Thursday, June 23, 2011
MLM Compensation Plans: Part 2 - An Explanation Of The Binary Compensation Plan!
I'm back with more information about compensation plans. First let me just say this, if you missed the first part of my post. YOU should definitely click here and read it now.
What I will be talking about today is, Binary compensation plans.
What is a binary? It's a pay plan that has two legs. All YOU need is to get two people to join you and get paid the bonus money. The thing is, in 2 to 3 years this type of plan will need some tweaking. If the company does not do this, then it starts to pay out to much money. If you're in a binary, the company will have to fix this, YOU GOT TO REALIZE THIS. Otherwise the company will not last.
What I'm seeing a lot of, is the so called check match, that is often associated with this type of plan. When the companies tell you, that they will pay you 50% on everyone you sponsor in. Where does the money come from? It has to come from some where. It comes from your strong leg, you don't get paid on your strong leg, it's the weak leg you get paid on.
Here's an example of what I'm talking about:
Say you got 2,000 in volume on one leg, and then you have 1,500 in volume on your other leg. You will only get paid on the leg with 1,500 in volume (this is your weak leg).
Now let's just say that you sponsor someone in and they really get busy and start sponsoring people in and now the leg with 1,500 in volume increases to 3,000 in volume and the other leg is still at 2,000, now you will only be paid on the leg with 2,000 in volume (this is now your weak leg). You see how this works, this is called breakage, and who do you think pockets the money from that 3,000 in volume that was generated. The company does, that the breakage.
Now I know what you're probably wondering, what's the best pay plan? I will put it this way, any pay plan that pays the most amount of money on average volume. Pretty simple, huh!
It makes perfect sense doesn't it. When you've got a pay plan that does this, your retention will increase. Your distributors won't quit, and YOU will build a huge residual income.
Now on tomorrow, I will be talking about the stair step break away compensation plan. I invite you to come back here and learn about it.
Before I go, I want to share with you a very powerful FREE resource that will benefit you greatly in finding the right business.
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