Don’t Believe the Doom and Gloom Survival Rates. Most Will Find Success.

By Patrick Boulay
Publisher

Remember Mark Twain’s famous response to the New York Journal mistakenly publishing his obituary? “The reports of my death are greatly exaggerated.”

The same can be said in response to the frequent misstatements about startup business survival rates. Every month, New Business Minnesota is delivered to 8,000 recent startups. If you believe the misinformed, then 80 percent of you won’t survive to file a second tax return.
Starting a business is damned hard, not damned impossible. The truth is the there will be risks in any endeavor you undertake.

Let’s look at two familiar choices. Start a new business or start a new job working for someone else. What are your chances for surviving either one over five years?

If you believe the conventional wisdom, you’ll find security and longevity working for someone else. That same wisdom says that you’ll fizzle and fail in your own business in the first year.
As a new employee, you first have to survive the 90-day probationary period. That shouldn’t be too hard. Your continued tenure with that company will be controlled by several factors: you might not like it or things might change so much that you’ll leave for a greener pasture, you might get laid off or you might get fired.

According to the Bureau of Labor Statistics, half of all workers have been with their current employer for less than four years. Longevity, depending on the job and the industry, is about three to five years with one company.

Another study by the Society for Human Resource Management reports that 76 percent of employees are seeking new employment opportunities. Half of them are “actively” seek jobs by sending out resumes to recruiters, online job boards and talking to friends. The other half is more passive, but is very open to invitations for new opportunities.

That doesn’t sound very secure to me.

As a startup business, your future looks pretty good by comparison. Contrary to what you may have heard, these are the numbers most cited as the success rates for startup businesses.

• Year One: 85%
• Two: 70%
• Three: 62%
• Four: 55%
• Five: 50%

But the story gets better. Research into the circumstances behind a business closing found that one third consider themselves to have closed while successful. If you count businesses still in operation and those that closed successfully in the first five years, you get a success figure close to 66 percent.

The outcome after five years is decidedly positive for the entrepreneur. In fact, 67 percent said they would do it again. And 65 percent reported that they were better off financially than when they started.

According to the SBA Office of Advocacy that produced much of this research:

“These results suggest that potential entrepreneurs, particularly those planning very small ventures, have less to fear than what is commonly believed. Their prospects of survival are reasonable, and if they close, their prospects for being successful at closure are reasonable.”

Think of all the people who have told you how much they admire your courage for forsaking the security of a job and starting your own business. Armed with this information, feel free to return the complement. It appears as if they are the ones who have taken the riskier route.

NBM