Q:
What year is the most critical for business survival?
A: The
statistics indicate the first four to five years are the
"survival years." Each year, one out of 12 businesses in
the United States closes its doors, but this rate is one in six in
the first four to five years. A recent study of new businesses in
British Columbia found "there is no abnormally dangerous year
among the first five. By the same token, the risk of going out of
business does not lessen in any of the first five years."
Of course, not all businesses that close are failing. In fact,
the IRS tells us that 57 percent of business owners with employees
and 38 percent of those without employees who went out of business
reported they were successful at the time of closure. Consider, for
example, the homebased worker whose major client offers her a job
she cannot refuse.
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Still, the first one to two years are hardest for many, and
specifically for certain industries, such as independent (not
franchised) restaurants and network marketers. It's also true
that in a fast-changing world, any business can be faced with
survival issues at any age. New technology, changing distribution
patterns and shifting consumer tastes can all bring a business'
survival into question.
What makes the first five years the most hazardous? For a
homebased business, it's not having a financial plan to cover
family living expenses particularly during the first two years. It
takes time to develop and concentrate on marketing techniques that
produce business, to find a profitable mix of products--whether you
offer products or services and sometimes both--and to develop
repeat and referral business. Most people say everything takes
longer than they expected.
If you're thinking about starting a business, what can you
do to give your business the best shot? Start it on the side part
time before you give up your day job, and let your current income
absorb the learning curve most new businesses must go through.
Paul and Sarah Edwards are the authors of several homebased
business books, including Working From Home. Their latest book is Why Aren't You Your Own Boss?