MLM Comp Plans - How Companies Hide Binary Breakage

In "MLM Comp Plans - Why Companies Love The Binary" I revealed the scandalous features that attract MLM companies to binaries like teenage boys to girls. Today we'll see how breakage is hidden from reps and their prospects working this type of comp plan.

Here's what a basic binary looks like.

A binary comp plan has two downline legs of sponsorship. One leg is "weak" while the other is "strong". A classic binary requires ⅓ of all sponsored recruits be placed in the weak leg While ⅔ must go into the strong leg.

Here's where the breakage occurs in a binary.

• The Strong Leg
• Unbalanced Growth
• Imperfect Timing
• Viperous Up-Line
• Run Away Strong Leg Growth

The most obvious place breakage occurs in the binary is in the strong leg. Absolutely every single penny of company-wide strong leg earnings go directly to the company.

Nothing less than perfect growth and timing relative to the pay cycle qualifies for payout.

Some naïve prospects have accepted offers of a "pre-built downline" only to discover this downline is their strong leg. Most of these folks never catch up to achieve that coveted ⅓ - ⅔ balance. Meanwhile the upline sponsor that offered this "deal" cashes his fat commission check while saying, "Thanks sucker!"

Even if everything else goes according to the ideal scenario, all it takes to disqualify a business builder is a sponsor monster in the strong leg to strangle the dream of financial independence.

Here are my thoughts on the binary comp plan.

Some compensation plans have much simpler and easier qualification requirements, and actually pay out 50% or more of total earnings to the distributor base. So why would anyone want to settle for maybe just 33%?

This is probably the hardest plan to earn a check from because it requires total perfection. Perfect balance, perfect timing, and perfect upline cooperation … oh, and then there's that wild card run away super recruiter thing.

I am not perfect and I doubt you are either. And even if you are you still can't control what others do. So, unless you are part big-time gambler and part super analyst, then I suggest you look for a company with a comp plan that doesn't stack the deck against you like this one does.

I appreciate you,

Bill Tessore

MLM Comp Plans - Why Companies Love The Binary

In "MLM Comp Plans - Why MLM Companies Love The Matrix" I revealed the dirty MLM secrets behind companies' love affair with the matrix compensation plan. Today I'm throwing back the covers off of the Binary and its network marketing lovers.

Here's what a basic binary looks like.

A binary comp plan has two down-line legs of sponsorship. One leg is "weak" while the other is "strong". A classic binary requires ⅓ of all sponsored recruits be placed in the weak leg and the rest must go into the strong leg.

To get a check a perfect ⅓ - ⅔ balance between the two legs must occur when the comp plan "cycles". A cycle is a production bonus pay period.

Here's what companies love so much about binaries.

• Production bonuses are only paid out on a perfectly balanced ⅓ - ⅔ structure … at the end of the pay cycle.
• No money is paid out without that all-important perfectly balanced ⅓ - ⅔ structure.
• No monies are paid out on activity in the strong leg.
• The company keeps a minimum of ⅔ of all monies generated by the entire distributor base.
• The ⅓ - ⅔ structural balance requirement makes payout of residual income virtually impossible.
• Very few network marketers, especially beginners, understand how this comp plan really works so droves of people join and spend lots of money only to learn the hard way.

Most people never make any money with a binary plan because it’s too hard to balance both legs.

Sometimes a rep desperate for a check finds an opportunity seeker and then "gift" excess strong leg members to her saying "I'll put all these people beneath you so all you have to do is build the other leg."

The reality is the newbie is least likely to ever build the weak leg enough to achieve the ⅓ - ⅔ balance so critical to getting paid.

All the while the company sits back and watches the carnage while counting the 66 ⅔% of unpaid money the distributor base spilled their blood, sweat, and tears to earn.

What's my advice?

Unless you’re into astrophysics or rocket science you should find a company with a compensation plan that pays you for all the hard work you do.

I appreciate you,

Bill Tessore

MLM Comp Plans - Why MLM Companies Love The Matrix

In my previous post, "What Is Breakage In A MLM Comp Plan?" I explained what breakage is and how companies use it to pay reps less than what they claim … often a lot less. Now let's take a look at the Matrix compensation plan to see why it is so popular with some companies.

Here are the basics of a matrix.

Let’s say you’re in a company with a 3 x 5 matrix comp plan. In this plan you have 3 recruits on the 1st level, 9 on the 2nd level, and so on down 5 levels. A 3 x 5 matrix pay-line is complete at rep number 363.

Here's why network marketing companies love matrix type plans.

• They're easily understood so lots of people join.
• "Big money" claims attract new prspects regularly.
• "Spill-over" appeals to impulse buyers.
• 90% of network marketers are blue personality types, so the matrix plan plays well to a huge number of prospects.
• Reps who receive "spilled positions" are paid fewer recruiting bonuses on a full matrix.
• Drop out rates are high, so fewer residual income is paid out.
• Earnings "outside the pay-line" go to the company, so residual earnings are limited.
• Though some matrix plans offer unlimited one-time bonuses for sponsoring outside the pay-line, very few reps ever earn them because most reps sponsor an average of 2.7 people in their network marketing career.
• Since a matrix can have any number of "first level positions" and "levels of depth" the company can determine if they want to attract mostly recruiters, or average networkers.

MLM companies like the matrix comp plan because there are many structural variables they can use to their advantage. Pay out caps and the ability to choose to attract sponsor monsters or average Joes are just a couple things in the company's favor.

The built in income limits of a matrix attracts fewer networkers capable of building stable team growth. Most of the folks who join a company with this type of comp plan never do anything with it because they expect spill-over to do the work for them.

If you are a sponsor monster, then a matrix comp plan is perfect for you. However, if you are like the vast majority of networkers who want to build a team with real residual income potential, then you might want to keep looking.

I appreciate you,

Bill Tessore

MLM Comp Plans - How Companies Hide Matrix Breakage

In my previous post, "What Is Breakage In A MLM Comp Plan?" I explained what breakage is and how companies use it to pay reps less than what they claim … often a lot less. Now let's take a look at a practical application of this phenomenon in the form of a Matrix comp plan.

For illustration purposes let’s say you’re in a company with a 3 x 5 matrix comp plan. In this plan you have 3 recruits on the 1st level, 9 on the 2nd level, and so on down 5 levels. A full 3 x 5 matrix has 363 positions down-line of the original sponsor.

So where's the breakage, and how is it hidden?

• One-time infinity bonuses: "These are in place to reward top producers.
• Compensation outside the pay-line: "The infinity bonuses take care of that.
• Spill-over: "This helps you fill your matrix.
• Direct sponsoring: When it occurs the company keeps that to itself. This happens when someone joins without a sponsor code, or their sponsor is terminated and no up-line rep takes the terminated sponsor's place as direct up-line (this is called "orphaning").

Here's the problem with these three forms of breakage.

• One-time infinity bonuses sound good … until you fill the matrix. At that point the only way to make more money is to continue sponsoring for a one-time check. It's like being an employee only you still have to pay Social Security and earned income self-employment taxes.
• Compensation outside the pay-line is that residual income limit I mentioned earlier. If you sponsor prospect #364 and beyond, then you now have a commission-only job. Your residual check stops growing.
• Spill-over actually robs reps who receive it. Every position spilled from an upline rep's activity takes one point of residual earning power away from that down-line rep that receives it.
• Direct Sponsoring This puts the corporate entity, the company, in the place of an active rep. The company earns commissions and bonuses just like everyone in the distributor base. So the company's entire distributor base is in competition with the company and all its resources.

MLM companies use breakage to pay the bills, make a profit, and reward producers. It’s an inescapable fact of life in network marketing that companies don’t advertise.

Some companies do all they can to reduce breakage to the advantage of their distributor base. Others see breakage as a way to pay for luxuries, live a lavish life style, and squeeze as much production out of their reps as possible.

My best advice is to always look for what’s not mentioned about the comp plan. That’s usually where breakage is found and your real income potential lies.

I appreciate you,

Bill Tessore