The majority of business startups fail?

Updated: Aug 28, 2021

During 2019, the failure rate of startups in the U.S. was 90%


Why start a business if you are likely to fail?

A practical look at the data suggests that those who work within the Tradesman industry and decide to start their own business are more likely to survive.


Here is startup data from a 1916 study: Why businesses failed.

To quote study author Kerry Jones:

We looked at the stories of 193 failed start-ups to extract the lessons from their demise. To find the patterns behind why these startups failed, we analyzed post-mortem essays written by the founders and press coverage about the shutdowns. - Author Kerry Jones Article


Since most startups attribute multiple reasons for business failure, these figures don't add up to 100%

A Tradesman who starts a new business are more likely to survive.



Statistic No# 1: 26% of businesses fail because the business model is not viable.


During the last few years a plethora of technology and biotech based startups have attracted considerable funding investments. Technology based industries like AI and robotics have become trendy and the media love it. From time to time some industry trends turn so called "bubbles" and burst. The 1990s dot.com bubble is a good example of an overhyped industry where people lost connection with their industry business model viability.


The Tradie industry is not at all like dot.com or high tech/biotech. The business model is clearly defined and has stood the test of time.


There will always a demand for plumbers, electricians, builders, etc., at any location where people and buildings exist.

The industry business model is viable so it gets down to the individual Tradie's skill and reputation that will affect the viability of any individual business.


This is discussed in more depth below.


Another determining factor is how effectively they reach their target audience.


The Guide describes a detailed 10 step process that explains how to create a new business and market it effectively online. It also ensures you follow best practices at all stages of the setup process.


Although the data suggests there is a high failure rate for startup businesses, those skilled at being a tradesman are much more likely to succeed than people within many other startup industries.


Stats about startups:

  • 79% of entrepreneurs anticipate a strong environment for small businesses post-pandemic.

  • 80% of U.S. small businesses are self-employed.

  • In 2016, 69% of U.S. entrepreneurs started their businesses at home.



Statistic No# 2: 24% of all businesses fail because they run out of cash


It's unlikely a tradesman would run out of cash when starting a new business because their costs are minimal.


A typical Tradie business set-up costs in the U.S.


Getting started

  • Vehicle and signage

Depending on your budget, you can purchase a used work van for between $5,000 - $10,000. Plus basic van signage of $200- 500.

  • Business & trademark registration

Business registration - less that $500

trademark registration - $50 - $150 within a State

  • Branding – creating a business, domain name, and website

Less than $100 if you are prepared to complete most of the process yourself. Download a copy of the Guide for instructions how to do this.


Fixed costs

  • Insurance

Typically range from $500 to several thousand dollars.

  • Annual email, website, and domain name registration

The Guide's content covers all these costs.


Working capital

  • Production materials and stock orders

Typically several thousand dollars to fund materials required to do the jobs.


Pro Tip: If you can obtain 20th month following credit from your suppliers and invoice customers at 7-day payment terms, you have effectively covered your working capital requirements.

  • Marketing

These costs are entirely variable and are determined by the amount of funds available and, how much emphasis and effort is made.


Further comments about marketing

The amount of money you spend on branding loosely relates to how effective it is in attracting new customers.


The Pareto Principle applies here. It states "80% of outcomes result from 20% of inputs. Thus "fiddling around the edges" of any development adds a great deal of time and costs often without adding much value.


The same applies to branding your business. Done correctly branding a Tradie startup can be done on a shoestring budget.


The Guide covers both branding and marketing in more depth along with Pro tips.


Stats about startups:

  • 33% begin their small business with less than $5,000.

  • The ratio of men entrepreneurs to women entrepreneurs in 2019 is 10:7.

  • 77% of startups rely on personal savings for their initial funds

Creating a new business needn't be expensive for a tradesman. A van and signage will be your highest cost. You can also save on branding costs by following the 10 steps process described in the Guide.



Statistic No# 3: 18% of all businesses fail because of a lack of traction


Anybody newly employed within the tradespeople Industry and, who desires to succeed will gain knowledge and skills.


if a tradesman is skilled at their job then their new business is less likely to fail due to a lack of traction.


The keyword here is desire.


if there is desire, there will be success.


Although closely related to desire, a positive personality will also contribute to success.


These two attributes cannot be stressed enough.


A tradesman's desire to fix a problem and their positive attitude will in turn, have a positive impact on the way customers think about them. Customers are less likely to recommend a grumpy or non-communicative person over a pleasant communicative person.


Given these traits, customers will remember an employed worker even more than the business name.

"Call Jo's Plumbers and ask for Freddie, a delightful person who did a great job fixing my leaking shower faucet."


As an employed tradesman's reputation increases, that person will know the right time to create their own business. Their chances of failure due to a lack of traction will be greatly reduced.


There are other reasons why lack of traction can affect any new business. Correctly administering the business is essential; getting invoices out on time and reducing overdue debtors is vital to any sized business.


Stats about startups:

  • A 2018 study shows that a 60-year-old is 3x as likely to build a successful start-up as a 30-year-old.

  • In 2018, 30.2 million small businesses were operating in the U.S.

There are plenty of reasons why a new business can fail due to lack of traction; however, the key reasons for success are;

  • desire to succeed

  • pleasant personality, and

  • a marketing strategy that gets your business seen

Conclusion

Between 18% and 24% of all new business start-ups will fail due to;

  • the business model is not viable

  • they run out of cash

  • of lack of traction

The reasons for failure are reduced for those working within the Trade Industry because:

  • The tradespeople business model is well established within any society.

  • Tradesman based startups requires minimal funding.

  • If a worker has the desire and personality to succeed, they will.

Last comment

A potentially high cost for any tradesmanlooking at starting their own business is related to branding.


The Guide shows you how to establish your business brand and get it online at any budget level that suits you.


Click here to download a copy of the Booklet.


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