Odds of Success Calculator for Startups
June 10, 2009 by Stephen Kersey
Filed under Business
Entrepreneurs know that they face long odds whenever they create a startup company. If you love numbers, you’ll enjoy this new Odds of Success Calculator that will calculate the exact odds of your startup succeeding.
The Odds of Success Calculator is available at StartupNation and it was created in partnership with EquityNet. Simply answer eight questions about your startup company and the calculator will spit out the odds.
The questions range from judging your business plan to evaluating your startup team. To create the odds, EquityNet claims to have studied more than 500,000 other startups.
Overall, I think it’s a neat little toy. However, if you want to keep your positive vibes and not stare directly at the daunting statistical challenge you face as the owner of a startup, it might be best to avoid the Odds of Success Calculator.
Odds of Success Calculator (Image: StartupNation.com Screen Cap)
As CEO of EquityNet, I have personally reviewed over one hundred studies on business failure. In addition, I have also invested in dozens of emerging technology enterprises. I would like to offer the following perspectives based on my experience.
In the world of entrepreneurship, standards and good statistical information are lacking. It is a common myth that only 1 out of 10 businesses succeed. In fact, according to research from the Bureau of Labor Statistics, around 45% of new firms survive their first 4 years. Given that entrepreneurs often consider inaccurate information when deciding to start up a company and potentially change their life, it is critical that they be empowered with a better sense of the risk of their venture. That, along with identifying helpful resources, is the intention of the Odds of Success Calculator.
The Odds of Success Calculator is intended to educate entrepreneurs on the complex issue of enterprise risk in terms of rates of failure, primary attributes that influence failure, and resources to help avoid failure. It is not intended, as some may have implied, to produce a score that can be taken to the bank. That level of analysis obviously requires a greater scope of consideration.
That said, the Odds of Success Calculator does generate a meaningful score. While consideration of 30+ risk factors, such as with EquityNet’s Enterprise Analyzer software, is more comprehensive than the 8 factors considered by the Odds of Success Calculator, many respected researchers have found as few as 4 criteria to be statistically significant in predicting success and failure. For example, Dr. Robert Lussier, a serial risk researcher and publisher, noted in a study that “only 4 of the 15 variables [measured] were significant in this study” and that “the [resulting] model will accurately predict the success or failure of a specific business approximately 70 percent of the time.” You can find this Lussier study here: http://www.allbusiness.com/accounting-reporting/budget-budget-forecasting/495836-1.html