Why Do MLM Companies Fail: Top 8 Reasons (And How You Can Prevent Them)

Nov 13, 2018Sheffield Blog

How to Find Success in MLM

According to the Federal Trade Commission, 99% of all MLM businesses fail, and in many cases, these failures come well before the companies have had a chance to turn a profit. But why is that, why are so many companies operating in this space doomed to failure? Well, that is a topic that we will be exploring throughout this article; additionally, we will take a closer look at the multi level marketing failure rate as well as other components of the MLM business model.

8 Reasons Why MLM Companies Fail

In most cases, a low network marketing success rate is the byproduct of poor planning or execution, perhaps even both. That said, some of the common reason for these business failures include

1. Lack of Corporate Experience

The success of any business, either online or in the real world, can hinge on corporate experience. In fact, a lack of corporate experience is often the downfall of many early-stage MLM companies. The best way to avoid this pitfall is to have sound leadership, and if you’re an early stage MLM company, this could mean hiring a consulting firm to ensure you remain profitable while avoiding problems that could sabotage your business.

2. Subpar Leadership
While infrastructure is important, having the right people in your organization should be paramount. Studies have shown that companies with strong leadership can be very successful despite not having the best technology/innovation. A great leader also has great mentors. Make sure that the leadership position is filled not by the most experienced person, but the one that has access to the most experience possible.

3. Poor Products
In the MLM space, having the right product is essential; if a product does not sell, that could spell disaster for your business. Before bringing a product to market, you should ensure that they are products that people actually want, meaning they are emotionally satisfying, marketable, and priced competitively.

4. Culture
Business culture can play a critical role in the success and failure of any business enterprise. The best way to instill company culture is to have clearly defined goals, markets, and demographics that play into the long-term success of your business. The companies that don’t have this basic foundation in place are usually the ones that don’t survive in the cut-throat world of multi-level marketing.

5. Failing to Spread the Word
Effective marketing is the best way to get the word out about a business, but many MLM companies fail to capitalize on the power of social media. Social media is a great way to drive sales; people often tend to purchase items that receive a stamp of approval from social media influencers. If you don’t make this part of your marketing strategy, you’re doing yourself a tremendous disservice.

6. Legal Complications
Operating within the confines of the law is a good way to improve your multi level marketing success rate; this means focusing on profit margins, tax laws, compensation plans and, most importantly, avoid unnecessary frontloading.

7. Lack of Solid Systems
Although not quite as critical in the early stages of business, the systems that you have in place will ultimately dictate the success of your MLM business. MLM businesses, for the most part, operate on an international platform, which means you will need multilingual and multi currency platforms, social media automation, comprehensive replicated sites, and much more to be successful.

8. Support
All businesses, regardless of size, will need support systems that will enable them to keep tabs on local and international markets. These supports systems must also take into account the legal requirements for every country/market that they conduct business. If you wondering why do MLM companies fail when trying to expand into foreign markets, an inadequate support system is often the reason.

9. Lack of Passion
A good MLM business is a full fledged business. It should not be treated as an online scheme that can bring in money while you sleep. Rather it should be approached as something you will work on for many sleepless nights before you ever make a dime. Once you have begun to build trust with clients and have a full understanding of the customer base and product, then you will begin to make money. Have a strong vision and go for it.

Why Do MLM Companies Fail?

In summary, if you’re questioning why do some MLM companies fail? There are a number of reasons, but it inevitably comes down to a vision of quick money overnight which is not what MLM is all about.