“There are lies, damned lies, and statistics.” -Benjamin Disraeli
For one of my upcoming posts I’ve been scouring the web trying to find statistics on how many small businesses fail after a certain amount of time. The first few articles I read said that over half of small businesses fail during the first year and that something like 90% fail before their 5 year anniversary. These are dismal stats and definitely very disconcerting to a newbie business owner like myself. I continued digging, hoping to find some good solid numbers to back up what I had read, but as it turns out, there really aren’t any.
And herein lies the problem with the Internet and statistics: people spew out numbers left and right to justify the point they are trying to make, but rarely, if ever, are they able to point to a reputable source from which the information came. Even when they are able to point to a source, it’s never really clear what time frame is being used as a reference or how the data was gathered.
Lets take a look at some of the contradictory information I came across over just 30 minutes of reading and research online:
“Nearly half of small businesses fail within a year…90 to 95 percent of small businesses fail within five years.” – Acording to this wisegeek.com article, the stats come from the Small Business Association, but they don’t say what reports were used or who in the SBA reported them.
“Two-thirds of new employer establishments survive at lease two years, and 44 percent survive at least four years.” – As was reported in this article on businessknowhow.com. They say they got their info from the SBA as well, but it doesn’t seem to jive with the numbers from the previous example.
In an article on Small Business Trends Scott Shane presents stats from his book that show only 25% of businesses fail after the first year and 50% are still going strong after year 5.
On an optimistic note, Rhonda Abrams of USA Today quotes some figures that put first year success rates of small businesses at 85%. That’a far cry from the pessimistic stats we’ve seen so far.
Finally, I found an article on businessweek.com admiting that small business statistics are hard to track and interpret for numerous reasons. The primary reason being that the definition of the word “failure” can vary widely from one report to the next.
So, what have I learned from all this? Well, first of all, I am going to be very cautious when dealing with small business statistics in the future, and for the most part, will refrain from using them in my posts. Secondly, there are too many contradicting numbers out there and when it boils down to it, statistics can be skewed and doctored to help prove almost any opinion.
So, instead of worrying about percentages or trends, I’m going to continue to charge ahead and ensure that I do everything possible to make my own individual journey as successful as I can. After all, the failure rate of computer consulting businesses started by Matt R. in Maryland in 2008 so far is exactly 0%. Sounds like the odds are in my favor after all!
“Definition of Statistics: The science of producing unreliable facts from reliable figures.” -Evan Esar