A Lot Of Businesses Fail… So What?
I’m not quoting exact statistics here but you’ve all heard the general consensus…
“80% of businesses fail in the first 5 years.”
“Two thirds of businesses go bankrupt within a decade.”
We’re continually beat over the head with frightening statistics about high rates of business failure. It’s enough to scare any logical young person away from creating their own LLC.
Yes, a lot of businesses fail but there’s more to that number than the doom and gloom click bait headlines such as “7 Reasons You’ll Fail As An Entrepreneur!”
Here are a few points to consider…
1. Serious Entrepreneurs Won’t Quit After 1 Failed Business
How well did you drive your first time behind the wheel? Is getting fired from your first job equivalent to total career failure? Were you labeled a ‘failure baby’ after your first unsuccessful attempts to walk?
Failure rates are probably much higher for first-time entrepreneurs than those who bring their accumulated skills and experience to their next venture. But of the people who start a first business, only a percentage will go on to launch a second, and even less a third. This means that a majority of this ‘failure’ data comes from entrepreneur’s first attempts to start a business. The small percentage who launch second and third ventures can't improve the statistics much even if they achieve very high rates of success.
2. 'Failure' Isn’t So Bad
Of the numerous business failures every year many of them are likely small, perhaps just a few thousand dollars… That's more of a well-priced learning experience than a life altering ‘failure’.
The ‘LL’ in LLC stands for Limited Liability. The government created entities like this to keep failure small when it occurs. Rather than losing your house, car and everything else in a lawsuit, your losses are limited to your investment so that business failure doesn’t equate to a financially crushing life failure.
3. A ‘Failed’ Business Could Have Been A Profitable Business!
If I open up a horsewhip factory in 1900 and sell my whips profitably for many years, is that a successful business? Yes.
In 1908, Henry Ford invents the car and soon nobody is buying horsewhips. I’m out of business in less than a decade. Was my business a failure? NO! I made a healthy profit and paid myself well for many years. Once the market shifted the business went bankrupt, but that does not mean it was a failure.
Businesses don’t need to last forever in order to be a good investment. Of the businesses that fail a portion of them were likely still good investments for their owners.
Don’t Let The Headline Statistics Scare You
Yes, your business may fail. If you’re a first-time entrepreneur it’s likely. The soul-crushing click bait articles displayed by major newspapers and websites paint a gloomy picture but they don’t tell the whole story.