Let’s be honest: launching a business is like jumping out of an airplane and trying to craft a parachute on the way down. It takes a lot of courage, ingenuity, hard work, and determination.
And, the biggest risk of all: there’s no guarantee that you will succeed.
However, the simple thought of creating something that is your own and sharing it with the world makes the risk well worth it. Yes, the chances of failure are extremely high, but the lessons you learn in the process are priceless.
If you’re a small business owner, then maybe this is not the type of encouragement you want to hear. But, we’re not here to sell you dreams but to present the reality of what it means to launch and run a small business in today’s market. So, here are five important statistics you should be aware of if you want to succeed.
It’s a Grim World for Small Businesses
According to the Bureau of Labor Statistics, two-thirds of businesses will make it to the two years mark, and only half of them survive for more than five years.
Don’t assume that if you’re in an up and rising industry, then you have better chances than other companies. According to the institution, the industry you’re in makes little to no difference to your “survival rate.” As such, there’s no significant difference between a web design company, for example, and a restaurant, one of the riskiest business sectors according to some.
In fact, the industry weighs less when compared to your longevity. Data shows that the “death rates” among small businesses are significant only in the first years of activity. The first two years and the next three are like rites of passage – once you’ve successfully survived them, you’re in the clear (at least for a while.)
Insufficient Cash Flow Can Be a Death Sentence
According to a U.S. Bank Study, the vast majority of businesses fail because of poor cash flow management.
Here’s the thing: a lot of businesses think that if they have sales and profits, then their company will grow automatically. However, when it comes to business, two plus two don't always equal four. Sure, money is coming in, but are you considering the costs of running and operating your business? Do you have the cash flow to sustain the growth and respond to an increase in products’ demand?
If the answers are no, then you can expect to run into serious problems sooner rather than later.
Poor Investments and Financing Decisions
You may have some savings or rely on your friends and family to build and launch your business, but the fact of the matter is that these funds aren’t sufficient to fuel a company. You need to spend money to make money – it may sound like a cliché, but it’s the truth.
According to the National Small Business Association, 73 percent of small companies needed financing in 2017.
Unfortunately, trying to determine how much money you need to grow your business isn’t a simple task. Numerous factors can influence your financing needs, such as the market demand, your customer acquisition costs, your potential for growth and even your employees. According to the same NSBA report, 43 percent of employer businesses needed about $25,000 in startup capital, while only 12 percent of non-employer companies required the same figure.
Don’t Expect to Become a Millionaire Overnight
After reading all this data, you’re probably wondering if being a small business is owner worth it?
Of course, being your own boss, making your own schedule, and getting the chance to do what you love are excellent perks, but what are you getting in return?
Well, most small business owners aren’t exactly millionaires, but a PayScale report shows they make around $59,000 a year. Unlike what you may think, the largest income influencer isn’t the industry you’re in, but the geographic location.
So, the pay may not be great, the stress is enormous, and the risks are extremely high. But, in spite of all that, 84 percent of business owners claim that they don’t regret starting their business and that if they could choose, they’d do it again.
The Rise of Ecommerce
In this overly connected world, our lives migrate to the digital space. We work, shop, read, communicate, entertain ourselves and even fall in love online. And, businesses need to keep pace with the new way of living if they want to remain relevant.
The numbers paint an accurate picture: over 1.61 billion people worldwide purchased goods online in 2016, generating a staggering $1.9 trillion in revenue. This figure is expected to grow in the following years.
But, don’t assume that setting your eCommerce site and promoting your products or services online is enough. Online consumers are extremely picky about what they want and even something as small as a one second delay could make them abandon your site. So, if you want to leverage the eCommerce trend, make sure to provide a seamless user experience, personalized content, and timely offers.
If you’re a small business owner, then these numbers should give you an accurate idea of what you could expect. It’s a bumpy ride with numerous obstacles on the way. But, with the right information at hand and the right mentality, you could face just about any challenge.
Buckle up and get ready!