Small Businesses: What Factors Decide Their Survival?
As a small business owner, you know that the decisions you make ultimately affect your future success. Many small businesses never make it past 7 years, so it is important to stay updated about your market and make educated decisions. Here are some statistics and guidelines you can follow to let you know what factors make a business stay strong.
Statistics of Small Businesses in the U.S. Economy
99.7% of Employer Firms:
Take up 50% of private sector employees.
Compensate for 44% of the total U.S. private payroll.
Have created 65% of new jobs during the past 17 years.
Employ 43% of high tech workers, including scientists and engineers.
Consist of 52% home based businesses and 2% franchises.
Took up 97.5% of all identified exporters and brought 31% of export value in the 2008 fiscal year.
Generate 13 times more patents per employee than large patenting firms.
Success Rates of Businesses through the Years
Number of Years:
1 – 85%
2 – 70%
3 – 62%
4 – 55%
5 – 50%
6 – 47%
7 – 44%
8 – 41%
9 – 38%
10 – 35%
Average Characteristics of Small Businesses in the U.S.
57.1% of small businesses bring in less than $25.00.
93.1% of small businesses bring in less than $250,000.
51.6% of businesses are based at home.
62.9% of home based businesses do not have employees.
Differences between Closures and Failures
The Census Bureau groups together both voluntary closures and failures, causing business failure rates to appear more intimidating. An example would that in 1994, the census ratio of failures to successes for startups was 11:1 (91%), while the D&B ratio for the same year was 10:1 (10%).
Causes of Failure
1. Inexperience.
2. Not Enough Funds.
3. Bad Location.
4. Bad Management of Inventory.
5. Over-Investing in Fixed Assets.
6. Poor Credit Arrangements.
7. Using Business Funds for Personal Uses.
8. Growing Too Quickly.
9. Tough Competition.
10. Low Amount of Sales.
Business Plans Raise Capital
Here are the statistics of businesses that completed a business plan:
Securing a Loan
Yes - 36%
No - 18%
Secured Investment Capital
Yes - 36%
No - 18%
Observed Business Growth
Yes - 64%
No - 43%
As you can see, small businesses have a tough road to travel because they are very susceptible to bankruptcy and debt. Use the above information to help you become a better informed entrepreneur and lead you to the path of success and prevent your business from becoming a statistic.
