The Small Business Failure Rate

According to the Bureau of Labor Statistics 20% of small businesses fail in their first year, 30% of small business fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business.

Ignore this.

  • These statistics include all cessation of business including successful sales and mergers into larger business.
  • These statistics include the failure of every stupid Lampe berger or candle shop opened by some dumb doctor’s wife.  They include MLM garbage, stupid gyms, and other poorly thought out schemes destined for failure.  Thousands of hobby businesses by unserious people are launched every year.  I knew the mobile DJ services would fail.  I knew the bricks and mortar tabletop gaming store would fail.  And on and on.  They should fail.  Their failure should hearten you.

There are ways to protect yourself from failure:

  • Start marketing before you have a business.  Build the audience, the email list, the tribe, before you have the product.  This is the harder thing, so start now.
  • Start VERY, VERY small.  I don’t mean no employees, I mean with very small offerings.  Offer the minimum viable product.  More on this later.
  • Tend to the needs of your first clients diligently.  Use every interaction with those first clients as fodder for future pricing, advertising, and other decisions.
  • Do not over identify with any idea, offering, or aspect within the business.  Be willing to change or discard any aspect of the business if reality dictates it.
  • Do not put yourself in a situation that will not allow you to change any aspect of the business.  These things might include leases, partnerships, or notes.

I’ll write more on this as the fancy strikes, but just know the the failure rates you see are weighted heavily by the fanciful and the retarded.  Don’t be either and don’t borrow money and chances are you’ll make it.

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