Comments on: Thinking of Starting a Business? Your Odds Just Improved http://www.youngentrepreneur.com/news/thinking-of-starting-a-business-your-odds-just-improved/ Young Entrepreneur Forums - your online discussion forum to share and talk about Entrepreneurship. A place to learn and to help others with starting, managing and growing successful business ventures. Thu, 09 Feb 2012 11:43:00 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: Bob Foster http://www.youngentrepreneur.com/news/thinking-of-starting-a-business-your-odds-just-improved/comment-page-1/#comment-10183 Bob Foster Tue, 16 Mar 2010 20:31:33 +0000 http://www.youngentrepreneur.com/?p=3801#comment-10183 One needs to be careful using U.S. government statistics. Jerry Useem, when editor of INC Magazine, once wrote an article titled, “U.S. Business Data Worst in World—and Getting Worse.” Useem wrote this 14 years ago, and the data has continued to deteriorate ever since. To the point where there is not even a common definition throughout government agencies for what constitutes a “business.” That is why the U.S. Census Bureau only analyzes data for businesses that have employees and at least $1,000 of revenue. This leaves out over 70% of all U.S. businesses. (For a more definitive discussion on this issue, go to the Small Business Administration web site and look for the Working Paper titled, “Nonemployer Start-up Puzzle.”) Also, as Kathleen pointed out, failure rates vary drastically between industries. Part of every new business startup’s due diligence should be a discussion with their chosen industry’s association regarding the success rate of new businesses in their industry. Most associations track this much better than the government. “9 out of 10 businesses closing during their first year” has never been a “statistic,” it has been an opinion handed down from writer to writer. It may also be true for some industries, however. But, the most important thing for a new entrepreneur to remember is that if they don’t do their homework, and properly prepare—they WILL fail, regardless of what statistic is used. One needs to be careful using U.S. government statistics. Jerry Useem, when editor of INC Magazine, once wrote an article titled, “U.S. Business Data Worst in World—and Getting Worse.” Useem wrote this 14 years ago, and the data has continued to deteriorate ever since. To the point where there is not even a common definition throughout government agencies for what constitutes a “business.”

That is why the U.S. Census Bureau only analyzes data for businesses that have employees and at least $1,000 of revenue. This leaves out over 70% of all U.S. businesses. (For a more definitive discussion on this issue, go to the Small Business Administration web site and look for the Working Paper titled, “Nonemployer Start-up Puzzle.”)

Also, as Kathleen pointed out, failure rates vary drastically between industries. Part of every new business startup’s due diligence should be a discussion with their chosen industry’s association regarding the success rate of new businesses in their industry. Most associations track this much better than the government.

“9 out of 10 businesses closing during their first year” has never been a “statistic,” it has been an opinion handed down from writer to writer. It may also be true for some industries, however.

But, the most important thing for a new entrepreneur to remember is that if they don’t do their homework, and properly prepare—they WILL fail, regardless of what statistic is used.

]]> By: Kathleen http://www.youngentrepreneur.com/news/thinking-of-starting-a-business-your-odds-just-improved/comment-page-1/#comment-9873 Kathleen Fri, 12 Mar 2010 14:43:11 +0000 http://www.youngentrepreneur.com/?p=3801#comment-9873 Glaring caveat: these statistics only reflect formalized businesses, those that went through the wringer to apply for an EIN etc. A lot of people start out in the grey economy. It's only after they work at it for awhile and presuming they don't wash out, that they take the next step of getting official. There's also a wide variation depending on the business focus. For example, the failure rate of independently owned restaurant start ups is about 95%. Among crafters working at home in their spare time, it's similar. That said, it would be unfair or untrue to surmise that craft businesses at home are predisposed to fail. Far from it. The issue is more a matter of competing priorities and family needs may necessarily take precedence until children are older. I'd be more interested in measuring exits in this grey economy and their success rate when they re-enter it later on. Glaring caveat: these statistics only reflect formalized businesses, those that went through the wringer to apply for an EIN etc. A lot of people start out in the grey economy. It’s only after they work at it for awhile and presuming they don’t wash out, that they take the next step of getting official. There’s also a wide variation depending on the business focus. For example, the failure rate of independently owned restaurant start ups is about 95%. Among crafters working at home in their spare time, it’s similar.

That said, it would be unfair or untrue to surmise that craft businesses at home are predisposed to fail. Far from it. The issue is more a matter of competing priorities and family needs may necessarily take precedence until children are older. I’d be more interested in measuring exits in this grey economy and their success rate when they re-enter it later on.

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