A rumour has been circulating around the professional world that as many as 95 percent of startups fail. However, this statistic is grossly exaggerated, and if you have a great idea for a business, it shouldn’t stop you from following through. If you’re venturing into the startup realm, here’s a guide to help you understand your odds.

Startup Success Statistics Are Promising

Don’t let the statistics scare you: More businesses make it past their first year than you might think. In fact, according to the Bureau of Labor Statistics, about 80 percent of businesses make it through their first year of business.

Their research also shows that half of all businesses make it to the five-year mark, and a third survive 10 years. After a decade of enterprise, the vast majority of businesses stay open. Those that close usually do so out of personal choice rather than necessity.

Now, it’s true that a 50 percent failure rate in 5 years seems dire. However, it’s important to recognize that these statistics encompass all business startups, even those that were not seriously pursued. If someone bought a domain name, registered an LLC, or leased a commercial property, that counts as owning a business. Technically, they started a business, but they didn’t have the motivation or means to see it through.

If you count businesses that actively pursue success, with a dedicated entrepreneur at the helm, a well-thought-out business plan, and great products or services, the number of businesses that survive is much higher.

Failing Early Can Be A Good Thing

If you’re among the group of businesses that fail, don’t be discouraged. There are actually some positive things that come with failure.

“If you’re destined to fail, wouldn’t it be better to get it over as soon as possible — like ripping off a Band-Aid quickly to avoid prolonged pain? I think so,” says Keith Speights of The Motley Fool. “There are distinct benefits to failing quickly rather than slowly. Total losses would be reduced considerably. Business owners would be able to shift gears more quickly into a — hopefully — more profitable endeavor.”

The faster you fail, the less time and money you’ll pour into the business. Your risk will be low, and you can quickly bounce back, using the things you learned to spearhead a new, successful business.

Industries With the Highest Failure Rate

If you want to minimize the risk of business failure, simply don’t start the wrong business. For various economic factors, including demand and capital flow, some businesses have a harder time staying afloat than others.

According to research from Statistic Brain, here are the most common failed businesses and their failure rate:

  1. Information 63 percent
  2. Transportation 55 percent
  3. Communication 55 percent
  4. Utilities 55 percent
  5. Retail 53 percent
  6. Construction 53 percent
  7. Manufacturing 51 percent
  8. Mining 49 percent
  9. Wholesale 46 percent
  10. Local services 45 percent
  11. Education 44 percent
  12. Health 44 percent
  13. Finance 44 percent
  14. Insurance 44 percent
  15. Real Estate 44 percent
Biggest Reasons Businesses Fail  

Understanding exactly what causes businesses to fail will foster future success. There are a lot of things that go into business success or failure rates, including the person’s dedication to their business, local economic factors, and varying levels of business acumen.

According to research from CB Insights, there are some reasons that businesses are more likely to fail than others:

  • No market need 42 percent
  • Ran out of capital 29 percent
  • Incompetent or inadequate team 23 percent
  • Outplayed by the competition 19 percent
  • Pricing or cost issues 18 percent
  • Bad product 17 percent
  • No or lacking business model 17 percent
  • Poor marketing 14 percent
  • Unsatisfactory customer service 14 percent
  • Bad timing for the market 13 percent
  • Lost focus 13 percent
  • Disharmony among team and investors 13 percent

Bad location, lack of passion, insufficient financing, legal challenges, burnout, and a few other minor factors can also influence whether or not a business makes it to the 10-year mark.Those looking to start a business should take comfort in the fact that many businesses today succeed, but it’s important not to get too comfortable. Understand your market and define a tangible need for your business. Then, give it

Those looking to start a business should take comfort in the fact that many businesses today succeed, but it’s important not to get too comfortable. Understand your market and define a tangible need for your business. Then, give it your all. Once you get the funding and team in the right place, it’s much easier to stay ahead of the competition and thrive.

Anna Johansson is a freelance writer who specializes in entrepreneurship, technology, and social media trends. Follow her on Twitter.

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