do 9 out of 10 businesses fail title image

Brandon and I were recording a podcast episode the other day (we’re excited to get our new podcast edited and out to you soon).  He threw out this common statistic that 9 out of 10 businesses fail.  I told him I question the validity of that statistic.  He brought it up again today so I googled it.

Turns out there’s a lot of discussion out there.  You could go down a rabbit hole just via the first page of search results.  I looked at a several pages but ended up going to a semi-reputable source that has data going back to 1994.

 

Excuse me while I nerd out for a moment

I went to the United States Department of Labor and their Bureau of Labor Statistics and found the raw data I needed. 

This chart was especially interesting.  It shows how many business exist each year by their “opening year.”  They define opening year as the first year they reported labor data (actually hired staff).  You can look at the data yourself but here’s what they tell me:

  • After 20 years in 2014, 8 of 10 businesses that started payroll in 1994 had failed.
  • It took 20 years for the businesses that opened in 1995 too.
  • Same for 1996.
  • No other year since has gotten down to the 20% survival rate or been around for 20 years.

This would lead me to guess that it takes 20 years for 8 out of 10 businesses to fail.

Yet, remember, this only counts businesses that actually run payroll and have labor statistics to report.  There has to be way more businesses that never move from idea to sellable product or service.  Then there are those that never make enough to hire staff.  Plus, with more and more businesses using independent contractors, they might not show up on these stats.

Statistics can be funny things.  You can make them say pretty much whatever you want if you try hard enough.  But here’s where I go with this as a business who hired our first people in 2011, knowing that only 51% of my “cohort” of businesses survived to March 2016…

 

Okay, back to what this all means for entrepreneurs

I don’t know about you but when I started my first business, I imagined it would last for my lifetime or at least until I was ready to retire.  Even then, perhaps there would be someone to continue it.  I was only 26 when my first business opened so I was thinking of working in it for up to 40 years.  I had no thoughts of having an 80% chance of failing after 20 years or a 50/50 chance of being open today.

Even if your plan is to sell your business or maybe just run it until you don’t need it anymore, I think I can confidently say this,

“No one starts a business thinking it will fail.”

Why would anyone put themselves through that much hard work?  Maybe a masochist.  Not me though and probably not most entrepreneurs.

Entrepreneurship is fundamentally an optimistic endeavor.  We have to believe in ourselves and our products and services.  In fact, we believe in our businesses more than anyone else.  Full stop.

But we also have to be realistic.  That’s easier said than done sometimes.  We wear rose-colored glasses and come up with all kinds of silly arguments to justify our convictions.  Or at least I do that.

 

How do you maintain your optimism but get a healthy dose of realism?

Here are 3 ways:

  1. Get a coach.  A good coach will be your biggest cheerleader but will also ask amazing questions that draw you toward honest reflection.  I’m a coach because I experienced the power of coaching in this regard.  You owe it to yourself and your business to seriously consider this option.
  2. Get in community with other entrepreneurs.  When you hear other entrepreneur’s honest stories, you’re more likely to tell your story more authentically.  When you help others and receive help yourself, you’re more likely to maintain that optimism.
  3. Sometimes… you do have to look in the mirror and ask yourself, “What if this did fail?  Why would it have failed?”  With an honest response, you can start to address the reasons you might fail.  You might also realize that your heart is not in it as much as you thought.  That’s okay too.

My recommendation is to do all 3.  Brandon or I would love to explore the options with you.  Click here to schedule a 20-minute chat.  Want to skip a chat, check out ways to work with us.