Fear of failure is an understandable concern that can give even the ablest of prospective entrepreneurs cold feet about starting a new venture. Those doubts are amplified with every news story detailing the number of failed or closed small businesses.
L-A SCORE’s veteran counselor Edward Leveque suggests that small business entrepreneurs have a better chance of success than they may realize if they look behind those discouraging numbers.
“In fact, a review of business closings by the Wall Street Journal’s Small Business editors shows that the number of outright failures is highly exaggerated,” Leveque said.
“Nearly a third of business closures that government statistics assume to be failures are not really failures at all. These businesses were considered a success by their owners, who simply sold off the pieces or closed them to retire or pursue other activities.”
Data from the U.S. Census Bureau’s Business Tracking Series show that about 65 percent of new businesses are still operating after four years. That means new ventures actually succeed more often than not.
But the more resources a new business has to start with, the better its chances. That includes money, of course, but other assets such as market savvy and the right people. Here are four factors that improve the odds of new business survival:
• People. If you can afford to hire employees, do it. Well-staffed businesses have better survival rates than solo operations.
• Startup capital of at least $50,000. Not easy, perhaps, but businesses that start with less have a higher failure rate.
• A college degree for the owner. Better yet, enroll in a college-based entrepreneurship program.
• Home beginnings. To keep costs low, start initial stages of your business from a home office.
So why do small businesses fail in the first few years? Leveque lists some common reasons.
“Competition, mismanagement, high rent and insurance costs, high debt, inability to get financing, loss of clients and difficulty with collections. Most of these factors can be addressed early on through good research and planning, having a thorough business plan and getting advice from trusted, objective sources. Do your homework!” Leveque said.
To learn more about starting or building your small business, contact SCORE, a nonprofit organization of more than 12,000 volunteer business experts who provide free, confidential counseling and low-cost training workshops. In the Lewiston-Auburn area, call L-A SCORE at 782-3708 for additional information and an appointment; in Rumford-Mexico call 364-3123; in Oxford Hills call 743-0499. Or contact SCORE at www.SCOREMaine.org.