You’ve probably heard that 8 out of 10 small businesses fail. It’s been quoted repeatedly by a number of reputable sources. In fact, it’s practically small business canon for some people. It turns out, though, that this well-known statistic is a huge startup myth.
Check out the following facts:
- About four-fifths (80%) of businesses with employees survive their first year.
- About two-thirds (66%) of private businesses will survive their second year as a company.
- About one-half (50%) will go on to survive their fifth year in business.
- About a third (30%) of the companies will make it to their 10th year.
These numbers came from the U.S. Bureau of Labor Statistics. It’s in its annual Business Employment Dynamics report, which includes research on the “survival of private sector establishments by opening year.” It’s safe to say from the data that around 20% of small businesses fail in their first year, not the other way around.
It’s important to know this because it reflects the overall startup survival rates in the United States. Consider this: 400,000 companies are started each year. If 320,000 of those can survive, you can say entrepreneurship is alive and well in the country.
Another possibility to consider is that of failed businesses closing before even learning they had a fair chance of success. As innovation influencer Gijs van Wulfen puts it, “there is rarely only one reason why startups fail.” He says a successful startup needs only three ingredients:
- a relevant market need;
- a simple solution to a problem; and
- a scalable business model.
A lot of the time, decision-makers fail to recognize the opportunity the third point presents.
Apart from hyper-focusing on your market and product, you also need to make your business scalable and sustainable. No matter what industry you’re in, you should work towards steady growth and longevity.
An extremely strategic approach to growth can help maximize your chances for success. More often than not, you’ll only be prepared to scale once you start to recognize when it’s actually time to scale.
Want to tap into opportunities for growth? Keep in mind these five signs that can help you see when you’re ready to scale:
1. You’re getting more business than you can handle
The first (and possibly the biggest) sign is when you start bringing in more customers.
Initially, you might think it’s a huge problem. You’re becoming overwhelmed. There’s too much workload. Your inventory’s running out of stock. But what a great problem to have, right?
When you’re starting to bring in more business than you can handle, ask yourself the following questions:
Do I need to reposition my business’s place in the market?
Maybe it’s high time for you to be more specific with your niche. Say you work in video production, filming weddings, birthdays, christenings, quinceañeras, etc.
Now that you’ve built a reputation there, maybe you could identify your strongest suit and focus on it. You can specialize in a special occasion (like a bar mitzvah). Or you can highlight parts of your service (like post-production). This way, you can cater to the unique needs of your clients and become a trusted provider for your niche.
Does this growing demand call for a price change?
Raising prices can point you to existing customers who really see the value in what you offer. Apart from that, high demand could mean that you’ll have limited availability. This means you might have to deliver products and services more quickly than you get paid for them.
A price change could be a great way to prepare you for this. It helps you focus your time and effort on customers who offer the most profit. It also helps figure out your product and service packages. Beyond that, it can ultimately reveal where you stand in the marketplace.
Handling customer overload can be different for each business, so approach it carefully.
2. Your current workforce lack certain skills needed to keep the business afloat
At a certain point, your company will need you to stop juggling roles so you can focus on being on top of things.
For instance, let’s say it takes you eight (8) hours to handle bookkeeping, and that you’re getting paid $80 an hour. That’s $640 worth of labor in a day. Can you get someone to do this for less, say, the $30 typical hourly minimum wage for routine bookkeeping services? If your answer is “yes,” maybe it’s time to hire an accountant or even open yourself up to the idea of outsourcing.
You can also choose to delegate some of the work to a trusted employee who has the skills necessary for the task. Human capital characterized by strategic hiring is very crucial at this point.
3. You need more comprehensive business tools
Growing business demands can also take a toll on your existing infrastructure, hardware, and software. Right now, you might be using a small phone service that can only handle incoming calls.
That won’t be adequate now that you’re growing and your processes are changing. You need to invest in a complete business communications suite for outgoing calls, video conference with screen sharing, and business SMS.
In fact, you need even more capabilities to run your small enterprise. You’d need toll-free minutes and advanced call management.
4. Your net income has grown
Your business is starting to give you regular income now, and you’re actually making some profit. Take a look at your gross income and deduct all your expenses and bills from the total.
Are you seeing long-term, regular, and positive cash flow from the numbers you see? This is a good way to determine if your business is growing at a sustainable rate.
Do take note that there will be expanding business costs that come with business growth.
Don’t fall into the trap of taking out a loan from the bank to support your growth. Ideally, your revenues should take care of your operational expenses.
5. Your current partners can’t keep up
Another sign that your small business might be growing bigger is when your suppliers can’t address your needs anymore.
When this happens, you might want to talk to them so you could come up with a more beneficial arrangement. Or better yet, get in touch with new manufacturers or distributors who can meet your needs better.
With these things in mind, you can now ask yourself if it’s truly time to grow your small enterprise. It might be tempting to only pay attention to record-breaking sales. But you should also focus attention on strategizing for long-term development and growth.