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The binary plan is an organizational structure used to determine compensation. It is based on a hierarchical tree or chart with two legs, often described as power and profit, which must be balanced on both sides in order for a profit to be made. The plan consists of one individual on the top, who then recruits two individuals. These two individuals find two more recruits of their own and the hierarchy continues to grow in this fashion until it has reached its full market potential. The plan is used by multi-level marketing organizations, which are groups that draw compensation both from personal sales and those of their recruits.
By balancing the power and profit legs of the hierarchy, both within themselves and between the two, an organization using the binary plan can continue to grow efficiently. This is typically achieved by building the outer legs of the binary tree. For example, the top level individual brings in two new recruits. One of those recruits brings in yet another individual, who will be situated below him or her on the tree. If that recruit brings in another individual, then they will not be able to place another recruit on that level until the recruit on the level above brings in a second individual.
Keeping new recruits on the outside legs of the tree, while building up additional recruits on the inside of the tree with the same order ensures that the structure is never out of balance. For this reason, it is also important that the power and profit legs keep the same balance collectively that they do individually. This also ensures that all new recruits have sufficient oversight from individuals who are higher in the tree.
The binary plan encourages teamwork. Success of the higher positions on the hierarchical tree is partly dependent upon the results of the lower or recruited positions. By helping others, members of the organization can maintain balance in the hierarchical tree and thus encourage profits to rise steadily.
While the binary plan allows for unlimited depth in the hierarchical tree, it is still typically limited by market conditions. This means that while the system allows for fast and steady growth, it does have finite profitability. One solution to this problem is to start a new hierarchy. For example, if a business has tapped out a local market, it can increase profitability by opening a new location and thus beginning the hierarchical tree all over again.