How Businesses Fail

We’ve all seen the numbers on how businesses fail.

The numbers are out. The US Small Business Administration says that 20% of businesses fail within the first year. When you dig deeper they state that over half of small businesses fail within ten years. These data alone are enough to shut down some entrepreneurs. So what does it take to beat the odds? Must you be a wild-eyed risk taker to make a small business work in the US? The answer is no.

Failure defined.

If a business stops functioning it is considered a failure. Take for instance an example. I wrote a post on business partners. In it and in the accompanying video, I explain that I don’t know how to make partnerships work. My first partnership ended poorly. If two partners split and each start their own version of the company, which is what happened to me, the partners can choose to dissolve the existing business and start their own. This would be a failure of the original business, but results in two more businesses. If each partner builds a successful company the result would be two successful businesses and one failed company for a net gain of one successful company. But each entrepreneur succeeded. This and many more examples and hypotheticals show why these numbers are flawed.

How to avoid failure.

You don’t. Failure, as defined by the numbers, means most entrepreneurs will fail. As soon as they change their name, structure or model, they may have failed. Rarely does an entrepreneur begin their first venture and hit home run. Being flexible can be a good trait for entrepreneurs, that results in multiple “failures” according to statistics. The following video shows a few examples of “failures” I’ve had and the results. It also gives a great way to think about problems you may be facing to determine if it’s time to shut down, or power through.