4 Top Factors in Small Business Survival

The prevalent wisdom, passed down over several generations of management experts, is that most small businesses fail in the first year and most of the rest fail soon after. Not true, says the SBA, and they list some reasons for small business survival.

The SBA Office of Advocacy has released some figures that show most small businesses do succeed:

Two thirds of new employer establishments survive at least two years, 44 percent survive at least four years, and 31 percent survive at least seven years.

And businesses that survive at least four years have a good chance of surviving long term.

"Survivability" of a business has been linked to several factors:

• Ample availability of capital. In most businesses, capital is the key element in success. And availability of capital is directly linked to positive cash flow, to keep the business healthy.
  
  
• Being large enough to have employees. If you try to do everything yourself, you will quickly find there aren't enough hours in the day. Even if you just have an assistant, that person can help you schedule your time, do marketing, and manage day-to-day details. Sure, employees are sometimes tough to deal with, but they really are necessary to the success of your business.
  
  
• Age and education of business owner. Older, more educated owners seem to have a better chance for business success than younger, less educated people. This factor wasn't explained, so I would hazard a guess that older people bring more maturity to a situation and those with more education also have more experience.
  
  
• Reason for starting the business. People start businesses for all kinds of reasons, but it takes a lot of passion and determination to succeed. Someone who starts a business for the money won't try as hard and will tend to give up more quickly than someone who is passionate about the business. This is particularly true in health care and service businesses, where you have to really want to help people as well as make a profit.

Does this mean that if you don't have lots of capital, employees, age/education, and passion you won't succeed? Of course not. But if you do have these things, you have a better chance of succeeding in your small business.