Heartache and frustrations within the realm of MLM can be directly tied to unrealistic expectations from its dreamy enthusiasts.  I know, because I was one for many years.  To this day, I still devote a lot of my training and coaching efforts to achieving a proper balance in the minds of my new members.To recruit or sponsor an inexperienced MLM’er into a program under the guise of earning large sums of money without first establishing what’s REALLY required to attain that earning level is – to be blunt – misleading at best.MLM boasts more self-made millionaires than mainstream America – yet, its high failure rates for Average Joe doom it to remain infamous as a money scheme or sucker play.  Successful veterans know this characterization is not accurate. But, few do much to improve the situation. I can’t discuss every aspect of the dilemmas that haunt the business anomaly called MLM in this article.  However, since I mentioned the realities and illusions of pay plans, let’s dig into that.Compensation Concepts and other Common Confusion: What type of pay plan is best?  How do they really work?  In reality, rest assured, there are only a handful of basic concepts – each with its own pluses and minuses.  Your growing experience will eventually improve your ability to discern what’s best for you.Do I have to be an expert? The newer you are to the MLM industry, the simpler the pay plan should be.  Fewer hoops to jump through – few, if any, volume requirements just to get paid. Each new income opportunity introduces its version of “the best plan yet.”  In reality, 99.9% are just variations on an old theme – presented with a fresh coat of paint.  You do NOT have to be an expert on your pay plan to be successful. But, you DO need to know if it offers realistic potential based on YOUR skill level.  And you should at least be somewhat familiar with how your earnings are generated from the sales on the first 2 levels.Properly building the first 2 levels – or generations – on your sales force will cause the rest of the plan to work in your favor as your downline gains depth and volume.  You don’t really have to fully understand how the lower generations pay you – to get started. If you can’t build a productive foundation on the first 2 levels, you’ll never reach the lower levels anyhow.How Can They Pay Out 75 to 90%? Honestly, they can’t. That’s an obvious truism of any business. No company can survive on such a small profit margin.  To fully understand MLM pay plans, you have to recognize that they have built-in buffers and margins, better known as “breakage” or “blockage.”  These include multiple purchase levels and various other qualifiers.  MLM’er A is only eligible to earn on 3 levels while MLM’er B has qualified to earn through 7 levels.  This skews the company averages.These factors affect the ACTUAL company-wide gross pay out ratios.  If MLM Company X claims to pay out 80% commissions to its sales force, this means that 80% is their maximum pay out liability to any marketer who fits into a “perfect world” scenario and maximizes every aspect of the pay plan.  In the real world, this rarely happens. And when it does, it merely adds fuel to the motivational fire for everyone who is not fully maximizing the pay plan.  “See? He did it. I can too!”Yet, for each solitary MLM’er who might maximize the pay plan, there are thousands who don’t. So the law of averages keeps the company-wide pay out much lower than advertised.  Having worked behind the scenes for several MLM companies myself, I can tell you that the average pay out is only about 50-55%.  I worked with a trend-setting company back in the 90’s that actually got as high as 63% actual pay out on a plan that offered over 80%.  Again, they were an exception to the norm.What Should I Worry About? As a newbie, or MLM rookie, evaluate what you will earn on a sale.  Typically, this is when you sponsor another member who makes a purchase.  Then, what will you earn when THEY do the same? Calculate this early earning potential against what you must invest in personal purchases, marketing expenses, time and effort.  Determine if this equation will get you to the POINT OF NO RETURN within 90 to 120 days, assuming you work effectively and get consistent results.  (PONR is discussed in other articles I’ve written)  You must understand that you will undoubtedly operate at a loss initially. But, your goal is to reach profit within a reasonable timetable – and reach PONR shortly thereafter.What About Retail? Legitimate MLM opportunities must include the ability to earn without sponsoring. That means, retailing of the product/service must be a viable option.  In the real world, the majority of MLM sales are made through sponsoring and repurchase by existing marketers.  Retailing is a minute fraction of the overall business.  I consider it gravy to your primary earnings and don’t generally factor it into the equations mentioned above.What Should I Avoid? There’s a list as long as my arm of things to avoid in MLM. But, since we’re discussing pay plans, rookies should avoid binary programs.  Binary plans are based on 2 sales organizations beneath you – 2 downlines – or 2 legs as they are commonly called.While I won’t get into all the pros and cons of the structure offered by binaries, I do want to highlight the major drawback for MLM rookies.  These plans pay you on accumulated volume, not per sale.  That means you have to accumulate multiple sales and generally have to achieve a ratio of volume balance between the 2 legs. Seasoned marketers are better suited to the downline management required in binaries and can usually afford to satisfy the volume requirements BEFORE getting a check. However, most newbies can’t – period.Whether you are a MLM rookie or an experienced home business expert, you should consider programs that appeal to Average Joes of the world. Learn more about MLM issues through recommendations and in depth analysis as written by Michael Clutton by visiting http://www.michaelclutton.comMichael Clutton has been successfully helping others to achieve their home business goals since the early 1990’s.

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