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The rate of business failure is often overlooked and under-reported, but it’s a real occurrence happening all around the world. Here are 7 astonishing facts about business failure you should be aware of:
1. About 50% of Small Businesses Fail in the First Five Years
According to research by the Small Business Administration, about half of all small businesses fail in the first five years. That’s a stunningly large number and should give entrepreneurs plenty of pause, as it shows the immense pressure and risks associated with starting a business.
2. Most Failures Occur Within the First 18 Months
That same research also found that most small business failures occur within the first 18 months of operation. This further reinforces the difficulty associated with launching a successful business and shows how quickly it can all come crumbling down if you’re not extremely careful.
3. Generally, 90% of Startups Fail
There’s no way to get around it – the statistics are simply not in the favor of the entrepreneur. Statistically, an estimated 90% of all startups fail, which is an incredibly high number and should be considered when going into business for oneself.
4. 25% of Businesses Close Due to Poor Management
Poor management can be a death knell for a business. Some businesses simply run out of steam or don’t have the operational know-how to succeed. A full quarter of all businesses have failed due to poor management, whether they were mismanaging their finances, personnel, or customer relations.
5. Financial Difficulties are the Biggest Cause of Business Failure
If bad management wasn’t the top factor in business failure, then money issues undoubtedly are. Financial difficulties are by far the biggest cause of business failure, regardless of size or sector. Money woes can sink any business, regardless of how good its product or service is.
6. Many Startups Fail Because of Poor Pricing Strategies
Pricing is a huge factor in any business’s success or failure. Too often, entrepreneurs either price too low or too high, leading to cash flow and margin issues. As a result, prices should be carefully analyzed and monitored to ensure the business is getting a fair return on its offerings.
7. Bad Location is a Common Cause of Business Failure
Location is crucial for any business, yet it’s often over-looked. Setting up shop in the wrong part of town or in a part of town with no foot traffic can be incredibly costly for retail operations and for online business, where website traffic is so important.
These 7 astonishing facts about business failure should give entrepreneurs a glimpse into the real risks associated with starting a business. Although failure is a real possibility, it need not be the end result. The smartest entrepreneurs risk failure in order to reach success.
7 Astonishing Facts About Business Failure
