Back on May 2, 2022 LendingTree published a report about the newest business failure stats. Although this report is an editorial I think there are some good lessons new entrepreneurs can learn so they can avoid their business collapsing.
Business Failure Stats: Let’s Review The Hard Truth
The report discusses the latest figures from the U.S. Bureau of Labor Statistics (BLS). You, as a new or seasoned business owner probably doesn’t want to hear this: One in five businesses fail within the first year. After five years nearly 50% of small businesses are no longer in operation.
If you’re in Hawaii your states has the highest percentage (25%) of new business that close after a year of operation. The next two states are on the mainland: District of Columbia and Kansas.
Why Does This Happen?
Businesses fail for several reasons:
- Lack of money
- Employees leave or can’t find good employees
- Owners discover self-employment isn’t for them
- There’s no demand for their business
What Can You Learn From This?
What should you learn from these business failure stats? Well, for one you need enough money or access to good employees if your company is going to succeed. Without money or employees you won’t survive. And with the rising costs squeezing small business and the Great Resignation still going on many entrepreneurs find themselves in difficult positions. To stay afloat you will have to pay more for products/services and to retain your talent, lest you give up and lose it all.
Business Failure Stats: Avoid These Industries
There are some industries you should avoid because these have the highest failure rates:
- Oil extraction
- Janitorial services
- Customer service
- Arts and entertainment
If you already operating in one of these industries then prepare for the worst, but hope for the best. If you’re interested in opening a business in these industries still I highly suggest you have Plan A, Plan B, and Plan C.
How To Succeed In Your Business
Reading the business failure stats the small businesses that survive do the following:
- Have a business plan
- Has cash reserves
- Uses credit wisely
- Have low expenses
- Invest in good training programs for their employees
If you follow all of those tips you improve your business’ chances at success. And that’s the best you can do. Life events can happen and throw all your best plans out the window. Yet, you can still bounce back if you have a good foundation. And that’s what you need to do from the very beginning.