I’m researching business ownership success rates for a presentation next week. It turns out that – wait for it – the numbers are way better than they’ve ever been.
Scott Shane writes in Entrepreneur, “The rate at which American employers go under has fallen by 30 percent since 1977.”
Mr. Shane’s article then discusses five reasons why he thinks this is so:
- Business founders are assessing their potential startups more rigorously.
Absolutely! We now clearly understand that startups and small businesses aren’t just smaller versions of large companies. They’re a different breed entirely. The lean approach, business model canvas, and startup events have spread this thinking everywhere.
- New companies are being started in sectors that have a higher chance of success. This is a predictable result of analyzing and assessing, isn’t it?
- Business owners are better educated than ever before. Not only do we have better models than ever before, it’s easier than ever to find good lessons and advice.
- The technology available to business owners is better, and it’s getting used more. I can attest to this from launching a new product last month. Creating websites, landing pages, processing orders, and setting up merchant accounts can all be done in a few hours.
These points go directly to something I’ve always preached: business ownership is a distinct vocation. And like any profession, it requires knowledge, training and practice.
Mr. Shane’s fifth point is that less companies are being started. Which means that competition to established businesses from new entrants is reduced.
This declining startup rate is often presented as bad news. But it’s predictable: business owners that are better educated and doing more up-front assessment will naturally start fewer businesses and – as we’ve just seen – fail less often.
But when they do decide to start, their success rate is higher and I bet their businesses grow faster, too.
This awareness, that “smarter = more successful”, showed up clearly in a survey of over 1,100 business owners I did last year. They identified three things they needed to be successful: better thinking, better planning, and better advice.
But – and I found this very interesting – 74.1% said that they didn’t get enough support from their professional advisors.
Hmm… seems like business owners are leading the way. Time for us business advisors to pull up our socks and catch up!