The most common concern new entrepreneurs have is the fear of failure about starting a new venture. These doubts are increased with the seemingly constant news stories about failing or closing small businesses.
“The truth is that small business entrepreneurs have a better chance at success than they may realize,” said Ralph Tuttle, Central Maine SCORE mentor.
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.
“The analyses show that nearly a third of business closures that government statistics assume to be failures are not really failures at all,” he said. “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 Information Tracking Series shows that about 65 percent of new businesses are still operating after four years. This means new ventures actually succeed more often than fail.
The likelihood of success is increased by the availability of more resources. That includes money, of course, but also other assets, such as market savvy and the right people.
Here are four factors that improve the odds of start-up survival:
People: If you can afford to hire employees, do it. Well-staffed businesses have better survival rates than solo operations.
Funding: start-up capital of at least $50,000. Not easy, perhaps, but businesses that start with less have higher failure rates.
Education: a college degree for the owner. Even better, enroll in a college-based entrepreneurship program.
Home beginnings: To keep initial costs low, start your business from a home office.
Why do small businesses fail in the first few years? The most common reasons include 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. Unforeseen and uncontrollable factors that lead to failure may still arise, but doing your homework will definitely put the odds of success in your favor.
For more information and an appointment to meet with a volunteer mentor, contact Central Maine SCORE at 782-3708 or at lewistonauburnscore@gmail.com. In Oxford Hills, call 743-0499; in Rumford-Mexico, call 364-3123. Or contact SCORE at www.SCOREmaine.org.
This column is provided by the Central Maine SCORE chapter.
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