Business Failure Rates Highest in First Two Years

New research from the U.S. Bureau of Labor Statistics suggests that most failures of American startups will occur in the first two years of their existence.

After that, the rate of business failure slows.

"The data show that, across sectors, 66 percent of new establishments were still in existence 2 years after their birth, and 44 percent were still in existence 4 years after. (See chart 1.) It is not surprising that most of the new establishments disappeared within the first 2 years after their birth, and then only a smaller percentage disappeared in the subsequent 2 years. These survival rates do not vary much by industry."

The following chart shows business survival rates by industry sector. Interestingly, the sector with the highest survival rates is education and health services. The sector with the lowest survival rates is the information industry. Of course, this study tracked new business startups from between March of 1998 and March of 2002 -- the height of the dot com boom.



Click to view larger image

Tags: Business; small business; startup.

Boom Times for Irish Small Businesses

The Sunday Times has an interesting article noting that small businesses are booming in Ireland. The number of small businesses has doubled in the last 10 years, rising from 160,000 in 1995 to over 300,000 today.

The pattern of entrepreneurship in Ireland is similar to the pattern in other well-developed countries with vibrant economies, such as the United States. Some of the key characteristics of the SME (small and medium enterprise) sector in Ireland include:

• The number of manufacturing businesses is low. Instead, the trend is to import and distribute goods that have been sourced in low cost economies.


• Freed from capital intensive manufacturing, firms have more time and money for research into creating new and better products.


• The business services sector is booming, in part because Ireland has become a prime location to outsource services to.


• Construction is thriving, and craftspeople and tradespeople are finding opportunity.

And all the new-found wealth and prosperity in Ireland is creating an affluent consumer culture. It is sparking a chain reaction, leading to further new business opportunities. Consider the implications of this quote from the article:

"Delaney said changing lifestyles and increased wealth have created new business opportunities. 'People see ideas all around them and create a new market for something which was lying idle,' he said, adding that garden centres and DIY shops have mushroomed as more people socialise at home and use their garden as an extension of the living area. 'It's an area where there's a lot of innovation and product development,' said Delaney. 'In the past, we wouldn't have thought of having outside gas lights on a decking because nobody would have put decking down.'"

Read the whole article.

Tags: business; small business; entrepreneur

Cost of Starting Up is Lower than Ever

Joe Kraus, founder and CEO of JotSpot, writes that it's a great time to be an entrepreneur because it's never been cheaper to launch a company.

He points out that Excite.com took $3 million to get launched, but that JotSpot took only $100,000. He attributes the cost differential to four factors:

• Hardware is cheaper;


• Infrastructure software is free;


• Access to global labor markets means inexpensive access to talent;


• Search engine marketing lets you affordably reach small markets.

While his thoughts primarily describe Web technology startups, it's not hard to see how his thoughts would apply to other kinds of businesses.

And what are the implications? He suggests we can expect more people to be entrepreneurs (since more people can raise $100,000 than $3 million). He also suggests we will see more companies "bootstrapping to profitability."

Be sure to check out the whole post, including the comments and and other posts linking to it.

Tags: business; small business; entrepreneur.

PowerBlog Review: Innovation.net

Editor's note: We are pleased to bring you the seventy-second in our regular weekly series of PowerBlog Reviews of business weblogs. This week's review is being guest-blogged by Lynne Meyer. Lynne Meyer, APR, is president of A Way with Words.

By Lynne Meyer

The Innovation.net blog's tagline says "it's all about collaborative innovation."

Innovation.net is the brainchild of Mike Docherty. He began blogging a little over a year ago in order to learn about blogging. He says, "I wanted to learn about blogging and had lots of ideas and observations on managing innovation from my 24 years in general management, marketing and new product development. I want to help my readers draw deeper insights and knowledge from what they see and experience related to innovation and entrepreneurship."

Mike is CEO of Venture2, Inc, a consulting and new ventures management company focused on launching breakthrough innovation in the consumer products industry. He blogs from Delray Beach, Florida, USA.

Mike's postings vary in length, which is a nice way to mix things up. For example, Mike's May 5, 2005, posting is only two short paragraphs. A posting that ran a couple of months prior ran 10 paragraphs.

Mike also mixes things up with a different technique. He intermingles artwork with his postings. Sometimes it's a photo, other times it's line art. And it always relates to the content of that particular posting.

Here's something I like very much about Mike's blog. He includes interviews.
One such interview was with the CEO of a company called Eureka Medical, about Eureka's business model and philosophies on medical innovation. The interview is excellent because it asks a question and allows the interviewee to delve into the answer in depth. Because the interview with the CEO covered a lot of territory, Mike wisely broke it up into a series of three interview postings. And he didn't run them as three consecutive postings, but instead over a period of three weeks. This technique can keep readers interested in coming back.

About 15 years ago, business books became red-hot "must reads," and the trend continues. Because we want to be successful in business, we scoop them up by the dozens. They typically have catchy titles (who can ever forget "Winning By Intimidation" and "Who Moved My Cheese"?) and concepts (Be a 60-second Manager!). I don't know about you, but I've bought some of these tomes, only to read them and think "Where's the beef?" It would be good to know which ones are truly worth reading because, let's face it, time is precious for us all.

Mike read one such book -- Blue Ocean Strategy -- and then reviewed it in a posting:

"I've read other reviews, and they seem generally very positive. Sorry, but I can't help but feel that this book's premise is a metaphor in search of an idea. Maybe I didn't get that 'I can change the world' feeling, however short-lived it may be, that I get from reading other innovation visionaries I respect and read. However, I wouldn't recommend this one."

Mike just saved his readers -- those lucky souls who hadn't yet shelled out 30 bucks to buy the book -- money and time.

One of the key characteristics about this blog is the way it gives an in-depth and high-level look at consumer product innovation. This is a blog intended for senior-level decisionmakers. This is not a "tips" kind of blog. Rather, it is a strategy blog.

Visit Innovation.net.

Issues Small Businesses Face in International Trade

As more small businesses start to do business globally, what are the issues they face?

Dr. Jeffrey Cornwall of The Entrepreneurial Mind offers some interesting, real-life insights about the challenges small businesses today face when doing business globally. He summarizes points made by Ian Levitt, owner of an automotive parts distribution business called Qualcast, during the recent International Small Business Council convention chaired by Dr. Cornwall:

• Credit risk. As he began to do business in China, he faced the need to finance large purchases by Chinese customers. He would have to carry their debt until the parts arrived and were weighed and checked. This could mean several weeks to months. Unfortunately, banks view lines of credit on such accounts receivable as too risky to finance even if only for a few weeks. He was able to speed the process along, but had to tie up all of his cash on a single order.



• Currency issues. More of his European customers now do business in Euros rather than dollars. This opened him up to significant currency exchange risks. Even as a small business person, he was able to buy a large stake in Euros for twelve months to stabilize his exchange rate.



• Credit card fraud. Sadly, credit card fraud is a major issue for international trade, and many clients insist on using credit cards for purchases. Ian said that he can no longer accept credit card orders from his international clients due to the high rate of fraud.