Binary Compensation Plan is based on 'people helping people' idea. It is one of the most reputed/trusted MLM compensation plan in the MLM business which has proven its effectiveness by generating huge chunks of revenues/profits for many TOP MLM Companies within a very short span/period of time.
A Binary Compensation Plan is a multi level marketing compensation plan that is essentially a tree-like structure with left and right sub-tree, that incorporates the idea of Outer(Power) leg and Inside(Profit/ Pay) leg with a growth rate of [2 * n] where n denotes the number of members which can be potentially infinite.
In this plan, each new member or distributor acts like a node who can have only two frontline distributors that behave like left and right subtree and are typically called Power leg and Profit leg /weak leg respectively. Under Power leg, new members are placed directly underneath their recruiter which results in spillover. On the other hand, the profit leg is filled by members who are personally sponsored by their immediate ancestors.
One of the key aspects of Binary Compensation Plan is the "spillover" process in which each member or distributor is responsible for recruiting or sponsoring only two others to join the plan, which results in rapid expansion of the network with potentially unlimited members. However, if the member has already recruited two members, then the new member is assigned a new node generally in the power leg(left subtree) resulting in gaining a new member which is shared by all the ancestors regardless of who recruited them.
The Binary Compensation MLM Plan is a volume driven plan rather than level driven plan. According to this, the subtree which makes the least profit becomes the pay leg due to a concept called Balance Volumes which states that members of both the subtree are paid commission based on the pay leg(whichever tree has driven lesser profit) regardless of individuals performance which drives distributors to recruit more members thereby increasing the overall profit. In order to fix the power leg issue, many companies have introduced policies that require distributors to introduce/recruit one member in both the legs to become eligible to receive the commission.