October 20, 2014  
 
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Small Business Failure Rates

Interested in small business failure rates? When it comes to how often startup businesses fail and how long it takes to fail, it's difficult to separate fact from fiction. But it is possible to determine what leads some businesses to succeed while others fail.

If you listen to the experts, starting a small business seems to be right up there with shark-diving and base-jumping as a dangerous activity that's best avoided.
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But although new business failure rates are high, you've decided to give it a shot anyway. Here's what you'll need to know to keep your business out of the statistical graveyard.

The exact failure rate for small businesses is a hotly contested topic in business circles. Some experts believe that publicized failure rates are highly exaggerated, while others stand by their claim that the businesses included in most failure rate estimations only represent the tip of the iceberg.

Even so, most business experts conform to a theory of "thirds": Of all the new business startups, 1/3 eventually turn a profit, 1/3 break even, and 1/3 never leave a negative earnings scenario. According to a study by the U.S. Small Business Association, only 2/3 of all small business startups survive the first two years and less than half make it to four years. With numbers like that, it's no wonder so many would-be entrepreneurs think twice before taking the plunge.

But needless to say, there are certain things you can do to increase the odds of success. You don't need an MBA to make your small business profitable - just guts, determination, and a little common sense advice.

Attitude

If you start your business with the attitude that it's probably going to fail, guess what - it will. The businesses that succeed are the ones that were founded on an attitude of success. For successful small business owners failure is not an option, and so they avoid people who live and breathe negativity. Instead, they stay positive and move full steam ahead toward reaching their goals.

Sacrifice

Starting a small business is not a comfortable or luxurious undertaking. It requires nothing less than a total commitment to make whatever sacrifices are necessary to succeed. The most successful small businesses make sacrifices early on and reap the benefits once the business has surpassed the startup phase.

Risk

Looking for a risk-free investment? If so, you'd be better off putting your money is a savings account and avoiding small business altogether. Small businesses are inherently risky ventures. Sometimes the risks pay off and sometimes they don't. But unless you are willing to take the risks in the first place, there is virtually no possibility that your business will ever succeed.

Planning

More often than not, the one thing that separates small business successes from small business failures is planning. With all of the resources available to small businesses these days, there is no excuse for not taking the time to create an executable business plan for your company. A good business plan is a roadmap that highlights the best routes to profitability and warns you of potential hazards along the way. If you don't have one, it's highly likely that you'll be lost - and out of business - in no time at all.

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Conversation Board

We greatly appreciate any advice you can provide on this topic. Please contribute your insights on this topic so others can benefit.

Linda Heath, President, Financial Holographix Inc. 11/2/2008

I concur with the comment under planning that says"there is no excuse for not taking the time to create an executable business plan for your company." As a recovering commercial banker who is concerned about restoring the borrowing capacity of Main Street companies, I encourage business owners to heed this advice and create, update and revise their business plan as the first step to making their companies more bankable.


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