Tuesday, March 30, 2010

Business failure rate is up to 90%, Myth or Fact?

For most small business entrepreneurs, one of the scary statistics quoted whenever someone talks about going into business is that up to 90% of businesses will fail.

Have you ever had your friends or family quote that to you?

Why is this figure religously quoted by business experts, media, and your mother-in-law?

Well it seems that once-apon-a-time an academic who was charged with researching this topic, on a slim budget, performed a simple analysis of business names in existance now, as opposed to those in existance 5 years ago, and then inferred business failure as the cause.

Of course this didn't take into account change of ownership, change of business name, businesses exiting because the owners were retiring, takeovers etc. But nonetheless the myth was created. 

In reality for Australia around 7.5% of businesses cease trading each year according to the Australian Bureau of Statisitics and approximately one third of these are attributable to 'business failure.'

This is not to say business is easy or for the faint hearted, but you can tell your mother-in-law to cheer up it isn't a horror story either.

Business Success to You!

Nigel Martin

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