You are told that most businesses fail. People quote failed business statistics left and right, but the numbers are all over the place. I recommend that you read The Ten Commandments for Business Failure.
I have read an article in Fortune Magazine that stated that 9 out of 10 startups fail, but where do they get their numbers from? There is no source for this claim, so can you believe it?
The U.S. Census Bureau reports that 400,000 new businesses are started every year in the USA, but 470,000 are dying.
Does this mean that more businesses are dying than businesses are starting?
Wow. That is a scary number. It is also a bit strange to have more businesses fail than businesses started.
Does that mean that all businesses that started fail?
I hope not.
“More than one-third of businesses today will not survive the next 10 years”. John Chambers Cisco’s CEO of 20 years
There is a recent Harvard University study done by Shikhar Ghosh that claims that three out of every four venture-backed firms fail.
According to the U.S. Bureau of Labor Statistics, about 50% of all new businesses survive five years or more, and about one-third survive 10-years or more.
This is an interesting statistic because it shows you that a more mature business has a better chance to survive.
According to the Small Business Administration – The SBA – close to 66% of small businesses will survive their first two years. What that means is that only about one-third of total businesses will fail during the first two years. The SBA also tells you that about 50% of businesses fail during the first year in business.
This is a much better number than the 9 out of 10 failures that some claim.
Another very important thing to consider that a closed business doesn’t mean that the business has failed. For example, the business owner might retire one day and shut down the business. Or, an entrepreneur could get sick or die.
I don’t think we should treat closing a business with a failing business.
Regardless of who you believe when you start a business there is a good chance that you will fail. Your job as an entrepreneur is to maximize your chances to succeed in business.
While you get inconsistent numbers on what percentage of businesses fail, you can do a lot to prevent your own business from failing.
Of course, there are many more reasons a company can fail, but I wanted to list just a few.
In the comments section below, share what you think is the reason so many businesses fail.
photo credit: zero percent box
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