That is the assertion I hear all to frequently in discussions involving new business startups. It is as though the listener, a new entrepreneur, is powerless to do anything about it. Cast a 20-sided die and, if your number comes out on top, you’ll succeed.
Don’t know about you, but those odds suck.
I disagree with the assertion that 95% of startups fail when I hear it.
Here’s why. Two years ago roughly, I started doing a series of presentations on being an entrepreneur. As part of regular day long event to new business owners, I noticed a lot of people talking tactically about the various aspects of business.
(This is a topic I’ve addressed in the past…it bears a fresh review.)
Throughout the day, speakers spent a lot of time talking about business plans. About why you need an attorney, an insurance agent, a CPA, and so on. Very true. Very tactical. And many of the points made using the basis of Fear, Uncertainty, and Doubt (FUD).
I noticed no one spoke to the emotions these new business people (new, not necessarily ‘young’) were likely feeling, the fears they had, friends telling them they’d almost certainly fail. So I volunteered to do a presentation on, "Do You Have It in You to be an Entrepreneur?"
The ‘95% assertion’ was one that I’d heard all my life. I decided, before propagating it further in my own presentation, to see if I could qualify the statement.
What I found was very interesting.
According to the US Small Business Administration: "Seven out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more."
So, not only is the opening assertion not true, a QUARTER will stay in business 15 years or more. Wow!
In the following slide, I use a chart to contrast conventional ‘wisdom’ with SBA’s reality.
Now here’s why I did this: Talking to a group of new, or contemplating new, business owners I wanted to give them a sense of hope. Something more positive than telling them essentially: you will fail.
Note: The SBA appears to make no distinction as to why a company ceased to exist (e.g. failed, was reformed as a corporation (e.g. a LLC became a C-corp), merged, or was acquired).
SBA source: (http://web.sba.gov/faqs/faqindex.cfm?areaID=24 #7)