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What Do Small Business Failure Rates Really Mean?

When you tell people that you’re starting your own small business, you will likely be given some sort of statistic about how many of them fail in the first year.

(It’s usually about 20%, for the record. Only fifty will make it past five years.)

Whilst they probably have the best intentions and are just trying to warn you to be careful, scaremongering statistics are not helpful. What you really want to know is exactly why so many businesses struggle to get off the ground. It’s not enough to tell you that you’re likely to fail; you need to know the specific areas that you are going to struggle with, so you can make sure that you direct extra effort towards them.

If you’re fed up of vague business advice, check out this list of the most common areas that small businesses and startups struggle with.


Dealing with the accounts is one of the most difficult things in a new business. Having a great idea and the passion to carry it through doesn’t require specific training, but accounting does. It isn’t something that you can take half measures with, either, because if you get it wrong you’ll end up with all sorts of problems – like people not getting paid on time, or making errors on your taxes which can land you in trouble. The best way to make sure that you get it right is to outsource to somebody like qdos accounting. They will be able to offer an expert service and it takes the pressure off you. Alternatively, you could hire an in-house accountant. Either way, get a professional to deal with it instead of trying to do it yourself if you don’t know what you’re doing.


This doesn’t sound like enough of a problem for an entire business to fail, but it is. Lots of people massively underestimate how difficult and time-consuming it is to run your own business. If you aren’t prepared for the workload, you’ll get a nasty shock. When you’re burning the candle at both ends, you’ll start to notice the effects. Your concentration will suffer and your ability to make judgments will be severely impaired. This will have a knock on effect in all of the other areas of your business. Standards will slip and you could end up ruining everything. The reason that this happens to people is that they try to take on everything themselves. It’s understandable; after all, you have a vision and you don’t want anything to divert from it. However, you aren’t superhuman and you can’t run every aspect of a business yourself. If you can’t learn to take a back seat sometimes and trust your employees, you’ll regret it.

Cash Flow

Cash flow is the one thing that people usually mention when they’re telling you how likely you are to fail. While it’s not the only reason, it is one of the most common. You need to spend a lot of money to get started, and if you can’t find some customers soon, you’ll be haemorrhaging money. Before you know it, you’ll be completely empty. Don’t count on getting customers straight away and plan for at least a year without any income whatsoever. That way, anything that you do bring in will be a bonus.

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