The Myth of Business Failure Rates
I’ve long wondered who started the myth that “9 out of 10 businesses fail” when I’ve seen so much data to the contrary. Finally Dr. Cornwall has noted that this is a complete urban myth:
There has never been a study that shows this high a failure rate — ever. Some studies using flawed data showed as high as 60%, but they count a business that is sold as a “failure”. If the company no longer existed, it was counted in the failure column. Now with better data the studies indicate 40-50%. And remember, with training and education these failure rates drop to 15-25% in other surveys.
I’ve also seen before that business “failures” according to the statistics from the Census and the SBA often include people who have closed profitable businesses for whatever reason. Â
So in the long run, the real rate of failure of new businesses is probably around 25% provided you learn some basic business skills.
(via Biz-Opportunities)
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November 12th, 2006 at 12:51 pm
[...] When asked how many new businesses fail, many will say, “Nine out of ten.” Seems that’s an urban myth. Dr. Cornwall debunks the business failure myth rather succinctly. [...]