Entrepreneur Article One: Saving Our National Treasures Entrepreneurial Success versus Small Business Failure

What follows is totally new thinking regarding the nature of small business success and failure. Accept as a preface that this is neither an attack on more traditional thinking, nor a rebuke of agencies, educators, and other caring, accepted authorities on the subject of entrepreneurship. Instead, this is a journey into the more personal aspects of entrepreneurship and a new perspective on solving a difficult problem.

There are two widely accepted reasons used to explain why small businesses fail. One is an inadequate understanding of the business; the other is insufficient capital to sustain the venture. Even though those are obvious contributors to failure, I believe there is a much more basic cause of failure; one that is far more powerful and important than knowledge or capital. Just keep in mind as we go forward that any venture can be shoe-stringed financially, and the processes required to run almost any business can be learned. Therefore, accepted theory is not my resting-place.

Let’s begin our analysis with an often stated, yet unfortunately true, piece of information. According to government statistics, two-thirds of all new businesses fail before they are five years old. Like many of you, that statement had been drilled into my head to the point where I was made immune to its implications. And, even though I have personally experienced most of the wins and bruises associated with entrepreneurship, I never took to heart, or fully appreciated, the true meaning of that statistic until I quietly pondered the numbers. Then, as the magnitude of the problem impacted on my thinking, I took up the Grail and set out on a quest to help entrepreneurs win more and suffer less. That mission is both the center of this article and the core of my work. 

Percentages are often more meaningful when we consider the numbers they represent. For example, if we state, and accurately so, that only 5% of the total number of businesses in existence are start-ups, that is not terribly significant. But, that 5% represents 700,000 start-ups per year; a huge number by any standard. (Note: There are somewhere between 12 and 14 million total businesses in North America, ranging from General Motors to Pete’s Amway sales, whether white or black entrepreneur, women or men, or young and old. The percentages and the facts are about every entrepreneur and every free enterprise.) 

The next step is to calculate failures and see what kind of humanity we are dealing with. If my math is right, 66% of 700,000 equates to roughly 455,000 failed or failing businesses at any given time. Friends, please focus on the size of that population for a minute. Four Hundred Fifty Five Thousand infant businesses are in various stages of dying! Think about it! If we just assume that the average “new” business employs a minimum of two people, and further assume that at least one family of three depends on the success of that business, I think we have a population well worth saving. If all of Boston, Dallas or Detroit were in a death grip, a state of emergency would be declared and sufficient forces would be mobilized to fix whatever was wrong. I am a conservative thinker on most issues, and I am not for more interference in our lives, from the government or any other source, but with those statistics, don’t you think some real help in the form of a solution for decreasing failures is in order? With such a high loss rate, you would think that general subsidies to truly fix the problem would be a shoe-in, but unfortunately, that is not the case. In most instances, the bottom-line medicine given to most failing owners is, at best, a heavy dose of empathy.

 

Please think about how many bank accounts and life savings are wiped out via the carnage of 455,000 dying businesses. How many families are torn up? How many health problems result? Literally, how many lives are lost? What is the net cost to society as a result of the problem? And finally, what are we doing about this tragedy? When you take a hard look at the issue, the answer is little of real value. This is the true reality of entrepreneurial success and failure. This is the true reality of small business start-up statistics. 

We support entrepreneurship because it is our economic lifeblood and the foundation of our hiring future. We strive to help businesses in general, but on the individual level, those facing failure are courageous souls who basically face the world alone. We offer great assistance to the unemployed and the needy, and that is proper, but our entrepreneurs are also valued commodities that deserve care and nurturing. Our governments, workforces, indeed, our entire economic base depends on these critically important men and women, but we are woefully lacking in assistance when they are in trouble. 

Next time, we will take a look at the players involved and begin to flesh out why traditional thinking and support systems need refinement. 

By Nicholas A. Bibby

Source: The Bibby Group