According to the Small Business Administration (SBA) in United States, 50% small businesses survive beyond five years. In fact, 33% fail in the first two years itself. the main cause for failing is cited as lack of experience.
Here, failing means not being able to carry on the business due to financial problems (or resulting legal action) or closing down the business voluntarily.
How does a small business survive in the long run?
1. Choose the right business to be in.
Small business five-year survival rates by industry:
Mining (51.3 percent)
Manufacturing (48.4 percent)
Services (47.6 percent)
Wholesaling and agriculture (47.4 percent)
Retailing (41.1 percent)
Finance, insurance, and real estate (39.6 percent)
Transportation, communications and utilities (39.4 percent)
Construction (36.4 percent)
2. Buy existing established businesses with proven systems and track record in place.
3. Make good use of your money and find customers fast (by building things that people want.)
For startups who have taken outside funding, the average lifespan is less than 20 months from its last funding round, when it fails to get more funding (or a buyer). Most don't last beyond 16.5 months after last funding and a few struggle on, finally closing in five years.
4. Get a grip on financial and marketing knowledge relevant for your industry, fast.
The Dun & Bradstreet Business Failure index indicates that 92% of all business failures are because of one of two failures of the owners of the business:
A lack of financial management skills and knowledge.
A lack of marketing skills and knowledge.
Lesson: Focus on sales from start.
5. Don't rely on just one/two customers or products.
Spread your risk. As they say, don't put all your eggs in one basket. And please don't be dependent on one/two employees as well.
6. Think long term from the start
Better products, more products that people want, useful partners along the way...just look at your business plan regularly to get a grip on things and what else you have to do.
7. Do everything you can to survive
A study in the United Kingdom of 20 small and medium-sized high-growth companies found three things these outliers were doing very well consistently:
- They kept their costs down, without compromising on quality, which meant they didn't have to indulge in desperate price wars all the time.
- They kept innovating, bringing in new products, services, or processes. They spent on R&D.
- They built tailored solutions, working closely with all important customers to bring out highly customized offerings.
Thank you for reading.
This guide is from The Success Manual, which contains 200+ guides to succeeding in business, career and personal life. Get the pdf ebook for $12 only.