How Many Small Businesses Fail Within the First Year of Business?

Whether starting a new business or an old business going through some changes, there are questions entrepreneurs frequently ask: Is my business going to be successful? Will this new business earn enough to justify my time and effort? Will I be able to attract the type of clients and staff I need to keep my business thriving? The answers to these and many more like them are found in economics.

Economic theory has long been used by entrepreneurs and small companies alike as a way to help guide them through difficult times. If a company operates with a model that is currently doing well, it makes sense to continue using that same economic theory to ensure its continued success. For instance, if research proves that a new business idea is a sound business model that will succeed, then it only makes sense to apply that same theory to that new business. After all, if all previous examples of that new business model’s success were proven incorrect, wouldn’t it be foolish to apply the wrong theories to create a different new business model?

As it turns out, many people make the mistake of applying economic theory to new businesses. This is because many people do not understand how important it is to understand business statistics. Statistics, after all, are objective. They provide information about specific, real, physical aspects of any given business. By studying business statistics, entrepreneurs can determine which aspects of their businesses are doing well, which are not doing so well, and which areas need to be improved upon in order to make those businesses more profitable.

For example, when it comes to small businesses, business statistics tell us that sales revenue is at an all-time high. In this regard, one could conclude that the majority of these small businesses are currently profiting from their offerings. However, when it comes to profitability, only thirty-six percent of small businesses are making money. This means that the vast majority of these businesses have yet to realize any significant amount of profit. If these businesses could only calculate their profits, however, they would find that their actual numbers were far lower than what they should be because of many factors.

For example, many small businesses only employ a handful of employees. When we look at statistics, we discover that only 25 percent of businesses with fewer than four employees actually make money. Even though it seems that there is no rhyme nor reason to the percentage of these businesses that fail, there are definite reasons why many of these businesses do not earn even a penny. In order for any business to survive and enjoy any amount of success, it has to employ a significant number of employees.

Small business grants offer funding to many businesses each year. While this may seem like bad news for small businesses, there is no better news. Grant money allows these small businesses the chance to utilize their capital and finance the growth of their companies. While there are hundreds of different kinds of business grants, there are two in particular that provide the greatest funding opportunities.

The first is the SBA’s Small Business Administration, or the SBA, which has the very interesting name. The SBA was established by Congress specifically so small businesses could be helped by the federal government. Since its founding, the SBA has been helping guide millions of business organizations through every step of their business life. Interestingly enough, over half of all small businesses that use the SBA as an advisor eventually fail within the first year. It is this failure that the SBA uses to help provide assistance to those that are in danger of failing.

As you can see, there are plenty of great statistics that show exactly how many small businesses fail within the first year. In order for a small business to succeed, it is important that they have the proper resources available to help them grow and expand. Thankfully, grant money is available to help these organizations obtain what they need. If you would like to receive free business grant money, it is important that you visit the official SBA website to find the funding programs that may be able to save your business.