More businesses fail than survive in their first 10 years.
(Mouse over the graphs in the dashboard above to see more detail about the success and failure rates. You can change the “Year Business Started” date to see that the rates do not change much over time. You can expand the size of the dashboard by clicking in the bottom right corner.)
About 50% of businesses survive to see their 5th birthday. Only 35% survive to see their 10th birthday.
The flip side of those numbers is one-half of businesses fail in the first five years of their existence. And 65% fail in the first ten years.
I’ve seen businesses fail and it is a gut wrenching experience… even when I had no stake in the company. It creates a feeling of pain and regret that sticks with you for a long time.
I find those success and failure rates fascinating on several fronts.
First, I learned very early in my business career that making money in business is hard. Being consistently and predictably profitable is a much bigger challenge than most people realize.
Expenses are always rising. Your competition is gunning for your customers.
You really have no choice but to constantly, and persistently, work on improving your financial results in order to survive and thrive in business.
Making Money is a Skill
I agree 100%.
Getting and keeping customers… profitably, is a skill that requires constant attention and focus by the owner and management. It requires hard work and continuous improvement in every area of the business.
The Monthly Financial Rhythm of Business
Second, most businesses with annual revenues of $10 million or less do not have a seasoned CFO defining and orchestrating the Monthly Financial Rhythm of the business. There is no one providing a service that I lovingly refer to as “adult financial supervision”.
Business is already hard.
Compound that with sloppy financial management and you risk becoming one of those business failures statistics.
It’s All About Profitability and Cash Flow
Ultimately, your profitability and cash flow determine whether you survive and thrive in business.
Make sure you have someone orchestrating the Monthly Financial Rhythm within your company so you put a laser focus on profitability and cash flow.
Pay very close attention to the metrics that matter for profitability and cash flow. (This dashboard showing my business profitability survey results is an eye-opener for determining what your profitability targets should be.)
Use fun dashboards to help you manage and monitor financial goals and results.
I’m rooting for you to be one of the businesses that survives and thrives for many years to come. 😊
Philip Campbell is a CPA, financial consultant, and author of the book A Quick Start Guide to Financial Forecasting: Discover the Secret to Driving Growth, Profitability, and Cash Flow and the book Never Run Out of Cash: The 10 Cash Flow Rules You Can’t Afford to Ignore. He is also the author of a number of online courses including Understanding Your Cash Flow – In Less Than 10 Minutes. His books, articles, blog and online courses provide an easy-to-understand, step-by-step guide for entrepreneurs and business owners who want to create financial health, wealth, and freedom in business.
Philip’s 30 year career includes the acquisition or sale of 33 companies (and counting) and an IPO on the New York Stock Exchange.
This book provides a straightforward, easy-to-understand guide to one of the most powerful financial tools in business: a reliable financial forecast. It will transform the financial future of your company and help you make better, faster, smarter financial decisions.
Too many entrepreneurs and CEOs today are feeling more like passengers than drivers in their business. They’re staring at their rearview mirror as they bounce along in the passenger seat. Their company is careening along on the highway of business as they wonder and worry about where their business might end up financially.
A reliable financial forecast solves this problem by providing a clear view through the financial windshield of your business. It creates the visibility and clarity you need to drive your company toward a bigger and brighter financial future.
What if you had answers to questions like:
What’s about to happen to my profitability and cash flow?
How much cash can we distribute to the owners of the business?
How long will it take to pay off our debt?
What will our taxable income be this year?
A reliable financial forecast puts the answers to these questions at your fingertips. It helps you take control of your profitability and cash flow because it gives you answers to the most important financial questions you have to deal with every day.
Put yourself in the driver’s seat of your business by tapping into the unique and exciting benefits that financial forecasting can unlock for you.
If you already own the book, the free tools and downloads are waiting for you. Click here to access the financial spreadsheets, examples, rapid learning guides, and more.