MLM critics like to quote that 95% of all people sign up for a MLM opportunity fail. Is that true?
How do you define "Failure". Is that losing money, or a break even situation, or dropping out? And what about people signing up and not taking any action to establish a business? And do you separate networkers, retailers and customers? Statistics are very much different per company. The myth is simple, as always with myths, the answer is more complex.
More than 50% of direct sellers report that their net income from direct selling, after taxes and expenses, is positive.
In addition, a positive net income is reported by nearly half of new direct sellers — those representing their current company for less than a year — and by nearly half of direct sellers who say that they are not very likely or not at all likely to continue in direct selling in the future.
If you do a due diligence on a MLM opportunity you can better take a close look to the Retention Ratio. The popular definition for Retention Ratio is: Which percentage of distributors renew their contract, or buy a product. Depending on the opportunity this can be between 10% -80%.
The facts about distributors: (Source: 2002 National Salesforce Survey, Research International, Inc.)
- 82% of direct sellers have been with their current direct selling company for one year or more, and 47% for five years or more.
- 89% of direct sellers rate their personal experience in direct selling as excellent, very good, or good.
- 84% of direct sellers say that direct selling meets or exceeds their expectations as a good way to supplement their income or as a way to make a little extra money for themselves.
- 91% of direct sellers say that direct selling meets or exceeds their expectations as a business where the harder they work the more money they can make.
- 78% direct sellers who are in direct selling for less than a year report that they are very or extremely likely to continue as a direct seller in the future
In addition, research shows the following
- 25% -50%+ sign up to get a product for wholesale price.
- 10% -80% renew their contract, depending on the company.
- 50% -60% do not take business action.
- 10% -15% works the business.
- 80% of sellers say direct selling meets or exceeds their expectations.
- 74% of US adults have purchased products from a direct seller
It is easy to start a MLM business, which can be a "threat". People do not take their new venture serious as the investment is low, and treat it as a "hobby". If you treat your business as a hobby you will likely to get paid as a hobby. They enjoy their products but will not get paid for doing nothing. Is that a failure of the MLM system? Do not think so…. There is no business in the world where you get paid to do nothing…..
A good MLM – Network Marketing company gives money back (usually 90%) if business kits and/or products/services initial cost are returned within 90 days (some up to one year). So it is a great way to try a business at low or no risk. If it doesn't suit somebody, they can drop out with little or no loss. In general: people who take serious action makes money in MLM and enjoy the fruits of the opportunity.
The 95% Fail in MLM is a Myth and busted!
50% who works the MLM business makes money….
The opinion of Top Leaders:
Ray Higdon – Numis Network Nr. 1:
"There are two ways I look at the proliferation of using the high failure rate (seems to range from 90-97%)
1) A recent study says 90% of people are unfulfilled by their jobs. Does that indicate 90% have failed? Should jobs not be attempted? The truth of the matter is everything in life has a perspective failure rate depending on how you look at it. If someone has been at a job for 20 years but they hated every minute of it, I would call that a failure.
Where you get a high failure rate in anything is when there are options. Network marketing is viewed by most to be an option. A way to make additional money or feel better about themselves. In that regard, I believe the only way you can fail is either by being brought into the industry with false expectations or hype or by quitting.
I would suggest that most people who have been in network marketing have had glimpses of feeling better and perhaps made a little extra money and did not "fail" but simply took the option that was more comfortable to them which is stay at a job they hated. I am willing to bet that 90% of people that work at Wal-mart make dismal wages but there are 10% that are execs that make very good salaries, whether any of them are happy is debatable.
2) The other underlying proliferation of the high failure rate is by savvy marketers. Savvy marketers know, just like the media, that people are most interested in having proof to tell others not to get their hopes up, vs hear good news. They have been programmed this their entire lives. Marketers that want to appear smarter than others have to stir up controversy and win agreement. This is most easily done by being negative, not positive.."
Mardy Eger – MLM Top Earner (MDE International) $3 million a year:
People fail because of a combination of things. #1 The lack of systems in place, remember people fail when systems don't #2 Lack of focus, most people join opportunities looking for that one magic bullet, sign up and expect miracles to happen. I call these folks P.J's ..Professional joiners…. I was once guilty myself many years ago.
It is important to become a student of the industry, learn the trade, learn about the company that you are in, plug into the system that is working and producing, Find the person/s that is successful in your company and cling to and learn from that person.
PJ's join and the quit and go to the next New thing… remember when you quit and start over ..again and again you will never get anywhere but First base.
As far as failure is concerned, a person hasn't failed until they have given up. Never give up. In my book 'No Excuse For Failure" I go into get details on this subject and even share my own personal experiences through the years and what it took for me to overcome constant failures in my own life and career.
When it is all said and done, what other industry will you find a one time investment to start your business ranging form $200- maybe even $2k and have the same opportunity to earn massive six figures yearly and as some have done (And this list is increasing daily) Seven figures. No where but the direct sales and MLM industry.
Look at business owners that have spent hundreds of thousands and in most cases even millions, and still their bottom line never equals to those that take seriously the opportunity of MLM and the powerful direct sales industry. So failure isn't paying the start up costs when you join a program, failure isn't when you haven't yet broken even… but failure is ..when you join and never work your business, never follow the system that may be working great for so many others, never show up to learn, and when you quit.
Tim Sales, Top MLM Trainer explains the "most people fail" objection
Steve Mitchell – Talkfusion Double Diamond $30,000+ per month Top Earner
Firstly, I’m not sure who’s making this statement? As I don’t know ‘who’ it is that started or continues to support this statement, I’m going to have to make an assumption – and that assumption is that this claim is being made by those who
A) Not in the network/relationship marketing industry, or
B) someone that had/has a negative axe to grind. One thing is clear – it is nothing more than someone’s opinion, and is definitely not based on any fact. I suspect it’s one of those urban myths started by someone who was trying to justify their own lack of success, and is avoiding accepting their own responsibility for simply not doing what they said they would when they started their own network marketing business. But aside of who initially made this statement and the rationale behind why such a claim would be made, is there any validity to it? Before we debate anything, we need to:
A) Define what is deemed ‘in MLM’? Because before we can consider if 95% fail, we need to be clear who is this 95%/5% that are “in MLM” – what determines someone ‘in MLM’?
B) Define what is meant by ‘fail’? Firstly
A) Define ‘in MLM’ – my thoughts are very simple on this – there are 3 types of individuals who have some sort of association with MLM: A) Customers B) Passive Distributors C) Active Distributors. Let me clarify who is who…
Customers: These are simply people who register with an MLM company to purchase products, either at wholesale or retail prices.
Passive Distributors: These are people who register with an MLM company but do NOT get ‘active’ in the business – do NOT follow the company’s or field leadership’s business-building system; do NOT engage in learning; do NOT take any actions to build their MLM business.
Active Distributors: These are people who register with an MLM company and DO get ‘active’ in the business – they follow the company’s or field leadership’s business-building system; they engage in learning; they take actions to build their MLM business.
If we are looking to see what percentage are successful in MLM and whether there is any truth in 95% failing, the only people we can assess accurately are those that are ‘Active Distributors’ by the very nature of them being the only ones who have actively done something. We cannot bring in to the equation the Customers and Passive Distributors because they have made it clear they are NOT ‘actively’ building so how can they ‘fail’ at something they are not doing.
Rather like saying someone failed at learning to drive, when they never ever sat in a car and turned the key – did they fail at driving? Heck no, because they never ever started or took any action to learn to drive so how can they have ‘failed’.
So looking at the Active Distributors numbers only (because they are the only ones by definition who are clearly ‘in MLM’ taking action), how many of those ‘fail’? Well let’s just address B) define ‘fail’? – it can’t be given a straightforward definition because what is one person’s success, may be another person’s failure – so for now I will simply assume ‘fail’ is defined by: “an Active Distributor who followed all their company and field leadership system, got trained correctly, took all the necessary actions to achieve their goals but then ultimately gave up and quit on the MLM business completely” – which I think is fair criteria to judge if someone is ‘active’ and yet ‘failed’ in MLM.
My experience from building networks for the past 21 years, with networks totaling about 180,000 people over this time, is about 30% of Active Distributors ‘fail’ (see ‘fail’ definition in previous paragraph), which means by definition 70% of Active Distributors succeed in MLM, which I believe is an accurate, completely reasonable statistic and highly encouraging for the vast majority of people who want to start their own affordable home-based business in this wonderful network marketing industry, bearing in mind it’s a similar success rate as the Franchise industry but MLM does not require the tens of thousands of investment more often required to open a franchise.
Sean Haynes – Global Wealth Trade Top Earner
It is interesting 90% of businesses many costing over $100,000 to start fail which is a fact. People use their homes and others things as collateral against starting these businesses which leaves them in extremely difficult position.
Yet everyone recommends business because we know it creates wealth and we know 74% of the wealthiest people in the world got that way through business. These critics who I am not sure where the 95% come from choose to attack a form of business that people can start part time from home for a very low investment for which they get access to training, support, personal development, excellent products and a chance to increase their lifestyle through an additional stream of income.
In fact this form of business is the last best chance for the average person to hit a financial home run. We know from today's stats from governments that 95% of people with a job are not financially secure at age 65 so maybe this is where the '95%' figure came from except that maybe they mean '95%' have a chance to make it and not fail with MLM. No other industry offers for such a low investment option such a high chance of success compared to anything else on earth.
As the true statistics show 50% of those who work their MLM business actually make some money and break even or better with their businesess and out of those more get truly wealthy than in any other form of business on earth. Will people fail? Will people run into challenge? Yes but then again so will people in traditional businesses and jobs and usually much more so than in MLM.
I think the fact of the matter is that MLM truly gives the 95% whose jobs don't allow their dreams to come true or to reach financial security the last true chance of free enterprise to financially achieve their promises. The only failure is for those who give up and then it is not MLM failing them but them failing themselves.