You’ve probably seen many of the same articles and blog posts I’ve seen claiming that there is a 95% failure rate for new direct sales consultants and network marketers. It’s a widely used statistic that seems to be generally accepted as fact.

Fact is, the reported 95% failure rate for direct sales and network marketing businesses is unsubstantiated.

In fact, it’s quite difficult to find information that confirms or refutes the generally accepted statistics on business failure. I almost gave up on writing this article because I had so much trouble finding clear information that could be substantiated by additional sources. I couldn’t find one article that also referenced a source for the information when quoting the statistic.

Some of the difficulties with measuring success and failure include:

1. What defines failure? For the most part, statistics on small business failures are based on how many companies or individuals are still in business after a certain period of time. The reasons for closing the business aren’t considered. While many of the closures may be because of lack of profit, others closed for a variety of other reasons including being sold for a profit. It’s been shown that about a third of new businesses “closed while successful” and “…only one-third of new businesses
   (33 percent) closed under circumstances that owners considered unsuccessful.” (source 1). Many network marketers tend to change companies and they probably don’t consider these changes a failure.
2. Data that’s being analyzed to determine failure rates doesn’t distinguish between different types of small businesses or home businesses. Network marketing is most likely lumped in with all small business or at least all home businesses.
3. Many direct sales and network marketing companies are privately held firms that do not have to disclose financial information, again making it difficult to analyze success and failure.

So where does this 95% failure statistic come from?
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