Ever wonder how many and why small businesses fail?
According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn.
However, the Small Business Administration published stats that say about half of all employer establishments survive at least five years and a third survive ten years or more.
Why small businesses fail so often is debatable…
There is some debate on which number is more accurate, but the consensus is likely between 50-80% failure rate for new businesses. Perhaps some of this debate on the differentiation of numbers hinges on definition of terms and classification. (i.e. the difference between “entrepreneurs who start businesses” and “all employer establishments.”) Take, for example McDonald’s, when a new franchise opens, it is definitely considered “new employer establishment” but would that be counted in the numbers for “an entrepreneur who starts a business”? Probably not. Further, the definition of failure is important, as reportedly some 17% of businesses that closed were actually considered successful. So, the numbers are out there, and the more accurate number depends on a simple definition of terms.
The bottom line is that either way, the number of businesses that ultimately fail is much higher than it needs to be. As entrepreneurs it is essential to be properly prepared and organized when going into business. If we are not, chaos will follow and the chances of joining that 50-80% are dangerously real.
Read article on: Getting Out of an Entrepreneurial Rut
Some mistakes may ultimately be damning, and others might just be contributors to a larger problem. Let’s take a look at some of the most common mistakes that people have run into when starting a new venture:
- Starting a business for the wrong reasons
- Lack of Organization
- Poor Management
- Insufficient Capital
- Lack of Planning
- No Website
- Lack of Experience
- Bad Advice
- Lack of Market Knowledge
- Lack of Financial Responsibility/Awareness
- Lack of Focus
- Not in Touch With Customer Need
- Inability to Differentiate Within in the Market
- Poor communication
- Poor leadership
- Inability to Draw Up Business Model
Now that we have an idea of a few of the pitfalls that are associated with starting a new business (and possibly scared a few people in the process), let’s keep in mind that there are many successful entrepreneurs out there. But what is it that sets them apart from those destined to fail. Gallup did a study on the 10 most important talents for a successful entrepreneur.
The 10 talents of successful entrepreneurs are:
- Business Focus: You make decisions based on observed or anticipated effect on profit.
- Confidence: You accurately know yourself and understand others.
- Creative Thinker: You exhibit creativity in taking an existing idea or product and turning it into something better.
- Delegator: You recognize that you cannot do everything and are willing to contemplate a shift in style and control.
- Determination: You persevere through difficult, even seemingly insurmountable, obstacles.
- Independent: You are prepared to do whatever needs to be done to build a successful venture.
- Knowledge-Seeker: You constantly search for information that is relevant to growing your business.
- Promoter: You are the best spokesperson for the business.
- Relationship-Builder: You have high social awareness and an ability to build relationships that are beneficial for the firm’s survival and growth.
- Risk-Taker: You instinctively know how to manage high-risk situations.
These 10 talents do not address every factor that affects business success. Non-personality variables such as skills, knowledge, and experience along with a host of external factors play a role in determining business success and must be taken into consideration when theorizing on business creation and success. But these 10 talents explain a large part of entrepreneurial success and cannot and should not be ignored. Understanding and acknowledging your inherent talents gives you the best chance at success.
Susan Sly is a best selling author, speaker and entrepreneur. She has appeared on CNN, CNBC, Fox, Lifetime Television and the CBN. Susan is the mother of five children and resides in Scottsdale, Arizona.