What are my chances of success in a small business?

Fear of failure is an understandable concern that can give even the ablest of prospective entrepreneurs cold feet about starting a new venture. Those doubts are amplified with every news story heralding the number of failed or closed small businesses

But a look behind the numbers reveals that small business entrepreneurs have a better chance at success than they may realize. In fact, a review of business closings by the Wall Street Journal’s Small Business editors shows that the number of outright failures is highly exaggerated.

Nearly a third of business closures that government statistics assume to be failures are not really failures at all. These businesses were considered a success by their owners who simply sold off the pieces or closed them to retire or pursue other activities.

Data from the U.S. Census Bureau’s Business Tracking Series show that about 65 percent of new businesses are still operating after four years. That means new ventures actually succeed more often than not.

But the more resources a new business has to start with, the better its chances. That includes money, of course, but other assets such as market savvy and the right people. Here are four factors that improve the odds of new business survival:

1) People. If you can afford to hire employees, do it. Well-staffed businesses have better survival rates than solo operations.
2) Startup capital of at least $50,000. Not easy, perhaps, but businesses that start with less have higher failure rates.
3) A college degree for the owner. Better yet, enroll in a college-based entrepreneurship program.
4) Home beginnings. To keep costs low, start initial stages of your business from a home office.

So why do small businesses fail in the first few years? The most common reasons include failure to have a comprehensive business plan, competition, mismanagement, high rent and insurance costs, high debt, inability to get financing, loss of clients and difficulty with collections. Most of these factors can be addressed early on through good research and planning, having a thorough business plan, and getting advice from trusted, objective sources. Unforeseen and uncontrollable factors that lead to business failure may still arise, but doing your homework will definitely put the odds of success in your favor.


Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Servingf Mercer and Middlesex Counties