Monday, August 21, 2006

New Businesses Face Real Challenges

Although starting a business can involve a steep learning curve, the number of companies that fall over the edge in the first few years has not been adequately quantified.

According to Amy Knaup, a researcher at the Bureau of Labor Statistics, 66% of 212,182 employer businesses started in the second quarter of 1998 lasted two years while 44% lasted four years.

Brian Headd, Small Business Administration’s Office of Advocacy economist, used Census data available on 12,185 firms started between 1989 and 1992. Headd discovered that while 66% remained open after two years, 49.6% persisted after four years, and 39.5% were still around after six years. But success is truly in the eye of the beholder. The one third of businesses that shut down or were sold were still considered successes by their owners. That’s because some of the owners chose to shut them down because of retirement or ill health or wanted to turn a profit.

But the Achilles heel of this study is that while it is possible to get solid stats on companies with employees, it is virtually impossible to ascertain the fate of non-employers which account for ¾ of all U.S. businesses; they file little information on their companies.

It helps to know the odds of success however confident you are in your business venture. Whenever businesses do succeed it’s a triumph of a well researched understanding of a sector and your unique response to it. If you keep a steely-eyed composure in the face of overwhelming odds, you will continue to build a stronger business.

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