The most important statistics of entrepreneurship

The statistics associated with start-up businesses are not good. Upon reading this article and the associated statistics, you might get the impression that I’m trying to discourage you from becoming an entrepreneur. You would be wrong. The goal of this article is to accomplish one of two things. Either give you a solid heads up regarding what you are heading into so that you can prepare in advance, giving you a much better chance to succeed, or secondarily, to give you that clear view of reality that might chase off those who are not emotionally or financially prepared to take the risks associated with entrepreneurship. Most entrepreneurial ventures start out doomed to failure by optimistic naiveté. 

We all look back to points of our lives where we wish we would have known then what we know now. There is always a long list of things we wish someone would have told us. That list regarding entrepreneurship is endless, but these statistics are an important start. 

• More than 99.9% of business ideas never get past the idea stage. They might have an executive summary or business plan written, but that’s as far as it goes.
• 81% fail within 5 years. This is generally accepted as a conservative number. Most experts believe is it closer to 90%. 
• 94% fail within 10 years
• Most business fail because of lack of ability to find or produce enough capital. While it is the lack of capital or revenue that kills all companies, this is a lag indicator. There is always a problem, often one that could have been fixed, that led to the eventual loss of money. 
• Most business with capital fail because of lack of, or ignorant marketing plans. The biggest problem with most marketing plans is that they come from the heads of the founders, rather than the specifically researched demands of the market.
• 4 of 5 surviving small business are barely covering their costs month to month. If they were to go a month without income, they would die.
• 4 of 7 (57%) of venture capital backed companies fail within 5 years, this despite significant research and due diligence on the company, its executive team, it’s product and market, etc. by supposed experts in successful business.
• 2 of 7 (28%) of venture capital backed companies struggle along and don’t product a profitable exit strategy for either the investors or the founders.
• 1 of 7 (14%) of venture capital backed companies succeed enough to cover losses on other projects. 
• 65% of Entrepreneurs who receive venture capital, are replaced by the VC’s within 2 years, this despite the investors rigorous evaluation of the founding executive and his team, prior to capitalization.
• 60% of small businesses are operating without a business plan
• 93% of Entrepreneurs operate with no articulated short or long-term goals 
• Small business owners/entrepreneurs rank among the highest in categories that include divorce, suicide, depression, alcoholism, heart attacks, and ulcers
• 90% of small businesses are operating without a succession plan and have no financial or legal remedy for the company to continue in the case of the founder’s death or disablement.
• 70% of business owners sell their business for 50% - 60% below fair market value
• Next to the start-up and early years of the business, the transition to new management is the most precarious and risky event in the life of the business. 
• Most owners are required to finance the sale of their companies; if the new owners fail, the now worthless company falls back into the lap of the original owner, who now has nothing to show for his years of work
• Most owners become employees of their own companies and work until they die
• Most successful ventures create no retirement benefits for their owners.
• Most successful ventures create no death benefit for the entrepreneur’s spouse.
• Most Entrepreneurs have no plans to grow and are satisfied if their bills are paid.
• Most people would like to be Entrepreneurs, but don’t have the guts.
• Talent, Education, Industry Experience, Capital, Product Expertise, and Best Products are not predictors of success. 

Entrepreneurship is not for everyone. In fact only a very small percent of people have the mindset required to be a successful entrepreneur. The overwhelming majority of working people have a large company mentality. They want to show up on time, work until quitting time, then go home and bring no work with them. They want to fulfill the requirements of their job description, and not step out of that clearly defined box. They don’t want to make impactful decisions, they hate change, and they prefer to stay completely away from anything that might risk their job or impact their income. They want to collect a paycheck every two weeks and know in advance how much it is. In fact, most people would rather make less, but know in advance how much it is, than make more against an uncertain schedule or amount. 

If you offered to flip of a coin, a 50/50 chance at double or nothing of their paycheck every week, the vast majority of the working public would turn it down as too risky. But entrepreneurs wittingly or not, risk their entire career against the equivalent of rolling 50 dice on the chance of getting a one on every single die. Are entrepreneur’s gamblers? Not in the traditional sense. The average entrepreneur wouldn’t necessarily go to Las Vegas and bet their paycheck on the roulette wheel. The difference is that an entrepreneur is gambling on him/herself, not something over which they have no control. The average company employee does not bet on themselves, but on those who are making the decisions for the company. 

Is this my attempt to talk you out of entrepreneurship? Absolutely not. It’s my attempt to make sure you know what you are getting into, and to open your eyes to the problems you will likely encounter, not to dissuade you as much to prepare you. Accurate intelligence is always good. Each of these problematic statistics has a solution. Knowing the problems entrepreneurs face will help you prepare and correct them so that they will not be the surprise problem that prevents you from accomplishing what you hope entrepreneurship will do for you.