There was this popular urban legend in business world that scared the hell of new individual that wants to start their own business. It’s also became a solace comforting self suggestion when anybody fail in their business. In blogsphere it’s no exception.
So What The Legend?
You have probably heard someone — even a highly educated someone, expound about the failure rates for small business. Some say 9 out of 10 will fail in their first year. Others say that 90% of small businesses will fail in the first 5 years. Others also use the 60% failure in the first three years. Even sometimes, more generalise, 80% of small business fail. You know what, mostly it’s all wrong and unreliable.
The Truth Is..
Rhonda Abram and Jeff Cornwall, had presented their findings as:
Credible studies show success rates five years out (the normal time line for such studies) to be around 50% +/- 5%. And as I’ve said many times, smaller studies of those who have gotten trained and educated in the process of starting and growing a business find success rates as high as 80-90%.
Freitag, indicate in his with the involvement of venture capital:
with a 30% success rate, serial entrepreneurs outperform first-time company founders by 12 percent (18%). founders which failed once before have a slightly higher rate of 20% to make money out of their venture.
He had based his finding based on this study.
Mike Speiser, tested a few hypothesis using some formulas introduced by Max Skibinsky, to determine optimal start-up burn rate and the Kelly criterion for a new start-up. He came up with a fews recommendation for start-up. You can read the whole experiment here. He conclude:
You can also increase your odds of success by building and shipping product quickly, by instrumenting your site / product so that you can run tests and make data-driven decisions, and by killing failed experiments quickly.
The lesson is
I think I close this post with a conclusion by Rhonda Abram:
To greatly increase your chance of success, find out as much as you can before you open your doors. Talk to people who run their own businesses, especially businesses similar to yours, and get a realistic understanding of the time, financial, and emotional resources necessary. Keep your eyes open — not to the possibility of failure, but to the very real demands of running your own business.
Popularity: 4% [?]
