By some estimates, over 99% of businesses in the United States are small businesses. These are companies with fewer than 100 employees and there are over 28 million of them in the entire country. Unfortunately the majority of these businesses will go out of business in a decade, but why? Twenty percent of small businesses fail in the first year, but even if you make it past that milestone you are far from home-free. Over a third of businesses fail in the second year, half fail by the fifth year, and 70% fail within a decade.
Twenty percent of small businesses fail because they were outcompeted, which can be a difficult thing to overcome even in the best of circumstances. Having the wrong team is a detriment to many businesses, and it puts 23% of them out of business. While you may want to lead with your heart and give everyone a fair chance, sometimes the wrong fit is just the wrong fit and you have to do what’s best for your business. Nearly 30% of businesses fail because they run out of cash at an inopportune time, while 82% of businesses go out of business because they repeatedly experience cash flow problems. Finally, 42% of businesses go out of business because the market they serve is no longer relevant, highlighting the importance of being versatile.
These are the most common reasons why businesses fail, though there are certainly many more. Researching which sector is growing the most is a great way to hedge your bets and make sure you are in the right market. Healthcare has some of the best survival rates, while transportation and construction have some of the worst survival rates. Food service is probably the most misunderstood business, because while it is totally possible to make a living in the restaurant and foodservice industry, misconceptions can hold you back from needed funding.
If you want to succeed in the business world, test your product to ensure it is marketable, listen to your customers and take feedback seriously, and make sure you build the best team possible. Don’t give someone a job because you feel sorry for them – make sure they are a good fit for your organization and will represent your company well. Learn more about why businesses fail and how you can prevent your business from failing from this infographic. You might be surprised to learn there are a few things you can tweak to increase your long-term survival!