Thursday, January 04, 2007

Small Business: Stronger than you think!

I don't know how many times I’ve heard the statistic that “80% of all small businesses fail in their first five years.”

Put it out of yourhead. I have never seen the source of that statistic, but I’ve always known it's wrong. No one knows how many businesses “fail.”

The best that researchers can do is track companies that go out of business – which means they can't tell the failures from the wind-ups, the retirements, the merged or the acquired.

But even that figure seems overstated, as I've just discovered a statistic that is much more bullish.

In 2005, Statistics Canada reported on the results of a longitudinal study of Canadian businesses that found Canadian firms last longer than most people thought. Sayeth StatsCan:

  • “Of all firms that were created during the 1990s, roughly one-quarter ceased to operate within the first two years, according to a new report that analyzes the impact of economic developments on business dynamics during the past decade.
  • "Just over one-third of these firms survived five years or more, and only one-fifth were still in operation after 10 years.”

So the 80% “disparu” rate is for 10 years, not five – which supports the contention that many of these businesses were wound down rather than “failed.” If a business needs 10 years to “fail,” it must have been a success for some of that time!

And never forget: most businesses are small businesses. The study found that as of 2001, “only 0.2% of firms employed 500 or more employees, but they represented 42% of total employment. The vast majority (92%) of companies employed fewer than 20 workers, and they accounted for 21% of total employment.”

You can check the stats yourself at http://www.statcan.ca/Daily/English/050215/d050215a.htm

1 comment:

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