Tally of business closings finds failures overstated

Tips For Small Business

October 26, 2008|By Stephen L. Rosenstein

If you've dreamed of business ownership for years but stories of all the business that failed are stopping you, take heart. There are ways to tilt the odds of success in your favor.

For one thing, the daunting statistics often bandied about that nine of 10 new businesses will fail are likely false.

A review of business closings by StartupJournal.com, a Dow Jones Co. division, shows the number of outright failures is exaggerated.

Nearly a third of business closures that government statistics assume to be failures are not really failures.

These businesses were considered a success by their owners, who simply sold off the pieces or closed them to retire or pursue other activities.

Data from the U.S. Census Bureau show that about 65 percent of new businesses are still operating after four years. That means new ventures succeed more often than not.

The more resources a new business has to start with, the better its chances.

That includes money, of course, but also assets such as market savvy and people.

Here are four factors that improve your chances:

* People. If you can afford to hire employees, do it. Well-staffed businesses have better survival rates than solo operations.

* Start-up capital of at least $50,000. Not easy, perhaps, but businesses that start with less have higher failure rates.

* A college degree for the owner. Better yet, enroll in a college-based entrepreneurship program.

* Home beginnings. To keep costs lower, start your business from a home office.

Stephen L. Rosenstein is co-chairman of the Greater Baltimore SCORE Chapter No. 3. Call 410-962-2233 to speak to a SCORE counselor or visit www.scorebaltimore.org. To send a question to SCORE, e-mail smallbiz@baltsun.com.

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