Have you heard people tell you that 9 out of 10 or most businesses fail within the first 2 years?
This is pretty fearful statistics. But where does it come from? Apparently from chicken littles, because I’m going to show you completely different numbers. And I hope they will become your new weapon in dealing with all the high priests of failed business myth.
Let’s look at the graph below:
I’ve made the graph based on three separate studies. The three separate studies show three business survival rates after 2 years of operation. The average number is 40%. So the business failure rate is actually 60% not 90%.
But wait, there is more.
Check the reasons why businesses have closed:
OK. Here it gets interesting:
3.4% closed due to bankruptcy. Almost 18% who closed their doors closed to realize profit.
Now, I don’t know about you, but all these numbers are far from 90% failure ratio that popular “business” books or blogs propagate.
Maybe it’s an ego thing. To cultivate the myth of entrepreneur as a hero carrying the world on his shoulders. Maybe it’s time to look at the real numbers, and go about our life and business with a more accurate view of reality.
Or perhaps, we, entrepreneurs will cling to that 90% failure ratio forever despite of the numbers. Because if we succeed we will tell our children.
“See Johnny, daddy succeeded in business against all odds”.
And little Johnny will look up to daddy and will see an unbreakable hero, who never gave up even when the competition kept delivering thousands of blows.
“I want to be like you daddy”.
That day a new entrepreneur was born.
References for fact checking junkies:1. Main article by David Maloney http://ezinearticles.com/?Small-Business-Failure-Rate—9-Out-of-10?&id=5089437 2. Study 1: Shane, S in the study ‘Startup Failure Rates – The Real Numbers’, 2008 http://smallbiztrends.com/2008/04/startup-failure-rates.html 3. Study 2: Headd, B in the study ‘Redefining Business Success: Distinguishing Between Closure and Failure’, 2002 http://www.springerlink.com/content/u5218354gk84k205/ 4. Study 3: Phillips, B. D., and B. A. Kirchoff (1989). “Formation, Growth and Survival: Small Firm Dynamics in the U.S. Economy,” Small Business Economics 1, 65-74. http://grips-public.mediactive.fr/knowledge_base/view/483/formation-growth-and-survival-small-firm-dynamics-in-the-u-s-economy/ 5. Do small businesses have high failure rates? Evidence from Australian retailers. http://www.allbusiness.com/buying-exiting-businesses/exiting-a-business/587648-1.html
Go ahead and start a business. Statistical odds are 50-50 or even better that you will succeed. Choose a market carefully and pull the trigger. If you don’t start a business the odds of success are: BIG AND UGLY ZERO! Business and selling brings money. Money can help you with your big goals.
And show me some love and Tweet and/or Share my post and write comments if you are in writing mood:). More importantly, get my free e-book, that will show you how you can write your life into a beautiful symphony. “Master of life: living without regrets”. Sounds good to you? It sounds good to me. Get the e-book to take control.