Overthrowing the Dreaded Business Failure Rate January 22, 2007
Posted by The Probabilist in : [Articles], Business, Entrepreneurship, Beliefs, Vision, Work, Assets , 2 comments
Nine out of ten new business ventures fail within the first five years. I don’t know about you, but I’m tired of hearing and reading that statement - simply because it just isn’t true! I wrote previously in what ways a business may come to an end and I felt I should make some further clarifications and explanations to debunk the 9 out of 10 failure rule for good. Following I’ll present ten different scenarios for businesses that last for up to five years and conclude a more accurate failure rate analysis from the results.
1. The business is still around. This is the one out of ten that still exists and shows a healthy pulse. Congratulations! I hope the business is treating you well and you’re working less while earning more in comparison to being a full-time employee in cubicle land. Remember that during the next five years your chances of survival are still the same as during the previous five years. These words aren’t even remotely discouraging to you or your efforts since you already feel invincible by now. But please do read the following ones just to give yourself a heads-up on possible outcomes that may not be that bad as the failure statistics try to terrorize us with.
2. The business got sold. If this is considered a failure, then count me in. A great portion of business start-ups launch specifically with the vision of being sold for big bucks in the coming years. This certainly isn’t the aim for my own blog venture, but I do wonder what the founders of YouTube have to say about the sale of their business. I’m guessing they’re feeling a bit down seeing as they failed pretty badly - in the statistics of things.
3. A better opportunity presented itself. This is the case of a business being alive for say, three years doing just fine when suddenly some new idea leaves you sleepless at nights. It might be your entrepreneurship contacts and friends deciding to put all heads together and start a completely new and innovative business that has far more potential than your current, slightly above average cash cow company. For the thrill of things and excitement thereof, who wants to run a business that ended up monotonous after a couple of years when there’s a chance of far bigger deals to be made in something completely different? Statistical interpretation: failure.
4. There’s an entity shift. Consider the previous scenario, but instead of joining or creating something completely different, you simply change the entity form to a more suitable one after you’ve noticed changes in your income generation or business model. Maybe you’re successful enough to make it into a franchise system, or you’ve simply decided to move elsewhere while still doing what you already have found yourself successful in. Statistical interpretation: failure.
5. Retirement or health related hindrance. “You’re old, sick and tired - you have failed.” How’s that for a comment to receive when you shake hands with your successor as (s)he takes over your business from you? Note again how this scenario doesn’t tell you anything about how profitable or growing the business has been before the shift happened. Saying that the inevitable or unrelated (e.g. physical accident) is accounted and marked as a failure is just plain silly.
6. Unknown, other or misc. reasons. While I’d like to let you know all possible reasons for a business to close down, there will always be the entrepreneurs checking this box when explaining the fate of their business. My own interpretation is that it is far more likely that these reasons stem from personal choices rather than failure related causes.
7. Not making a go of it. We’re gradually shifting lower and lower in the greyscale of success and failure, getting to a point quite exactly in the middle of both of them. This scenario means that the entrepreneur seized the business because it wasn’t as profitable as it required personal effort and labour. Working 14 hours per day might not be very motivating if you receive the same pay as being a nine to five employee. Note however that once again there’s no failure involved, only subjective opinion of how much the running of the business is worth to the individual entrepreneur.
8. Prevention from further losses. Now we’re getting very close to what some might define failure. This is the scenario where the entrepreneur is red-lining - losing money month after month. However, the creditors are still getting their agreed-upon payments, which means that only the business owner is the suffering party. Is this a case of failure? That’s up to you to decide. And when it comes to personality, defining yourself as a failure has never amounted to anything good compared to just accepting that you’ve tried something that didn’t succeed. Your creditors want you back for your next venture unless you’re occupied with banging your head against the wall and not realizing that you just have to bounce back.
9. Bankruptcy. Failure at last. At this point I have to give in and define this scenario as a failure. Undeniably, there has to be at least one outcome you want to stay away from knowing that nothing good comes out of it. This still doesn’t mean that the entrepreneur behind the business is a failed human being. You will find it long and demanding to dig your way out of the rubble and after that’s done, the future is up to you. Do you throw in the towel or do you learn from your mistakes?
10. The statistical anomaly. Some say the failure rate is 80 % and some say it’s 90 %. I say you decide this for yourself. Appoint this last scenario to any of the other nine ones that you’ve found most dominating over the others. If it’s failure to the worst degree then choose the 80-20 rate and if you think it belongs closer to success then choose the 90-10 ratio. This scenario is you in the making as you give birth to your next business venture.
Conclusions
My objective with this article was to turn the failure rate completely topsy-turvy. I wanted to show in a most simple way that the ratio of success and failure is completely inverted in comparison to what you might have believed previously about entrepreneurial success and failure. While the statistics say that 9 out of 10 fail, I state that 9 out of 10 succeed and only one fails. Note that this analysis does not take into account how common the different scenarios are in comparison to each other.
In my previous article I also defined entrepreneurial failure as the choice to stop being an entrepreneur. I’d also like to apply this statement into the 9 out of 10 rule. An entrepreneur that decides never to fail (as in not having the business vanish within the first five years), lives with the mind-set that they are ready to attempt 10 times before making it big. They know that most often you have to go with trial and error, or the ready-fire-aim approach. However, those who don’t share this mind-set are likely to quit after their first attempt.
When you apply this to the given ratio, it gets distributed something like this:
The most important insight you can gain from this article is that you first have to define for yourself what a successful and what a failed scenario is to you personally. Just because the mainstream statistical notion says that only a business running for at least five years is a success, doesn’t mean you have to think in these terms. Some may define the greatest success scenario as running a business for three years, selling it and retiring for good. Some may define success as running a business until their health stops them. And some are serial entrepreneurs and thrive from the thrill of starting fresh on a frequent time frame - while still being tremendously successful at almost every venture. Make up your own mind what you want to achieve, understand what the statistics mean and start creating your own, personal statistics of success. Failing or attempting a few times may be exactly the experience it takes to gain all the wealth and success that come from the business that ultimately succeeds - strictly under your terms.
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Steve Pavlina December 21, 2006
Posted by The Probabilist in : [Links], Business, Consciousness, Entrepreneurship, Health, Goals, Personal Growth, Productivity, Purpose, Beliefs, Sleep, Wealth, Blogging , 4 comments
Steve is one of today’s beacons in personal development. Not only does he write exceptionally rewarding and original articles, but he also inspired me to create this blog of my own. His website has been online a good two years now and is filled with over 500 articles on everything from courage, motivation, awareness, wealth, purpose, habits, productivity, business, intention-manifestation to the meaning of life and death.
Additionally, he has been recording podcasts once or twice per month on the very same topics and they are free of charge as well. They are highly recommended to listen to and I usually play them while walking, jogging and commuting. As of now, they sum up to over six hours of valuable insights on beliefs, courage, purpose, entrepreneurship, problem solving, etc. In October of 2006 he launched a public forum, which has been surprisingly active and of high quality. It’s the only one I’m currently regularly visiting and occasionally writing in.
A good place to start is the Best of StevePavlina.com section on the sidebar that covers the 20 most popular and valuable entries that he has posted. Like any other blog, you can search for specific content by category, archives (chronology) and search box. Some of his more lengthy and focused articles are found under the separate articles tab. Steve also has an excellent polyphasic sleep log from his five-month experiment a year ago. Be sure to check that one out too as I’ll be starting my journey after approximately a week.
While Steve is very successful in all aspects of personal development, he’s very much into genuinely helping others as well to become more conscious and aware of living purposefully. He has truly proven that it’s possible to do this while still recieving an adequate, or even overwhelming stream of income doing it. As Steve himself puts it, it’s all about providing value to others. And the one who is willing to practice and master this skill, will live a life of abundance instead of scarcity.
Some of the content on my own blog is the result of the great impact that Steve’s writings has had on me. So even though similarities may be found, it’s all in the name of spreading the good message of awakening more people to their true potential. My words don’t yet have the strength to describe how incredibly useful Steve Pavlina’s site is, so please do visit it just in case you didn’t stumble upon my blog through his forums where I participate.
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