The myth that nine out of ten small businesses close in their first year may or may not be completely true. According to more recent Dun and Bradstreet data, 76 percent of new companies were still in business after two years. But since these statistics are based solely on the number of business license applications forfeited, they may not be entirely accurate. Many business owners don’t immediately contact their licensing office; some never do.
Studies show businesses that do survive longer had more cash up front to invest. Other survival factors include the owner‘s age, higher education, and previous experience in their field. The number one cause of small business failure is “lack of planning,” and the most common mistake in planning falls with making poor financial choices right from the start.
Most people believe that to have a successful business you need to start with a large sum of money and acquire those start-up funds by taking risky business loans or mortgaging your home. That’s simply not true. In fact, 25 percent of business owners needed no dollar amount to start up.
Reports show that only 27 percent of business owners have borrowed the money they needed to start their business and 36 percent of owners used their savings for their business start-up. It is always better to save the money you need up front if you are able. A total of 69 percent of new businesses were started or acquired without any need to borrow money.
So if it’s that easy, why do so many businesses fail? It may be that new business owners spend more time planning a vacation than they do their new business venture. Many don’t calculate into the equation how their personal financial responsibilities will be met while their new business is growing legs. They will still have rent or mortgage, electric bills, phone bills, and other household expenses. A new business just can’t support home life for an estimated need of 1-2 years. This is where we fail to plan.
Starting a small business should be looked at as just that, a “small” business. The founder of Dell Computers was a college dropout. Starting small out of his garage, he managed to excel above all of the world’s top computer manufacturers. One in three computers sold today is a Dell.
Just over 32 percent of new business owners needed less than $5,000 to start or acquire their business. Businesses opening without a huge financial debt show a much greater chance for success. If you have a business idea, you need to keep it in proportion to the amount of money you have to pursue it. Instead of building a $400,000 franchise store, you might need to look at buying a $15,000 coffee cart that you can drive around to local events. There’s always a way to work out your idea without exceeding your means.
Successful businesses are started with proper planning. Spend the time needed to plan your business idea and do the research needed to ensure you have all your ducks in a row before you open up the pond for customers.
Related Articles
Are You Ready to be Your Own Boss?
By: Carol Denbow | 20/04/2008 | Business
Do you plan to give up your job and start a new business of your own? What would that take? What would be your new responsibilities?
*why Business Partnerships Don’t Work
By: Carol Denbow | 21/05/2008 | Ask an Expert
Partnerships are typically formed due to a joint business idea or the need for financial aid with business start-up expense. Either way, only about 40 percent of partnerships work out and partnership dissolution is like a divorce--it’s really ugly.
***how Much Money Do I Need to Start a New Business?
By: Carol Denbow | 30/04/2008 | Entrepreneurship
It doesn’t always require a massive amount of cash to start a new business.
***how to Find the Best Location to Start a New Business
By: Carol Denbow | 20/05/2008 | Strategic Planning
With some businesses, location won’t matter much. But with most, it’s location, location, and location!
Buying an Existing Business or Franchise
By: Carol Denbow | 16/05/2008 | Business Opportunities
Sometimes it is easier to buy an established business rather than start a new business from scratch. About 10 percent of new business owners have purchased an existing business.
What’s Holding you Back From your Business Success?
By: Susan L. Reid | 02/12/2007 | Business
Many business owners are struggling with their success and don't know why. Are you one of them? You've tweaked here, nipped there, and still something's not right. What could it be? Have you checked your thoughts lately? Many factors can contribute to a lack of business success, but the one most often overlooked is what you're thinking about. Here's how to align your inner thoughts with your outer business success.
What's Holding you Back From your Business Success?
By: Susan L Reid | 02/12/2007 | Business
Many business owners are struggling with their success and don't know why. Are you one of them? You've tweaked here, nipped there, and still something's not right. What could it be? Have you checked your thoughts lately? Many factors can contribute to a lack of business success, but the one most often overlooked is what you're thinking about. Here's how to align your inner thoughts with your outer business success.
Master’s not Required – Who Qualifies to Start Their Own Business?
By: Carol Denbow | 21/02/2008 | Ask an Expert
Nearly 90 percent of people state that at some point in their lives they’ve dreamed of starting their own business, yet few make the initial effort.
Got a Question? Ask.
Ask the community a question about this article:
Frequently Asked Questions
Selling a U.S. business to a European
By: RYAN | 14-07-2008
Dear Sirs, I am interested in selling my independant Porsche sales and service facility in Daytond Beach.I have been in business for 18 years and have made a good living.I have 2 ''problems''. 1...the business is run by myself and 1 parttimer.2 the current state of the American economy.The ideal person to continue needs to be young and with lots of Porsche repair experience.This brings me to the strength of the Euro against the dollar, and that Germans love this area..................how do I list my business in Germany? Ryan
I have a business with my mom, she is in financial troulbe and I am afftraid. what can I do?
By: the used one | 13-07-2008
My mother and I have a business together, she is in financial debt and trying to find ways to get out of debt by putting me in harms way. What can I do to protect myself against my mothers misguided attempts to clear the debt?
Im interested in opening up a juicy couture store ...
By: shexienessie | 13-07-2008
im interested in opening up a juicy couture store, but i have no clue how to even get started.. any suggestions or tips
Looking fr replica desighner hand bags
By: sheila | 13-07-2008
Can someone please help me i am trying to find chanel and ther name brand replica handbags so i can stay home with my new baby but yet make money.They seem to be s hard t find at a price were i could make money.please help thank yu sheila please e-mail me at parettbay@aol.com
Certain Type of Mango Butter Incense Oil
By: Qwete Lee | 12-07-2008
/can anyone tell me where to purchase a certain incense oil called MANGO BUTTER?. I'm not looking for the Orange color that smells fruity. If anyone believes they can help and willing to submit me a sample, please do so. Willing to send a couple of my own incense sticks of the Mango Butter. Company closed down, therefore I have not been able to find more of it.
sharia
By: wolfielou | 12-07-2008
List u.S. Companies that are sharia owned?
Q&A Powered by:
Latest Business Articles
15 Ways to Improve Your Closing Ratios and Sales Presentations
By: Katrina Sawa | 26/07/2008
It is not enough to do launching effective marketing campaigns to obtain new customers and to continually market to your existing database for more referrals and repeat business. In addition, you must be able to ask for and close the sale. Otherwise, it is a waste of time and money!
In Searching for Cost Reducitons, Look at Total Cash Flow Costs Rather Than Accounting Costs
By: Donald Mitchell | 26/07/2008
If you are a privately held company, look to reduce overall cash costs when considering alternative cost reductions, rather than the impact of reported earnings.
The More Trust, the More Time to Succeed
By: Andrew Cox | 26/07/2008
Bill Oncken, in his book Managing Management Time, says that the more trust you have with your "universe " of people, the more time you have to do the things that lead to success. Trust is hard to earn. Once lost it's hard to regain. It's the most precious asset in any relationship - at any level - at any time. Read on to see how a successful Division President builds trust.
10 Tips on the Issues With Selling Professionals
By: Drew Stevens | 26/07/2008
The world of professional selling is rich with information related to selling skills, sales training and techniques to assist professionals. However, after much rhetoric and information I am finding something completely different...a problem with selling professionals.
India - the Next Economic Powerhouse
By: Paul Hata | 25/07/2008
India is one of the fastest-growing countries in Asia. In 2006, India recorded a 1.2% of world trade share overall. The stat was picked out from WTO. The growth is mainly due to the liberalization that took place in India way back in 1991. Ever since then, there's no looking back.
Customer Service Toolkit
By: Drew Stevens | 25/07/2008
All businesses make money, yet those that are customer focused are more profitable.
Top 10 Brain Training Future Trends: New Mind/body Focus, Brain Trainers, and More
By: Alvaro Fernandez | 25/07/2008
In an emerging, dynamic, high growth market, like brain training, it is difficult to make precise projections. But, we can observe a number of trends that executives, consumers, public policy makers, and the media should watch closely in the coming years, as brain fitness and training becomes mainstream, new brain trainers appear, and an ecosystem grows around it. Here you have the Top Ten trends I predict.
Commercial Loans and Working Capital Financing Special Reports
By: Steve Bush | 25/07/2008
A prudent approach to working capital management is becoming more difficult for most commercial borrowers. Commercial loans have always been more complicated than realized by most business owners. Recent financing difficulties involving commercial mortgages, SBA loans and business cash advances have added significantly to the complexity of the entire commercial...
Business 
