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What percentage of small businesses fail in the first 5 years?

 

Small business vs network marketing

 

does network marketing work or not

 

I was listening to a podcast from one of the network marketing gurus and lo and behold they say that 96% of all small businesses fail. They went on to say that those numbers are about equal to those in network marketing. At least they were willing to admit that 96% of network marketers fail. I think it’s worse than that, but I’m not here to argue.

 

As the owner of a small business, other than my network marketing business, I was offended. I know for a fact that nowhere near 96% of small businesses fail in that critical first 5 years. I did a little research to find to what the latest numbers are.

 

I found this from the Bureau of Labor Statistics, Business Employment Dynamics:

 

About two-thirds of businesses with employees survive at least 2 years and about half survive at least 5 years.”

 

They also said this about the numbers:

 

As anybody who investigates this information further can see, there’s a large difference between the approximately 33 percent of businesses that failed financially (or were shut down through legal action) and the nearly 17 percent of those that were closed voluntarily.”

 

If you add up the two numbers, the businesses that have survived for 5 years and the percentage of businesses that didn’t fail, but were closed down voluntarily, that’s about 67% of businesses that didn’t fail in those 5 years.

 

I wouldn’t mind if the numbers that the guru spoke of were right, I’d take that as a great compliment. I’ve owned my small business for many more years than 5! According to the guru, I’m in the top 4% of business owners. The longevity of my business may put me in that category, either way. I’m not really sure and to be honest it wouldn’t mean that much to me anyway. I don’t consider myself to be anything special. I’m just a guy who was too dumb to know that I was supposed to fail!

 

What made me want to write about this was the fact that they were trying to say that in a network marketing business that you stand just as good of a chance of survival as any other small business, which the numbers don’t bare out.

 

small business vs network marketing

 

The chronic disingenuousness of the gurus really gets me hot under the collar.

 

I can remember, when I was growing up, being told that 8 out of 10 businesses fail in their first 5 years. I have no idea where that number came from and I have no idea where their 96% failure rate comes from either. Are they all pulling that number out of their … hats?

 

My problem with this is:

 

I don’t believe that anything will get better, for the rank and file network marketers, if everyone tries to gloss over the fact that the vast majority of distributors will never make any money in this business.

 

Leave it to a guru to try to convince everyone that it’s all peaches and cream out there!

 

I’m wondering what would happen to their income if more people believed that a small business, other than network marketing, was an option for them?

 

Here’s mine final point and it’s a question for you.

 

Does the Bureau of Labor Statistics count the failures in the network marketing industry in their figures? If they do and one were to take those number out of the equation, what would be the percentage of small businesses that fail in their first 5 years, then? It would have to be lower.

 

Just something to think about!

 

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