Most Startup Failure Statistics Are Misleading (Here’s The Truth)

To judge from old and misleading statistics across the internet, starting a business seems scarier than diving off a 100 ft. cliff.

Photo: Marsha Kelly; Credit:
 Paula Daniel
Photo: Marsha Kelly; Credit:
 Paula Daniel

To judge from old and often misleading statistics that spread like wildfire across the internet, starting a business seems scarier than diving off a 100 ft. cliff.

New ventures supposedly fail at an extraordinarily high rate, leaving founders staring down their financial ruin. The specter of failed startups has helped to frighten and discourage a generation of would-be entrepreneurs.

In truth, menacing statistics are largely an insubstantial ghost. In 2002, a Bloomberg article sparked debate when it published stats that suggest 80 percent of all startups will inevitably fail. As with so many popular delusions, the underlying reality is considerably more complex and encouraging.


Delusions of startup failure

The 80-percent-failure adage probably stems from a National Restaurant Association report suggesting 80 percent of independently operated restaurants fall by the wayside within two years. The intensely competitive restaurant industry is notorious for quickly destroying unprepared newcomers.

This narrow statistic isn’t a reasonable benchmark for innovative technology startups with strong engineering concepts, inventive retailers with popular products, experienced food-industry entrants with mainstream culinary offerings and a host of other thoughtfully planned ventures.


The truth about small business survival

The Small Business Administration (SBA) says a third of all small businesses will disappear after their first two years of operation, which is markedly more encouraging than the popular idea that 80 percent of startups will inevitably implode. In fact, the SBA reports nearly 40 percent of all businesses are still chugging along after a hefty ten years of operation.


Photo: Designecologist, Pexels
Photo: Designecologist, YFS Magazine


Move onto greener pastures

Many serial entrepreneurs prefer to keep moving on and apply their well-honed business instincts to push other promising ideas into commercial success. They’ll frequently sell off previous ventures. Other entrepreneurs strategically abandon small startup failures in favor of bigger successes with superior execution, often taking valued employees and other assets from their initial efforts with them.

A struggling small business might decide to merge with another to form a stronger, more competitive firm. This acquihire position often creates the misleading impression that one of them has simply disappeared.

A significant number of business owners sell off their commercial assets to retire into richly deserved peace and quiet. A supposed small-business closure often means moving on to greener pastures or the peace and quiet of a paid-off home.


Plan for success

After studying the dirty details of hundreds of failed businesses, it’s hard to avoid the conclusion that success rests almost exclusively on founders’ financial planning, market awareness, product development and comprehension of consumer needs.

An unprepared entrepreneur is headed for trouble before they serve a single customer. In contrast, a winning entrepreneur can develop almost any good business idea into sustainable success. If you’re genuinely ready to play the game, then you’re halfway there.


Cash flow will always be king

Operating a successful business is directly tied to the health of your cash flow. If you run out of cash on hand, you can’t pay employees and suppliers. The IRS in particular has a dim view of failing to keep up with payroll taxes. Politely but firmly pressing customers to pay their bills within no more than 30 days often works, and discounts for swift payment within 10 or 15 days can be a highly effective tactic to keep your cash flowing.

A bonus system that rewards employees who find ways to cut costs without compromising quality is a great move for many small businesses. Furthermore, don’t spend money unnecessarily. Overspending on poorly defined future needs is a bad habit that’s easy to break with self-discipline.

Ask your team to help you conserve limited resources by controlling power consumption, reusing supplies and taking other lean operational measures. Plenty of useful ideas exist if you prioritize cash flow. Also, ask your business mentors and advisors for their suggestions.


Study successful entrepreneurs in your niche

Learn from the success stories and cautionary tales of other entrepreneurs in your niche. This is an amazingly cheap way to avoid making other people’s mistakes on top of your own.


Photo: Designecologist, Pexels
Photo: Designecologist, YFS Magazine

You can leap ahead of a good majority of competitors simply by adopting the most effective marketing tactics and business processes of leading outfits in your industry. You’d be surprised at how few people bother to do this sort of basic research and look into obvious and hidden competitive advantages.


Listen to your customers

It’s a truism that listening to your customers is the golden path to success. Responding quickly to grumbles and recurring problems with immediate solutions can bring dissatisfied customers back into the fold. At the same time, you’ll develop a reputation for hearing the concerns and needs of your customers. This builds goodwill and attracts positive word of mouth on popular social media networks.


Make the most of limited resources

Concepts like minimum viable product (MVP) and guerrilla marketing can help rocket your startup into a commanding lead over other less nimble founders. Rapid-fire marketing experiments and quick updates of product features can help avoid the risk of losing precious time and money to unsuccessful approaches.

While you naturally want customers to be fully satisfied with the quality of your goods and services, perfection is the enemy of the good. Do the very best you can for now, and keep reaching for higher goals of excellence.


Keep a positive attitude

You might be surprised by how effective a relentlessly positive mood is at boosting employee morale and company culture. You’re the leader, and your staffers look to you for inspiration and direction. “Yes, I can,” is not just a slogan. Try saying it to yourself in the mirror every morning!


Marsha Kelly is a serial entrepreneur, after doing “time” in corporate America, who has learned about what products and services really work well in business today. You can learn from her experience and associates as they shop from the internet for tools, supplies, and information to build our businesses and improve the lives of our family and ourselves on their small business blog. Connect with @best4businesses on Twitter.




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