October 17, 2008

Shocking Stats: 85% of all Businesses Fail within First 5 Years

It’s a well known fact that the failure rate for small businesses is extremely high. We have heard the statistics, but what are the reasons? These are the apparent business failure rate as the years roll by:

First : 85%
Second: 70%
Third: 62%
Fourth: 55%
Fifth: 50%
Sixth: 47%
Seventh: 44%
Eighth: 41%
Ninth: 38%
Tenth: 35%

These statistics are, of course, reflective of small businesses in general. Nonetheless, it can be deduced that no matter what industry you are in, there is a high failure rate, and generally speaking, the top three issues or reasons for small business failure are relatively consistent.

Almost every study or report indicates the main reason for small business failure is improper planning and expectations. When we dig deeper into these reports, there are three critical areas of planning that are often overlooked or underestimated:

1. Financial requirements to get the business started.
2. Generating/developing business and revenue.
3. Managing and controlling growth.

It is the small business owners who are able to figure out how to accomplish and overcome the challenges that accompany those three critical areas who will typically enjoy a long, fruitful business life. The variable is figuring out how to do it. Most small business owners are very proficient at the product they supply or service they deliver.

It is rare that a small business fails because the owner does not understand what they are doing.

So before you get excited as the prospect of being your own boss, please have an expert understanding of what it is you want to do. Don’t just talk to people who have succeeded, speak to those who haven’t as well because it’ll help you to really understand what goes into sustaining a business – learn from their mistakes and don’t have a repeat performance.

6 comments:

Salute said...

Having a business is not easy, to sustain a business is challenging. Salute to all business owners.

Jeremy Lee said...

Most business people tend to forget that a fantastic product and service is not enough for a business to succeed.

Anonymous said...

True Ernie, true!!

Another bitter truth is that, those who survived the first 5 years and go on succeed in the business, only 5% of them truly have money and time.

Many of them end up with lots of money, but without time. Probably without health either.

HL said...

Many people want to become their own boss. Those who can sustain the business more than 5 years, it's really not easy. However, in fact not many are success out there.

Syamilia_Training Touch said...

It's not easy to run a business. Someone needs to have an entrepreneur mindset whenever he/she form a business. Always look for opportunity and be aware of threats.

Charm6781_Yatie said...

Fantastic management team and great leadership..will bring the company to many years of success. And of course must be complete with good product/services and financially stable.