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The editors at Top Business Degrees decided to research the topic of:
The Most Tried and Failed Small Businesses
General Stats
- Over 50% of small businesses fail within the first year
- 95% fail within the first 5 years
- Businesses with fewer than 20 employees only have a 37% chance of surviving the first 4 years
- only a 9% chance of surviving 10 years
- According to NFIB
- only 39% of small businesses are profitable
- only 30% "break even"
- Common reasons for failure:
- Lawsuits
- Continually losing money
- 30% fall into this category
High-risk Businesses
Independent Restaurants
- Failure rate: as high as 60%
- Owners are often skilled at their craft, but not at business
- The owner's ability to raise capital is key in whether a business will succeed or fail
- Restaurants also fail without proper marketing
- Location, location, location!
- Number of independent restaurants declined by 7158 during the recession
- During the first year of operations, 25.5% of independent restaurants close or change ownership
- Year 2: 45.1%
- Year 3: 59.4%
- Failure rate is higher in areas with a higher concentration of restaurants
Retail Stores
- Retail stores are more apt to fail due to fierce competition
- Marketing is key to get consumers interested
- High traffic locations are important, but often too expensive for business owners
- Retail stores require a significant initial investment
- 80% of retail clothing stores fail in the first 5 years
- Most retail stores fail because of
- poor management
- tough competition
- poor marketing
Direct Sales
- Higher than average failure rate for small businesses
- Examples include:
- Pampered Chef
- Mary Kay
- Amway
- Direct sales business owners must have
- exceptional sales ability
- stamina
- drive to succeed
- Improper training and lack of motivation leads to failure
- 40% of direct sellers spend less than 5 hours per week on their business
- 10% spend 30+ hours
- 99% of direct sales reps suffer significant financial losses
- less than 20% of retail products are purchased by anyone by the direct sales rep
Keys to Success in Small Business
- Start small
- a common downfall is tying up too much cash in overhead at the beginning
- Know your market
- learn as much as possible about your demographic before you open your doors
- Maintain quality merchandise
- Select merchandise carefully to meet your market's needs
- Listen to your customers
- Customer service should be a main focus. Happy customers will come back
- Be receptive to customer suggestions
- Company goals
- Set goals for a five-year target point
- Plot your course and break down your goals and strategies into a one-year plan
- Plan and control your inventory
- Establish a system to know and maintain your inventory level
- Market your business
- Location is key
- Think of cost effective ways to advertise your business
- Keep it Simple and Focused
- Most successful people do one thing very well and don't spread themselves too thin
Sources
- https://www.summitbusinesssolutions.ws/docs/reasons_biz_fail.pdf
- https://www.huffingtonpost.com/2012/02/28/restaurant-industry_n_1307930.html
- https://www.directselling411.com/for-sellers/myths-facts/a-few-interesting-stats/
- https://www.pyramidschemealert.org/PSAMain/news/MythofIncomeReport.html
- https://www.whitehutchinson.com/blog/2011/02/the-truth-about-restaurant-failure-rates/
- https://www.powerhomebiz.com/vol89/success.htm
