Why Even Bother Starting a New Business?

It ain’t easy to succeed as an entrepreneur. Simply put, the odds aren’t very good. Stastistics vary and aren’t always easy to come by, but here are some references:

• A study completed by the US Bureau of Labor Statistics showed that 33% of businesses failed within 2 years (between 1998-2002.) 44% made it beyond 4 years. According to the study, these results did not vary greatly between industries.
• A 2004 study in Canada revealed that nearly 75% of small business startups survived the first year, but less than 33% of micro companies (less than 5 employees) where in business after five years.
• A recent paper titled Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence From Serial Entrepreneurs looked at the rates of success for first time entrepreneurs versus those that have previously failed and succeeded. They found first time entrepreneurs have an 18% chance of success, which goes up to 20% for people who have tried but failed in the past. Those that succeeded before have a 30% chance of succeeding again. (Link came from OnStartups.)

When asked how many new businesses fail, many will say, “Nine out of ten.” Seems that’s an urban myth. Dr. Cornwall debunks the business failure myth rather succinctly.

So maybe it’s not that bad but starting a new business is definitely not easy. There’s tons of risk. Much of that risk could be financial if you’re putting a significant chunk of money into the business.

Best-case scenario – you start a business and succeed!

Worst-case scenario – you start a business, it fails, you lose your life savings, your partner leaves you because you worked too hard (and now you have no money), your friends abandon you, you’re depressed and lose so much confidence you end up working at McDonald’s or Denny’s.

Ouch.

Chances are, even if you fail, it will be nowhere near that bad. Failure is a part of business, and most people will tell you it’s a part of succeeding (me included.)

But now that I’ve painted such a scary picture, why would you even bother trying to start a business?