Failure Rate of MLMs vs. Small Businesses

Many MLMers bring up the idea that small businesses fail too. The implication is that because both MLMs and small businesses fail they are the same.

Unfortunately this is another HUGE MLM myth.

The U.S. Small Business Administration has this handy PDF of information of small businesses in general. It quotes:

“7 of 10 survive the first two years, half at least 5 years, a third at least 10 years, a quarter stay in business 15 years or more.”

We can easily flip this around to show that 30% fail in the first two years, 50% in 5 years, 70% in 10 years, and 75% in 15 years.

We also have extensive proof that failure rate in MLM is 99.5% or worse each year.

Let’s imagine that a million people start small businesses. After the first two years, 700,000 are still in business. After 5 years, we have 500,000 in business. After 10 years, we have 300,000 still in business. Finally after 15 years, we still have 250,000 successful small business owners.

Now let’s see what happens with a million people who start MLM businesses. Assuming a generous 90% failure rate (again it is typically much higher) after two years, we are left with only a thousand people. After 5 years, we are left with 10 people. We can’t go any further on, because then we’d be looking at fractions of a person.

It’s not even a close competition.

With small businesses you have 500,000 successful businesses. With MLMs you have 10.

It’s like comparing the failure rate of running a 5k with running 3000 miles across country. They may both be able to point to success and failures, but the scale is so very different that anyone who attempts to make such a comparison looks ridiculous.

This post involves:

Bad MLM Arguments

... and focuses on: