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Small business survival: The numbers don’t lie!

Team Space

If you speak to people who know business statistics, you will hear them say that many small businesses will fail within the first five years. These facts are a contributing factor to people buying long-established businesses in order to gain a higher chance of success compared to a start-up. So what are the odds of surviving more than five years? There are government organizations who keep statistics on this. According to the U.S. Bureau of Labor Statistics, “About half of all new establishments survive five years or more and about one-third survive 10 years or more. As one would expect, the probability of survival increases with a firm’s age. Survival rates have changed little over time.” These statistics are backed up by the Small Business Administration (SBA), who state that nearly 66% of small businesses will survive their first two years. What that implies is that only about one-third of total businesses will actually fail in these first two crucial years. The reason that is given is the lack of business experience by the owner/management of the business.

According to Statistics Canada, “Thousands of businesses enter and exit the marketplace throughout the year…..The greatest number of SME births (13,820) and deaths (12,590) occurred in professional, scientific and technical services, followed by construction (12,050 births and 11,900 deaths). Mining and oil and gas extraction had the fewest SME births and deaths (780 and 800 respectively). In 2013, the total number of SME births was 78,430, compared with 83,240 deaths, which resulted in a net decrease of 4,810 businesses.” With all these numbers, what are start-ups to do if they want to survive? Most business experts will say that watching debt and expenditures are key to success. Others will say that budgeting with fixed expenditures will also help you keep your focus on growth rather than where you can save money next.

Even the Canada Business Network states on their website: “When you start your own business, you may have to wear many “hats.” You may have some great ideas, but how are you at handling business operations like administrative or managerial tasks? You need to know your strengths and weaknesses. Lack of management experience can lead to small business failure. Do not be shy about seeking out the advice of experts, networking with other entrepreneurs, and hiring employees to help you run the business.” In other words, paying attention to detail and motivating others are all key elements to achieving business growth and ultimately, survival.
Here are some of the survival tips that Canada Business Network gives to help avoid the pitfalls that often lead to small business failure.

  • Develop a good marketing and business plan that takes into account customer needs, competition, pricing and promotional strategies.
  • Have a good working knowledge of business law or hire a lawyer.
  • Understand your business finances, such as cash flow and handling credit.
  • Keep a good inventory of your products or services and your existing customers.
  • Supervise, train and motivate your employees.
  • Make sure you have the experience, expertise and talent to run your business.
  • Plan every part of your business from start to finish.
  • Know your market and define how much of it you will be able to capture.
  • Make sure you are offering a product that is unique and competitive or at a lower cost than competitors.
  • Don’t under estimate your expenses and over-estimate your revenue.
  • Make sure you have some cash reserves or a line of credit to help you get through slow periods.

Another mistake that some small businesses make when starting out is trying to build all their infrastructure while they are just start-ups. They want to use start-up funds to lease office space, furnish it and lease expensive office equipment. They fail to realize how much the infrastructure costs to develop and how much debt they will have to carry for this infrastructure. There are alternatives that they should look into first, such as serviced offices, shared offices and coworking spaces.

Serviced offices and shared office spaces come at a fixed rate per month and the infrastructure is already set up. so there are no worries about negotiating leases for photocopiers or having to wire the office for Internet and phones, as they are already in place. Very similar to shared offices, coworking allows for a space to get work done without the formal or traditional office environment.

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