No doubt you’ve heard it stated that the USA is built on small business, that is because small businesses account for nearly 45% of all U.S. economic activity, and moreover, small businesses with 500 or fewer employees make up 99.9% of all U.S. businesses.
But according to the U.S. Bureau of Labor Statistics, nearly 20% of small businesses fail in their first year, 45% fail within the first 5 years, and 65% fail within 10 years of their inception. So, why do so many small businesses fail?
In this post, we’ll talk about start-ups and other small businesses that have 200 or fewer employees and visit those potential failure points and share how Beyond Wage could potentially help you ensure the difference between startup success or startup failure for your start-up small business.
Reasons Small Businesses Fail
When thinking about small businesses and especially start-ups it’s easy to think about the drive and passion the founders need to have to make it successful or the stories you hear about grinding your way to the top without any rest. Most small businesses have a clear vision and long term business plan but are not proven yet so that will make sure that the team is filled with people that are passionate about the vision.
But why do businesses fail? What are the most common reasons a small business might not make it past the initial 5 years?
Some of the most common reasons startups fail? The list includes lack of market demand, lack of money, inappropriate team composition, competition, pricing, user-unfriendly product, lack of business model, poor marketing strategy, and ignoring customers. Most likely, small business failures result from not just one particular point but a little of each of these or other not mentioned aspects that unfortunately lead to a start-up running out of gas before reaching its desired destination.
Personal Startup Experience from Beyond Wage Member
Starting a business can be difficult and there are a lot of potential hurdles out there as also shown in the above section. The team at Beyond Wage has a lot of first hand experience with starting businesses in several sectors and has personal experience with those problems for startups we mentioned before. Our VP of HR will share some of his personal experience with starting a small business, what he learned from it and how Beyond Wage would have been perfect for him and could be for you.
“My first business venture was an HR & Management consulting firm years ago. I was driven, passionate, I believed in the need for my services in the market and confirmed that through research, and I was so confident in my commitment & abilities that the risk seemed low. I worked night & day, I was driven, and I grew the business organically from the ground up. I did a lot of the right stuff, but I made some fatal errors that I wouldn’t realize until it was too late.
One of the biggest errors I made was filling the key roles on my team with those close to me that believed in me rather than finding the skilled people that I needed to help build my business. Why would I do this? Well, initially, I was short on operating capital, I thought I could handle most of the work myself (you know, the consulting, marketing, accounting, work product creation, etc.), and I thought working hard would create enough success to eventually be able to hire more of the right people.
Two and a half years as a business owner into my dream, I had helped some good people & good companies, cashed some checks, grown my business, worked myself damn near to death, and lost my drive to continue. I became part of that failure percentage listed above.”
Why Alternative Compensation Is Important
One of the primary reasons for small business failure (including mine) is inappropriate team composition, and this is exactly where Beyond Wage can help. Beyond Wage understands that work should be about more than just hours for dollars, and the best way to get buy-in and results is by giving employees some skin in the game. We’re talking about alternative compensation where models include a percentage of salary matched with percentages of company stock, stock options, commission, deferred compensation, and profit sharing just to name a few.
Many small businesses and start-ups operate on slim margins and have limited operating capital or cash flow, so why not use more of that capital on building the business while getting the talent you need at the same time?
That’s the question we’re answering at Beyond Wage by connecting candidates in the market that are looking for more than just dollars for hours with exciting opportunities with start-ups/small businesses that are looking for expert talent and they’re willing to give you a piece of the success.
“I really could have used Beyond Wage years ago!” – Wayne Hassinger, SPHR, VP of Human Capital Management
Come back for more small business tips brought to you by Beyond Wage.
Sources
- https://www.forbes.com/sites/forbesbusinesscouncil/2022/03/25/how-small-businesses-drive-the-american-economy/?sh=55d638e74169
- https://spdload.com/blog/startup-success-rate/
- https://payrofinance.com/50-of-small-businesses-fail-within-5-years-heres-why/