You’ve probably heard that most startups fail within five years. While technically true, this factoid isn’t very helpful at all. Growth and contraction rates will always vary between different businesses depending on an extremely wide range of factors. At an individual level, an entrepreneur’s preparedness, network, and experiences all serve to influence the ultimate success or failure of any new venture. This also doesn’t take into account an entrepreneur’s personality or mindset – especially the ability to handle setbacks.
Knowing success and failure rates within particular types of businesses isn’t totally pointless though. It’s all about taking calculated risks and knowing whether or not you possess advantages the other players don’t.
Our friends at Staff.com provided us with this handy infographic on startup business failure rates based on data from IBISWorld, Inc.com, and Small Business Trends.
Independent restaurants, brick-and-mortar retail stores, and direct sales are the riskiest ventures in the infographic- to no one’s real surprise. What might be more surprising is that consultancy and business services also rank among the riskiest. If you feel like you have a passion that involves these industries, you might feel discouraged from even getting started.
On the other hand, there’s no data presented for subtypes of businesses within these general categories. For all we know, it might be a great time to put your money in a Scandinavian restaurant and a similarly bad time to start a Taqueria.
The figures can be entirely accurate, yet still fail to point out the true story behind the risks of starting specific businesses. Like we pointed out earlier, figures don’t tell the whole story. Some areas are easier or more worthwhile to penetrate than others. Also, some might disagree with the way data was gathered with the cited studies or find overlooked opportunities.
Founding and investing in a new venture will always carry some risks, and data can only help you up to a certain point. In the end, it all comes down to how thoroughly you do your research, mitigating and choosing risks, and having the strength of will to see things through.
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