Failure Statistics
February 17, 2008
While any statistics deserve a measure of cynicism, these stats may provide some interesting indicators of positive commercial trends.
The Small Business Administration identified the overlapping causes for small business failure in the United States in 1999.
It released the findings of its “Financial Difficulties of Small Businesses and Reasons for Their Failure” study.
The causes identified were:
- outside business conditions (38.5%)
- financing (28%)
- inside business conditions (27.1%)
- taxes (20%), disputes (18.8%)
- personal calamities and other (32.9%)
Statistics Canada’s 1997 study found Canadian small business failures boiled down to external factors that were compounded by lack of management, planning or marketing.
Signs of Improvement?
Business lore has long believed that 50 percent of businesses fail in the first year and 95 percent fail within five years.
In stark contrast, the Small Business Administration found two-thirds of new employer establishments in the US survive at least two years, and 44 percent survive at least four years.
Australian Statistics released by the Productivity Commission also indicate most Australian businesses survive for a considerable time with around two thirds of businesses are still operating after five years and almost one half are still operating after ten years.
Extracting the Juice
“Enough with the statistics” I hear you yell.
It really doesn’t matter that much what the exact numbers are. The juice in this data is:
- a number of businesses fail because they are deficient in one or more core areas;
- many others blunder along and eventually work through or overcome their shortcomings; and
- the first few years of any venture’s life are critical.
We should each consider our personal deficiencies and our venture’s shortcomings. Periodically conducting a realistic and frank assessment can be a crucial management tool. Put it in your calendar, otherwise it is likely to meet an ugly end in a dark alley at the hands of procrastination.
Time for another confession: Despite my best intentions and efforts, I tend to be as blind as a welder’s dog to my own shortcomings.
I’ve made subtle progress over the years and asking colleagues and customers to point out weaknesses has helped. I’ve still got a long way to go…
Each time I’ve overcome my recalcitrance, I’ve been pleasantly surprised to find many clients are happy to let me know how I could improve things or even to just lend a bit of advice. They even seem to think more of me because I, at least, appeared willing to address things and change.
Disclaimer
The lawyer within me demands that I end this post with a disclaimer. I’m neither a statistician nor an academic expert in this field. These musings hopefully provide some insight and I welcome any corrections or enlightenment – just try to be kind when correcting my ignorance.
| Photo by Hamed Saber |