Business and Finance News

This is good news, now you want to hear the bad news?

If you do a quick search on the internet, you will discover hundreds of experts, coaches, accountants, journalists and Government agencies cite statistics “9 out of 10 businesses fail in the first year”. However, the fact that statistics is widely touted the merits does not necessarily mean that it is true or saved up by empirical evidence.

So, where is the truth? I have searched internet and could not find confirmation of any study which was done by bureau deemed to be or known to back-up this statistic. What I in fact found was evidence to the contrary. According to the Veda Advantage verification of the credit reference agency, only a small percentage of new firms close in their first 12 months of business.

What is the exact amount, you ask? Would you believe them less than two per cent?

However, they say that a further 32% close their doors between their second and fifth year of operations, while only 21 per cent of liquidation between the sixth and ninth.

Therefore, it is the good news. However, as you can probably guess, it is not all good news.
Simply because a start-up is not in the framework in the first 12 months, does not mean that the owner is running a successful business. I wonder if someone took the trouble to measure how much businesses have survived:

-Paid to the owner a salary that was at least equivalent to what he or she could also earned as an employee?
-A generated a profit and cash flow positive? and
-Had enough capital to repay their debts, pay taxes and providers etc. as they would come to maturity?

The first years of the company are extremely risky. Working with hundreds of business owners, we found that the vast majority choose to forego their salary or to inject more fairness to prevent them from moving prematurely. What this means is that, although they may not have disappeared “technically”, these fledgling firms are commercially viable and successful.

Statistics can be misleading and useful at the same time. It is easy to say numbers, but more difficult to justify their truth or explain the consequences of it.

The author of an article or a press release often use statistics for your attention and motivate action. This is why people use statistics – numbers are compelling and have an aura of authority. If these data are accurate or not, is only half the story. As a business owner or Manager, we must look deeper to find the ideas that we can withdraw and use to improve our results.

Personally, I don’t care what percentage goes under. No matter how long you have been operating, if you are not being paid a salary, producing profits and generate positive cash flow, you do not run a successful business. Close your doors, it is only half the story. The doors can be opened, but technically, no one is there.