Understanding Failure in Network Marketing

By: Scott Simon

If you know much about network marketing, then you know that over 90 percent of people involved in this business fail to ever make any money. Here, we’re going examine some reasons why that is, and how you can avoid it.

First, allow me to put that failure rate into perspective. You may have heard the statistic that 90 percent of ALL businesses fail. This isn’t actually true. The truth, according to the Small Business Administration, is that roughly 2/3 of all businesses either fail or otherwise shut down within the first six years. This only applies to offline, non-home based, brick and mortar type businesses.

The point is that, yes, failure in network marketing is worse. Lets admit it already! But, many new businesses are not going to survive no matter what the industry is.

Why is that? In the offline world its usually a matter of money. Most offline businesses fail because of a lack of funding. The owners just did not start with enough cash. In fact, for businesses with over $50,000 of capital, only 15 percent fail in that same six year time.

Network Marketing Failure

Unlike offline businesses, cash is not the reason most network marketing businesses fail. Yet the problem is not network marketing itself, which remains one of the best forms of business for many people. If that is the case, though, why do so few succeed?

I have been in network marketing for 5 years. In that time I have learned that, in most cases, people fail to make money for one of only a few reasons. These include:

* They never should have started in the first place – This business is not for everyone, regardless of what your company might teach you. It takes certain attributes to succeed in the world of free enterprise, and most people simply do not have them.

The fact that so many in the industry promote this business as a way to make big money (usually with minimal effort) attracts people that do not possess these attributes. If any of those people do join, they often fail to ever work on their businesses, and drop out almost as fast as they get started.

I don’t mean to let the sponsors off the hook here, either. They should not be sponsoring the wrong type of people. But most in this industry are so desperate for ANY result in their business that they do so anyway.

* Names lists do not work – The very first thing most companies have you do when you start is to create a names list of your friends, family, and people you know. Then, you are instructed how to go about “sharing” the business with them to try and get them to join.

Associates then go about alienating most of the people on that list. This process has contributed greatly to network marketing’s poor reputation. It also does not work. At least for most people. As noted above, this business is NOT for everyone. Unless you are one of the very few (less than 5 percent) who happens to know a lot of the right type of people, then your names list will be mostly useless.

* Purchased leads do not work – If names lists are bad, purchased leads are worse. Its quite likely that only 1 in 200 (or even 1 in 500) of them is a good candidate for business.

But, after the names list runs out, this is where many people turn. I have known a lot of people who buy leads. What typically happens is they spend thousands of dollars to sponsor a few people, with the hope that their business will someday grow to earn the money back. In most cases, they run out of money long before that happens, and end up leaving the business entirely.

A Need for New Methods

These problems are common, but they boil down to one primary cause: people use the wrong methods.

The problem is NOT you, though you may have been told that. The problem is using methods that do not work. They may have worked 10 or 20 or 30 years ago, but not today. They no longer produce results, or they attract the wrong people when they do.

In most businesses, when the methods no longer work, then you change your methods. Network marketing as an industry has yet to figure this out, but that does not mean that you cannot.

Internet Network Marketing

I now teach people in or considering network marketing how to do Internet Marketing using the same solid principles practiced by online businesses in many industries. We do not use names lists. We do not purchase leads. Instead, we apply concepts like niche marketing and attraction marketing to build solid businesses.

Why the Internet? Because its the best way for a home-based business to easily reach out to a large number of people. It is also a way to do business that works, but it does not come without its pitfalls. Internet businesses can fail too, but for different reasons.

Unlike offline businesses, its not typically for lack of funding. Doing business on the Internet does not require a lot of money. The main reason for failure on the Internet is that many people simply do not take the time to learn how to succeed. Instead, they jump right in, and make HUGE mistakes that cost them a LOT of money. Then, they run out of funding.

But, this is completely avoidable. All you have to do is get educated about what you are doing first. If that sounds like simple common sense, its because it is. Where do you get that education? Not from your company. Probably not from your sponsor or team, either. You will likely have to do it on your own, or find someone who can teach you. The good thing is, the resources are there if you look for them.

And, if you have not yet started, you have an advantage. Look to join with someone (there are not many) who is applying these ideas, and learn from them. Don’t let my talk of failure in this article scare you off. The whole point is to understand why other people fail. Then, you know what to avoid in learning how to do it right. Because, done right, there’s nothing quite like a good network marketing business.


About the Author
Scott Simon spent 17 years as a business consultant in Corporate Finance and Investments. He holds an engineering degree from the University of Wisconsin and a Masters in Business from the University of Michigan. Scott now publishes Online Network Marketing Today teaching Internet Marketing to network marketers.

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