Why Most Businesses Fail
Only 10% of businesses make it, but not for the reasons you think.
Today’s article will be short and practical, and it’s meant for all those of you who are entrepreneurs or aspire to be some day.
You’ve probably heard that only 10% of entrepreneurs make it. This is a fact that leads many to feel discouraged and hopeless, thinking that those businessmen that achieve success do so because they had elite education, rich parents, or unique opportunities, inaccessible to most.
However, the reason why some win in business is not because of random privileges or plain luck —although those things can play a part and make the path easier for some—, but because of a set of values and virtues that, over the long term, all but guarantee success. Too many look at such stats and take them as the ultimate truth and forget that the single biggest determining factor is human. Stats don’t tell the whole story. They miss the human component.
What the stat means is not that if you start a business it has a 90% chance of failing. It means that 90% of people do it wrong or simply are the wrong kind of person to start a business.
Stats make it seem as if it were simply out of chance: “100 businesses begin and only 10 at random make it”. That’s just dead wrong. It’s not random at all. It’s predictable, and ironically, it doesn’t depend on the market size, the business model, or on whoever has the best financial projections. It depends, almost 100%, on the person behind the business.
You can become the right person. The winner. The one that defies the statistic. It’s up to you to be that person. The rate of failure is not a stat in a vacuum, so don’t get too caught up in stats that make you feel as though you have no power and no control.
It’s up to you to become the outlier: The exception to the rule. The 10% that has the values and mindset needed to make it. Most fail because they have the wrong mindset and because they lack resilience, not for any other reason.
They don’t commit to it. They start for the wrong reasons. They quit at the first sign of trouble. They expect it to be easy.
I want you to do a mental exercise with me. Let’s say 100 entrepreneurs want to start 100 businesses. They have various business models, work on different markets, have different previous experience, and come from different walks of life.
Half of those won’t even start. At the get go, 50% of businesses already failed because the entrepreneurs were too scared of taking action.
After 2 months of starting their business, 25 entrepreneurs drop off. Life gets in the way. They fail to see results and think it’s not worth the hassle. They close up shop and get back to their routine. That’s an extra 25% gone. We’re down to 25 from our initial 100.
6 months to one year after starting, 15 other entrepreneurs quit. They realize it will take longer than they imagined and they are impatient for results, so they quit. Maybe their business model is clearly not great but instead of pivoting they just stop trying altogether. We’re down to 10 left.
After a year has gone by we are down to 10%. Those are the ones that end up making it, because even if they don’t earn a single dollar in the first year of trying to get their business up and running, they have developed the skills and mindset necessary to succeed. They have learned the discipline, consistency, resilience, and toughness required to stay in the fight after failing time and time again. It’s extremely likely that those entrepreneurs who are still trying after one year will eventually win. Maybe they have to change business models, pivot, reevaluate, restructure their operation, or change things around, but on a long enough timeline, the winners are those that never stop trying.
The lessons, in short are these:
1) Don’t take stats at face value and don’t ignore the human component. You can become the outlier that defies the statistic.
2) Your priority is to start as quickly as possible, to avoid failure by paralysis.
3) After you’ve started, if you simply manage to stay in the game long enough, keep learning, and keep trying, you’ll be one of the 10% of businessmen that make it.
If you’re a Christian man interested in business and entrepreneurship, I have opened a free community where we learn about pursuing business in a way that is aligned with God’s will and with our pursuit of sanctity. If you‘re interested in joining, just click the button below.
Hope this article helped you and may God bless you and keep you on your endeavors!
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Very nice writing.
Another factor in the math is that most successful entrepreneurs have started and pivoted away from multiple businesses before they hit on the one they have both the passion and skills to succeed in. Technically yes, those first businesses didn’t last, but that doesn’t necessarily mean the owners failed and went bankrupt and are now living on the street. Most likely, they just took what they learned from those businesses and are currently applying it to new ones.
It’s like the inverse of how the statistics on marriage are misleading, because they don’t mention the fact that people usually marry and divorce multiple times after they divorce the first time. So maybe 50% of “marriages” end in divorce, but that doesn’t mean that 50% of people who get married, get divorced. And it certainly doesn’t mean that your marriage has a 50/50 shot no matter what you do.