Why Small Businesses Fail & How To Be an Outlier

Motivation

Feb 23

Small businesses fail every day. They don’t make it. We’ve all heard the stats that show how rare it is to actually make it as a small business.

Here’s the facts by the U.S. Bureau of Labor Statistics (BLS):

20% of new businesses fail during the first two years.
45% during the first five years of business.
65% during the first 10 years.
Only 25% of new businesses make it to 15 years or more.

The odds are against us.

But if you are anything like me, you will bet on yourself every time and take the risk.

Sometimes businesses just fail. The business owner may make overall good strategic decisions and still end up having to close the doors.

So what are the most common reasons why new businesses fail?

Here is the short list of why new small businesses fail according to Investopedia:

Not investigating the market/Not satisfying a need
Bad business plan
Lack of financing
Bad location, internet presence, and marketing
Inflexibility/remaining rigid
Expanding too fast

These all make sense. Each of those can be a small business killer. The point of this blog though is not to be pessimistic.

I don’t think your small business has to fail. It doesn’t have to follow the statistics. You can be an outlier. I’m an outlier.

I think there is a common thread for the businesses that make it.

They just don’t quit. They don’t let their business die. They just keep running. They just go. They don’t let it fail.

Effort + Strategy + Stamina + Iterations = Shots on Goal

To use a basketball analogy for a second – you aren’t going to shoot 100%. But I also know you aren’t going to shoot 0%. You will make some baskets. If you try enough things, enough times, something is going to stick.

Hard Work + Some Luck = Success

I love the end of every episode on NPR’s How I Built This with Guy Raz podcast where he asks the final question, “Was it luck or hard work/skill that led to your business becoming a success?” I don’t think I’ve ever heard an answer where the business owner said it was 100% skill or 100% luck. I’ve listened to a lot of episodes and in all the ones I remember the entrepreneurs seem to state that there was some type of blend of both luck and hard work/skill. My favorite answer I’ve heard in response to that question is that it took a lot of hard work, skill, and an extended amount of time that put them in the right moments (that were debatably lucky) that they were ready for.

The hard work prepared them to be ready for the lucky breaks.

Here’s how I like to think of it.

Maybe we all are presented with lucky chances and setups, but maybe we all don’t seize them when they line up.

If you aren’t doing the work, then when you meet that person who could change everything, you’ll miss it. They aren’t going to be compelled to help or invest if you’re just sitting around on the couch all day.

Yet, what if you had a prototype, case studies, and proof of concept? It may end up differently.

If I’ve learned anything as a small business owner myself, as well as being a small business consultant who has worked with hundreds of small businesses over the years, it’s that there is never a shortage of work to do. You can always do more.

You can refine your product or service.
You can tinker with your business plan.
You can come up with new marketing campaigns.
You can show up on social media.
You can write another blog (which also helps with SEO 😄).
You can go to in-person events and meet-ups.
You can do sales outreach.
You can do market research.
You can perform your service better.
You can make more of your products.
You can analyze your finances.
You can test pricing and packaging.
You can update your branding and online presence.

It never ends.

I’m not preaching to work yourself dead. You need to enjoy life, too. You don’t have to work every waking hour. There will always be more work to do.

The funny thing is how many entrepreneurs I’ve heard tell me that they don’t really have anything else they need to do – that they are all caught up and “just waiting for some things to line up”. Maybe that will work, or maybe that’s a major contributor to the statistics I outlined earlier.

Success isn’t found in passivity.

Instead, I believe it can be found through the awareness of the agency that we have over making our businesses succeed.

There is a balance. We can’t control everything. There are a lot of outside forces at play. Economy, competitors, market trends, consumers willingness to spend money, etc. Yet, we do have some control. The more we lean into what we can control and dance with what we don’t, I think we tip the odds in our favor. It’s where we become the outliers.

If you need help on any of the above six reasons why businesses fail, hit us up. We believe in you and we have a knack for helping small businesses like yours defeat those killers. Yet, all you may have needed is just to hear that you are an outlier. You are a disruptor. You can defeat the odds.

There isn’t this impending doom coming for you where your business will all of a sudden just fail because that’s what the statistics show happens.

With some hard work/skill, luck, and not giving up you can win.

I’ll finish with one of my favorite small business stories about Dyson, the vacuum brand, that I heard on the How I Built This podcast. The way the founder, James Dyson, answers the question stated above about how much of his success is attributed to hard work/skill or luck, leads into one of my favorite analogies for business success:

“Absolute none to my intelligence, hard work yes, perseverance yes, and luck yes. I do believe though that you create your own luck, because luck is around.”

He continues, sharing about how running long distances is quite similar to running a business. He said he grew up doing long-distance running and the only way to succeed was by doing a huge amount of training – particularly by developing stamina, the willingness and ability to not quit for an extended period of time. He said he would often get tired while running, but then he would remind himself that the other runners were also feeling tired. He realized that when he was feeling tired that was when he should accelerate.

This is when you start winning. When you feel like giving up, it is precisely the point that everyone else gives up so you must put in the extra effort – and when you do, that success may quite literally be “just around the corner”.

Keep going. Don’t quit, accelerate instead. You got this.