Nine out of 10 people who complete a network marketing application will fail to build a viable business. Among that number will be people who don’t take action and people who build a business but experience true business collapse.
The oft-cited statistic purportedly from the Small Business Administration (SBA) that 9 out of 10 of all businesses fail within 10 years by comparison is not true.
According to Brian Headd’s Small Business Economics article 21:51-61, 2003: Redefining Entrepreneurial Success: Distinguishing Between Closure and Failure, 66% of conventional businesses survive 2 years or more, 50% survive four years or more and 40% survive six. years or more. Traditional small businesses are doing much better than the 90% failure rate cited by people in the network marketing industry.
What is the difference? Is the network marketing model itself flawed? Many family sales models use the same business model as network marketing. Real estate sales are a good example. Many of the top salespeople in the automotive, pharmaceutical, travel and other industries have as their primary responsibility recruiting and training salespeople and, in return, receive commissions based on the performance of their teams. It is not the model.
So what is it? Why do so many people fail in network marketing?
Working with people for the last 5 years and talking to other successful network marketers for the same amount of time, I have been able to find 5 reasons why:
1) The cost of entry is too low: Typical startup costs can range from $0 to $1,500. Imagine the person who decides to open a traditional business and has to invest tens of thousands of dollars to do so. How would that person be different from the person who can get your business off the ground with a credit card? The person looking to open a conventional business where investment is high will develop a business plan. That plan will include an assessment of skills, expected expenses, and projected income. If the prospective business owner realizes that they have a skills gap that is important to the success of their business, they will go to work learning that skill before opening their business or provide funding and a plan to acquire that skill while It’s in the planning. internships and before they open for business. Now imagine the person who can simply put their initial costs on their credit card. For most network marketers, there is no planning beyond the initial start-up. Most never ask their sponsors or themselves what they might need to be successful other than the initial start-up costs. They never ask what skills they lack. There are ongoing business costs on top of startup costs and those costs can range from $100 to $500 dollars per month. Many do not anticipate ongoing expenses. Ongoing business expenses tend to be considered cable bill-like expenses rather than investments in your business. Low start-up, then, can be a hindrance to success in business.
2) Lack of adequate training: Unfortunately, many companies and teams do not offer training beyond corporate events. To be successful, network marketers must master a simple formula, the invite formula, and use that formula 30 to 60 times a month. Without this formula, many new and experienced network marketers will invite the wrong prospects to review their information and be disappointed by the results. The invitation formula is easy to learn and implement. Why is there so little network marketing training available? I think the reason can be found in the very reasons people get into network marketing. Take the salaryman who wants to fire his boss. He never wants anyone to tell him what to do again; he hates his boss and wants to be free. Think of the corporate executive and entrepreneur, who are tired of managing people and looking to build a fleet of independent business owners they never have to manage. Bring both sets of people together in what is fundamentally a people business and what do you get? People who discover that they have to do what they were trying to get away from in order to be successful and free! WOW!
3) Too many people are looking for the big income score and don’t appreciate the small amounts of income they earn along the way. Most people get started in network marketing because of the big income claims. They want the six figures. If they don’t get them, they quit. Here’s a stat that will blow your mind. Anyone who earns $30,000 per year or more with their respective company is among the top 3% of people earning income for their company. Here is another fact. Income earned through network marketing is tax-advantaged income. Income earned through a job is not. Anyone who earns an extra $30,000 a year in tax-advantaged income and doesn’t make significant strides in improving their wealth will never improve their wealth by $100,000 a year. Ultimately, the path to earning and keeping six figures and beyond is a 5-10 year process and there is no way around it. It is a process that requires growth and change in the areas of personal finance, emotional maturity, spiritual maturity, and personal partnership.
4) Low EQ, Failed Expectations, Too much hype in the industry: It seems like I mixed 3 different ideas in one place, but actually they are all related. There is a lot of advertising in the industry. Joe Smith, the waiter, went from zero to six figures in a year. Of course, Joe Smith and his company forgot to mention that Joe’s entire family was involved in the network marketing industry, that they were all successful, and that Joe was working as a waiter just to find out what his options were. That skills are required is just one of the “inconvenient truths” of network marketing. Exaggeration invariably leads to failed expectations. If people understood from the start that network marketing is really a business that requires a set of skills, fewer people would start and more people would succeed. The organizations created would move from vertical sales organizations to consumer-based organizations as more people seek to become product users rather than business owners. Network marketing itself is an industry that attracts too many people who want instant gratification. Daniel Goldman described the Emotional Quotient or EQ in his book Emotional Intelligence. He found that the biggest determinant of long-term success was the ability to delay gratification.
5) Money In, Money Out: Many people treat network marketing as a money in, money out proposition. Imagine a black box. On one side of the box is the word “IN” in bold. On the other side is the word “OUT” in bold. It would be easy to think that just because you put money in, you should take money out. Investments rarely work that way. Look, the problem is that “black box”. Something happens in that black box that transforms inputs into outputs and therein lies the problem. As an illustration, I was on the phone with a potential client the other day. He said, “I’ve been scammed so many times, what I need is a person to work with me, show me the ropes, train me… are you that person?” My response was, “Yes, we have a training program that starts with our training manual. We have weekly calls and I will meet with you a couple of times a week and give you assignments every time we meet. You will not progress unless you do the homework assignments and attend training calls… are you that person?” Silence cold as stone. He never answered my question. With my first company I received motivational materials at a cost of $60 per month but without training. In my second program there were many training sessions that I did not take advantage of. I thought my team’s system would build my business for me. When I realized I wasn’t going to do it, I had the choice to quit or continue. To continue I had to ask myself some questions, among them, What skill or skills am I missing? There are 2 skills required in network marketing A) the skill of inviting which has built in the alembics of listening, sorting and sifting and B) the skill of coaching which requires the skills of limit setting and the skill of setting expectations. I lacked the ability to invite. I learned my profession through experimentation, direct observation and practice. I applied those same strategies to learn the skill of inviting and went from sporadic paychecks to consistently earning multiple 4-figures a month.