Comment by Jurene Mason on January 8, 2011 at 2:32pm

I appreciate you bringing this up.  I was pretty upset with a workshop that focused on that point in a room full of individuals that were seeking guidance on how to start their business.  Then the presenter added that current economy would make it even worse.  Wow, lets start them all out believing they are most likely going to fail.  

 

I am a believer that if someone finds ways to reduce the REASONS for failure as opposed to the percentage that they are better equipped to make a success of their business.  

 

The biggest reason for failure is starting without a  bone fide business plan.  Market research is another major area.  

 

What happens is a person gets an idea, they run out get a business license, then find out that they just joined 50 other businesses in the same area with the same idea serving a very limited audience.  Had they done a business plan, they would have discovered that early on.  

 

Or they might believe it was a great market area and did just enough research to see the need, but had no business sense in the accounting area selling products around their purchase pricing without factoring in overhead expenses ... they are literally giving away product while accumulating debt without having any warning of their train wreck ahead.  

 

We could go on and on ... the fact is if one wants to go into business, the research, the investment costs, the projections, are all very valuable in keeping a business successful and profitable.  

 

Success is not up to a statistic - it is up to you as the business owner.  Take a sincere look into all the areas concerned.  Seek mentors, planners, and information ... if after you have done your homework, you still have naysayers, find a group of forward thinkers that will help you make it happen.  

 

Good things are worth strengthening your "battle plans", they may be scary, yet, surrounded by the right leaders and the right "plans for success", you are assured a place in the percentage that does make it after all. 

 

Comment by Patrick M. Bopray on January 10, 2011 at 5:56pm

Great post J.T.          Jurene, your comments are very apropos as well. As a small business owner for 10 years I must fall into the statistical analysis somewhere but to tell you the truth I can't remember one time that I put a conscious thought into how my business affected these particular stats.

I wonder how these the failure rate statistics would be adjusted if it was taken into account that lots of business owners don't "fail" so much as they decide to quit.

As it is with most things in life from starting a business, to trading stocks to selling real estate, getting into shape or anything in between. We would be well served to take into consideration why people  "failed" versus what they might have had to do to succeed.

While the entrepreneurial idea of having more control over one's own destiny is alluring the bottom line is accountability for success falls on the individual. When things don't happen as expected no one is going to jump in and take the necessary steps to ensure your success. People don’t fail at things, they quit before they’ve learned the necessary skills to do them successfully.

So as alluded to by Jurene, do your homework up front, find a mentor or someone successful doing something similar then duplicate their efforts. 

We may complain about it but most people don’t have a problem being accountable to an employer so why should they have an issue with being accountable to themselves? In most cases working for yourself isn't any harder than working for someone else and it is so much more rewarding on a number of levels. It does however require a consistent effort and a willingness to hold yourself accountable for your actions or lack thereof.

Comment by Aaron Rollins on January 13, 2011 at 8:20am

Jurene touches on the likely real problem with the article in that their measurement tool and stats are probably true, but misrepresent the small business landscape as a whole in how they interpret the data. 

I used to do quite a bit of photography work for small businesses, and I obtained two different business licenses at different points to do this work.  I used them each a few times and claimed the income as personal because the amounts were small. Now they collect dust and I'm sure are considered "failed small businesses" when they go to put numbers together for an article like the one you cite.

Not all small businesses are started in the hopes of becoming big.  Some are temporary by design.  Some probably getting converted to corps and I doubt the research they do for these articles shows that...they probably just show that the entity as created no longer files taxes under that name or UBI # and is therefore "failed". 

While I would imagine the number of small business that want to be big some day fail at a significant rate, probably at least 50%, its fairly ludicrous to suggest a 99% rate is reflective of anything approaching reality.

 

Comment by J. T. Pedersen on January 13, 2011 at 9:51am

Thank you, each of you, for your comments.  This next week, I will be speaking to another group of new/potential entrepreneurs.  As I rework the messaging you've contributed some thoughts I may include.

A key item for debate has been along the lines of 'how are these numbers determined.'  Looking further at the SBA site, my take-away is this: SBA is simply monitoring how many New businesses are created and how many ceased operation.  One might expect that for a company changing it's filing status, the ratio's remain basically unchanged (e.g. LLC ceases to exist, the new Corp is created).

I've tried to find an answer (without making it a major research effort) as to what 'defines' a new business.  My conclusion, since SBA operates at the federal level, is that the determination is made based on Tax IDs.  So, if you've created a new LLC, but never filed for a Tax ID/EID, your business isn't being counted.

Cheers,

JT...

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