to see how much
more spill-over they might get, but they just had
to stay in until they found out what those other three
people were going to do. They may have heard the Mark
Yarnell story about how there were originally six
people directly above him, all of whom could have
earned a five-digit monthly income off of his organization
alone if they hadnt quit. There are many
such stories to be told, and these folks, with a downline
of three, didnt want to risk being the subject
of another one. In many Unilevels, and most Breakaways,
there is little incentive to place people deep, and
lock them in. In a matrix plan, its a natural
part of the process.
Matrix plans generally
tend to pay down more levels than other types of plans,
at least on paper. Since the width is limited, and
organizations tend to go deeper in matrix plans, so
do the levels bonuses are paid on. It is also much
easier to predict how much you will earn on each level,
since you will know exactly how many people will fill
each one. Generally, matrix plans are simple and easy
to explain and understand.
So if Matrix plans are
so great, why isnt everybody using them? Well,
unfortunately, what looks good "on paper"
and "in theory" doesnt always work
in the real world.
Distributors for opportunities
utilizing Matrix plans are notorious for promising
massive spill-over. Some even claim they can provide
so much spill-over they will build your entire downline
for you. Unfortunately, they never do. And those that
build any kind of organization this way flood it with
people who just sit around waiting for their upline
to do all the work. And when all these hucksters who
promoted their opportunity as being an "easy,
no work" program start getting taken to task
by their downline for not coming through with their
promises, they will moan and gripe about how their
organization is taking it easy and not working.
According to a recent
study, the average MLM distributor will sign up only
2.6 (our study came up with 2.1) distributors. So
if your matrix is wider than two, the odds are you
will never see a drop of spill-over. Also, keep in
mind this figure is not a median, but only an average.
In other words, most new distributors never sign up
anybody, and a very few sign up dozens, or hundreds.
So never count on spill-over to build your downline.
You should always go into any MLM opportunity with
the attitude that you are going to build your organization,
and any spill-over you receive should only be considered
Even though some Matrix
plans pay down ten or 12 levels, which may make them
appear to have a higher income potential than, say
a six level Breakaway or a seven level Unilevel plan,
they actually do not, in most cases. In the latter
two types of plans, allowing for unlimited width,
you literally have an unlimited number of distributors
you can be paid on. However, in most Matrix plans,
once you fill up the matrix, everybody spills off
the bottom level, out of your pay range. For example,
a 2x10 matrix will only hold 2,046 people. To build
any bigger, the program must allow you to reenter
the matrix again, or expand your front line. Most
of the legitimate, professionally run Matrix MLMs
do provide for expansion of your organization at some
point. Nevertheless, you still run the risk early
on of being forced to place a big hitter on a lower
level in your matrix, that could have benefited you
far more on your front line.
that seems to be of greater concern to matrix-type
opportunities is the scrutiny they tend to attract
from postal and government agencies. Any kind of plan
that pays down more than three levels leaves itself
vulnerable to attack by overzealous Attorneys General
and postal inspectors due primarily to the apparent
luck factor involved. Historically, these agencies
have indicated that a distributor really only has
a direct influence on three levels of distributors
below them (you train Bill to train Mary how to train
Bob). Beyond that, especially when there is a spill-over
angle involved, it could be perceived as more of a
lottery or pyramid (and has, on several recent occasions).
This perception is only
magnified by the fact that the vast majority of unscrupulous
money games and bonafide pyramid schemes all use a
form of Matrix plan. However, by no means are we stating
that all opportunities using Matrix plans are illegal.
There are strong, well-established MLM opportunities
that effectively utilize a Matrix style comp plan.
If done ethically, and with the right attitude, an
opportunity employing a matrix comp plan can provide
many benefits and advantages. However, as long as
they remain a haven for hype artists and lazy dreamers,
Matrix opportunities will continue to struggle for
the respect they deserve.
Some Things To Consider:
Following are some other
thing to consider when looking at getting involved
with a Matrix.
1. Check width versus
depth relative to payout.
on paper always looks better than in actuality. It
is very rare that most distributors will ever come
close to filling out a closed Matirx. For argument's
sake, assume a 2x 10 or 12 matrix with a 90% payout
with the higher payouts near the lower levels where
most distributors will fall. Pretty impressive, huh?
Not really. You will probably make more money with
a 5 x 6 matrix with a 40% payout.
2. Check to see if you
get paid on every level.
Some closed matrix
plans actually are known to skip some levels of commissions
until you have achieved a defined number of distributors
on a given level or through a number of levels.
3. What kind of products
do Matrix plans lend themselves to?
All. However, they
have been very popular with, and suited towards, service
related products like Buying & Service companies
& Subscription Sales with a defined monthly cost