Category Archives: Myths

[MYTH] 95% businesses fail in 3 years

Have you heard that from person trying to recruit you to MLM?

“95% (or 80%, or 90%) of traditional businesses fail in (first year, three years, five years)”

Sounds that MLM is better option. But is.. NOT.

Let’s check the facts.

Various businesses have various failure rate in on, three or five years.  For example funeral businesses usually do NOT fail in many years, while 60% of restaurants may be gone in 5 years. But this is still far form 95%!

How many businesses fail in first years?

Not as much as MLMer will tell you 🙂

For example restaurants – very “risky” business – about 20%-30% of them will fail in first year, 60% will fail in five years (sources: 1 2 3 4)

On the other hand – funeral homes usually lasts – just 1% of them fail (source: 1)

What about other business? Failure rate vary among businesses but you can assume, that
just 10-20% percent will fail in first year.

And 50% of businesses continue to exist after 5 years.

So, if you start a business, statistically you have 50% chance that it will last over 5 years.  After those 5 years, most of the businesses that still exist, will continue to exist for many years. (sources:  1 2 3)

See this graph by Bureau of Labor Statistics

Business failure rate
Establisment survival rate

How does it look after 4 years, by industry:

Industry Operating After 4 Years
Finance Insurance and Real Estate 58 %
Education and Health 56 %
Agriculture 56 %
Services 55 %
Wholesale 54 %
Mining 51 %
Manufacturing 49 %
Construction 47 %
Retail 47 %

Best and worst rate of success after 5 years:

Businesses with Best Rate of Success After Fifth Year
1 Religious Organizations
2 Apartment Building Operators
3 Vegetable Crop Productions
Business with Worst Rate of Success After Fifth Year
1 Plumbing, Heating, Air Conditioning
2 Single-Family Housing Construction
3 Grocery Stores
4 Eating Places

(source)

Now compare that to MLM

How many people will still be in that MLM after 5 years?

How many of them will make money?

 

Do you have better data? Or other comments? Please share!