A Brief Guide

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Choosing the Best Binary Compensation Plan

Are you seeking the best binary compensation plan?  The first step is to establish your criteria.  Here are some pointers to consider:


  • The plan incentivizes activities that drive sales and growth
  • The plan is economically viable and sustainable
  • The plan is perceived by distributors as fair and generous
  • The plan can be simply explained

Of these, the first is especially critical. The real purpose of direct selling compensation is to motivate the actions that drive product sales and distributor recruitment. This explains the complexity seen in many plans: the activities you want to see happen will change according to where distributors are on their progress through the ranks. Their focus will shift over time from selling and recruiting to leading and training.

Affordability is essential: your plan must be designed so that you do not pay out more than the company can afford.

It’s also essential that distributors trust your compensation plan and see it as fair. The best direct selling companies are perceived as generous in the financial rewards they provide distributors. Even more important, their plans are seen as fair. In other words, those who work hardest to achieve the most receive the highest financial rewards. 

Be careful with the principle: “simple to explain”. This doesn’t mean the plan itself has to be simple. It means teaching people only the essentials of the plan. No one has to earn an engineering degree to drive a car! When you’re presenting your compensation system — and this includes the best binary compensation plans — your wisest policy is to explain to distributors the steps they need to take to earn the highest rewards at each level. If you try to teach more, you risk creating confusion and distrust.

What Is a Binary Plan?

In every kind of compensation system, distributors are rewarded for selling products to consumers. They’re also rewarded for the sales made by distributors they have recruited, and by sales made by distributors they in turn add to the organization. In the everyday language of direct selling, the “frontline” is made up of people personally recruited by the distributor. When people in the frontline add distributors, these form a second tier, and when they in turn recruit new distributors, that creates the third tier, etc.

Many compensation plans allow distributors to recruit an unlimited number of frontline people. This is one way binary plans are different. The distributor’s frontline consists of just two people, creating two so-called “legs” sometimes known as the “power leg” and the “inside leg”. Commissions are normally paid on the power leg only.  More precisely, pay is based on matching the volume of the “power leg” with the available volume in the “inside” leg, in what’s called a “cycle.” Both legs will be grown by the distributor’s own activity, but also by those both above and below her.

Benefits of the Binary Plan

The binary plan is a very simple concept, and that makes it easier for novices to quickly grasp. Distributors like that they get paid to unlimited depth, unlike most unilevel or stair-step plans where payments stop six or seven levels down. Probably the single most attractive feature of the binary plan is that it tends to drive faster growth, which appeals to both companies and distributors.

Downsides of the Binary Plan

There are some key negatives about even the best binary compensation plan, and with a few notable exceptions, binaries tend to have higher failure rates. Rapid growth followed by company collapse is not uncommon with this type of plan.

With binaries, there tends to be a high emphasis on money rather than the product. This has a cultural effect that can be damaging to any direct selling company, especially in today’s consumer and regulatory environment. Binary companies sometimes feel more like a money game than a serious product-focused enterprise.

Pay is sometimes “capped” by the company to avoid overpaying, and this can be disheartening for ambitious distributors. Since the upline is usually focused on building the power leg, people in the downline frequently get little support in building their “inside” legs. The effect is that they fail to match the two legs adequately and don’t make the money they hoped. As a result, binaries tend to have high attrition.

How to Choose the Best Binary Compensation Plan

You may not find the best binary compensation plan by simply comparing different versions. What can make the biggest difference are the customized adaptations included in the plan. Binaries are sometimes combined with unilevels or check match structures. The objective is to combine the benefits of rapid growth afforded by binaries with the stability that comes from more traditional systems. This kind of hybrid development is a Sheffield specialty, and if you and your consultants decide that a binary plan is best for your company, it’s likely that we’ll recommend some form of hybrid customization.

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How Sheffield Can Help: Your All-Round MLM Experts

The Sheffield Group is known throughout the direct selling industry as the leading authority on MLM compensation plans. Over the past 30+ years the Sheffield team have launched or advised more than 1,000 direct selling companies. They’ve helped their clients select the optimum compensation strategy and then provided customized solutions that match their unique needs.  Sheffield is ideally positioned to guide you to the best binary compensation plan for your company, assuming a binary is the right solution. If it isn’t, your Sheffield consultants will propose a more appropriate alternative.

Beyond that, Sheffield will offer detailed advice, and introduce the best resources, addressing all the important areas your company needs to consider: product, marketing, distributors, operations, and finance.

Take a look at the scope of services and resources the Sheffield Group can offer your company:


  • Concept and Product Review
  • Compensation Strategy
  • Marketing Strategy
  • Sales Pathways
  • Product Positioning
  • Distributor Recruitment Strategies
  • Financial Modeling
  • Culture Development


  • MLM Software
  • Branding and Design
  • Website and App Development
  • Online Positioning and Marketing
  • Social Media
  • Executive Recruitment
  • MLM Law

Your Next Step

Looking for the best binary compensation plan? Before you commit to a solution that may or may not be ideal for your company, contact the Sheffield Group for a free initial consultation. To make an appointment, simply call us, or click the Message link below.

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