The binary plan is one of the most widely used compensation structures because the basic idea is easy to explain: everyone has two legs. But the details — matching ratios, caps, carry-forward and flush-out — decide whether members understand their income and whether the company can afford it. Here is how each part works.
Placement
Each member has a left and a right position directly below them. A sponsor can choose where to place a new member, or the system can place them automatically — for example on the weaker leg or the extreme left. Members placed below someone by their upline's activity are called spillover, and spillover is one of the reasons binary plans motivate teams.
Business volume
Each leg accumulates business volume (BV) from the purchases of everyone in it. Volume, rather than headcount, should drive income in a product-based plan.
Pair matching
When volume on the left matches volume on the right, it forms a pair, and the member earns a pair bonus — for example a percentage of the matched volume. Plans often use 1:1 matching, while some use a 2:1 or 1:2 ratio for the first pair to make the first income achievable. Variants such as the Australian binary pay per cycle of a set ratio.
Capping
A daily or weekly cap limits how much pair income a member can earn in a period. Capping protects the company's payout ratio when a few legs grow very fast.
Carry-forward
Unmatched volume on the stronger leg is carried forward to the next period, so members do not lose it. For example, if the left leg has 1,000 BV and the right 600 BV, 600 is matched and 400 carries forward on the left.
Flush-out
Some plans remove unmatched or capped volume after a period. Flush-out rules must be explained clearly, because members feel cheated when volume disappears unexpectedly.
Why accurate software matters
Calculations across thousands of members, with caps, ratios and carry-forward, must be exact, repeatable and auditable. Members should see their leg volumes, pairs, caps applied and carry-forward in their statements. One unexplained error can damage trust across an entire team.
See our binary MLM software, which supports ratios, capping, carry-forward and Australian binary settings, with a live genealogy tree.
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