If you ask the general public, you may hear suggestions that 50-90% of businesses fail in their first year. According to the US Bureau of Labor Statistics (BLS), however, those estimates are inaccurate. In fact, business failure/success numbers have been pretty consistent since the 1990s:
· Approximately 20% of new businesses fail in the first year
· 30% fail by the end of their second year
· About 50% fail by the end of the fifth year
· After 10 years, about 30% of businesses are still in business
Defining Failure
It’s important to understand that statistics don’t always reveal the whole story, so take heart. “Failure” of a business is counted if the business no longer exists. But it may have been sold and exists under a different owner/name, or an owner could have retired or closed due to poor health or other family hardship.
It’s also worth noting that extraordinary events, such as the Covid-19 pandemic, impacted businesses and created harsher than normal conditions. Some “failed” businesses during that period may have continued to thrive without unusual conditions they had no control over.
Some industries see greater ups and downs and may account for some of the business failure numbers as well. When there is a sudden demand for a particular product or service, many new businesses may take advantage of this short period of demand. It could be a side business or short-term plan of the owner to exist for that period and then close as demand wanes.
And finally, like test scores, the line between success and failure can be very thin. Remember that someone who scored a 60 on a test passed, and someone else who scored a 59 failed.
Reasons A Business May Fail
No matter how passionate you may be about starting a new business, there are at least 6 key areas to watch, assess, and plan for to help your business succeed:
1. Not enough research in the market to determine your product/service is needed
2. Inadequate business plan to anticipate current and future needs
3. Lack of financing to cover all business costs, from payroll to inventory and other needs
4. Wrong location for customers to find and buy from you
5. Rigid plans that don’t meet customer and vendor schedules or requirements
6. Rapid growth, while considered desirable, can be disastrous if funds and manpower/inventory are not sufficient
Grow and Succeed in Business
Knowing the possible pitfalls of business failure means you’re prepared to think and act on these matters before they become a problem. When you network with other business owners and find mentors or partners to support you, your chances for success improve. Learn from experienced owners so you are constantly innovating and growing your personal business knowledge to propel your business forward.
Business Growth Through Intentional Networking at Commerce Connections
If you’re interested in meeting local business owners who are in the business success category, join us Wednesday mornings as our guest! Our one-seat-per-industry networking group meets at The Scrambled Egg in Fishhawk between 7:30am -9:30am. Click here to schedule your visit with our networking group full of great people and a fun competitive edge that encourages your business growth.