
The Real Rates of Business Survival - kiriad
https://fleximize.com/business-survival/
======
sujeetsr
The second slide says "If 8 out 10 (or 80%) businesses fail after the first
year, the remaining 2 (or 20%) would probably not survive to see their fifth
year" \- how does this follow? The 'myth' only talks about the first year of
the business, and doesn't say that 80% of businesses fail _every_ year.

~~~
theothermkn
It assumes that "80%/year" failure rate implies something like exponential
decay. In this model of business, they behave something like particles
decaying; the business environment might be treacherous enough that failures
are due to factors that are essentially random and unmanageable.

While others (and you) have pointed to the deficiencies of this model, or at
least to its assumptions, it is not fallacious, per se. The presence of other
models--for example, that the first year is the most treacherous because the
new owner lacks experience--does not make the current model, nor conclusions
drawn from it, fallacious. Indeed, the implied size of the population, "all
businesses," is a warrant for some pretty strong claims. Additionally,
treating a saying as data, rather than respecting the context in and modality
with which it is offered is probably fallacious in itself.

So, quoth the Bard, "If you're wondering how he eats and breathes/and other
science facts/la la la/repeat to yourself, "It's just a show,"/"you should
really just relax!" :D

~~~
raverbashing
No, whenever this is said "80% don't survive the first year" it's _specific_
to the first year. Infant mortality basically

~~~
theothermkn
Half of all Carbon 14 decays in 5,730 years. So, we're not saying anything
about the next 5,730?

Language doesn't work like code. Many interpretations can be sustained by a
given text.

~~~
livingparadox
The statement "Half of all Carbon 14 decays in 5,730 years" does not say
anything about the decay in years after that.

Half lives on the other hand are defined as being a re-occurring phenomenon,
such that it _does_ say something about future years.

Language does not work like code, yes, but that doesn't mean it can't have a
clear and defined meaning. If it couldn't, language would be useless as a
communication method.

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erikb
8 out of 10 Start-ups(!) fail, not businesses. There are loads of businesses
that have a very low failure rate, but also a very low quadrupletuple-the-
evaluation rate.

Example: You work for company X and build wordpress blogs for companies A,B,C
since 5 years. Now you think it's not reasonable to have company X in the
middle since your relationship to A,B and C is good enough. So you quit and
work with them directly as a freelancer. At that point you started a business
and the risk of failure is as low as your estimation of the relationship to A,
B, and C is as good. If you are not too unrealistic you only do this when it
is very likely to succeed. But your business value may stay about the same the
next 5 years.

~~~
dpark
A startup is just a new business. In the first year of existence, every
business is by definition a startup unless created by spinning an existing
unit out of a business. Some people might say that the term "startup" is only
applicable to new tech companies aiming for absurd growth, but those people
are defining too narrowly.

The "8 out of 10 startups fail in a year" claim also rings hollow without a
citation, even if restricted to "tech startups". Is there some source that
demonstrates that 8/10 high-growth startups fail within a year or is this as
unsupported as the more general claim?

~~~
erikb
In general you are right. Start-up should be the word for any new business.
But in recent years the venture capital driven fast growing new-tech business
type was mostly associated with that word, especially on HN (since
Y-Combinator is a school for exactly that kind of business). That's why I gave
an example that is pretty much on the opposite scale. It's also a new business
but not what people think about when they hear the word "start-up".

~~~
k__
Was start-up really simply the word for new businesses in (american?) English?

I heard it only for the business you describe, but lately every newly created
design/tech-consultancy here calls itself a start-up.

~~~
Ntrails
I'd say if a company takes venture capital it's a start up, whereas something
based on bank loans and self capitalisation is just a business. But I don't
have any justification for that - just my association of the word.

~~~
k__
I thought a start-up needs to have a product/service that aims for ultra-high-
growth.

~~~
collyw
That seems to be a relatively accepted definition around here, but not a
dictionary definition.

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bretpiatt
[Edit: Adding specifics link on survival rates]

Shows the ~50% 5 year survival rate and goes out to 14 years:
[https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf](https://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf)

[Original comment]I don't have specific slice of the data to link right now so
summarizing how we dug in to look at business life for US small businesses. We
focus on US 2-25 employee small businesses and as we dug into numbers at
[https://www.census.gov/econ/susb/](https://www.census.gov/econ/susb/) and
[https://www.sba.gov/advocacy/firm-size-
data](https://www.sba.gov/advocacy/firm-size-data) we found that each year
~500,000 businesses enter and exit the 2-25. Most of the entrances is from one
of the 15-23 million sole proprietors adding their first employee and most of
the exits are a business shutting down or returning to a sole proprietorship.
In total for the category there are ~3.5M that employee ~40M people in total
which would be an average life of 7 years.

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Alex3917
Most 'statistics' cited in the media are completely made up, this isn't at all
unusual. I spent about 18 months trying to track down the primary source of
every interesting stat I could find, and most of them didn't pan out at all.

There is a saying that "reality has a well-known liberal bias" because most
left-leaning publications base their arguments on statistics, whereas most
right-wing arguments are based on emotion. But in fact most of the statistics
that used to support left wing policy are either completely made up (e.g. "137
million American adults don't have dental insurance") or else wildly
misleading (e.g. the stats on college tuition increases), to the point where
most of the arguments being made are completely divorced from reality.

~~~
munin
> There is a saying that "reality has a well-known liberal bias

you do know that was said by a comedian as a punchline in a standup routine,
right?

~~~
Alex3917
Really? The only thing that comes up via Google is Colbert using it to
satirize the right.

~~~
dpark
It was from Colbert's White House Correspondents dinner speech in 2006. Not
quite standup.

~~~
JoeAltmaier
No, that's pretty much the definition of standup.

~~~
dpark
{Shrug} Jokes+microphone doesn't make it standup. The content was closer to a
roast than traditional standup. Especially given the satirical style, I
wouldn't consider this to really be standup. But I also don't really care. I
was just providing a reference to the specific event. Call it standup if you
want.

------
nxzero
(That was a horrible experience trying to view the content; anyway.)

If you don't want to fail, don't try, but be sure you realize that no one else
is going to try for you; that is, not trying results in 100% failure rate for
you.

Next, new businesses based on an existing business model do not have the same
types of risks and failure rates of startups in search of a business model
that has never been done before; that is, this data includes not just
startups, but new businesses, and as it relates to understanding startup
failure rates is questionable.

~~~
zkhalique
Actually, a lot of people will try for you. If you don't do something, someone
else will. It's an interesting question as to why we humans want to be
personally responsible for the major changes in the world. I think we want to
leave our mark because we want our name to be remembered. We want to have made
a difference because we are concerned about our biological death. There is a
book called Denial of Death that explores this theme, I think.

After all, why does it matter toa particular person if they are the inventor
or originator or driving force behind a new technology that would have come
about anyway? If money wasn't an issue, say, like for Nicola Tesla.

Do we really think someone else won't do it? Actually we usually think the
opposite.

~~~
TheOtherHobbes
Actually we don't. Because the likelihood of someone else executing as well as
you depends entirely how far out towards the edge of the innovation bell curve
you are.

Beyond a certain point you can't be copied because _you 're literally the only
person or company in the world who can execute._

Obviously this depends on talent. Mediocre talent is much more widely
available than exceptional talent. So if you're not exceptional, you'll be
copied.

If you're talented you can be first to market, but you'll be copied sooner or
later.

But if you're truly exceptional you can't be copied at all, because you'll be
combining exceptional imagination, exceptional execution, and exceptional
access to resources. If you happen to combine those _and_ provide something
enough people want, you win your niche.

At this point you can only be imitated poorly. Sometimes that's enough to for
competitors to survive around you. But it's a precarious existence, and if you
continue to innovate you'll always be ahead of the competition.

~~~
a_small_island
I don't follow this line of thinking.

Almost any idea in any industry can be copied. Facebook was copied (and the
copiers executed well), despite FB having "exceptional talent". Groupon was
copied. Most new products are just copies of past products.

------
aeorgnoieang
I don't know the source of the claim in the referenced Forbes article, but in
my recollection the claim that 8 out of 10 businesses fail applied to
restaurants – tho even a a cursory review of Google search results related to
that don't seem to support it particularly strongly.

~~~
steven2012
I came in to say this as well. I only this figure apply to restaurants not
businesses in general.

------
tzaman
I think this issue/misunderstanding roots in the somewhat loose interpretation
of the word startup. A lot of my friends claim to have one, when all they
really have is a business idea and maybe a couple of lines of code. Does that
mean they are a real startup? By its definition, sure, but in reality what
they have is more of a playground than a real business.

------
mdorazio
I had never heard the 8/10 statistic and always thought it was about half of
normal businesses fail within 5 years, and 90% of startups fail within 3
years. Looks like fleximize supports the 1/2 statistic, and I found the data
for the 90% one [1]. I think it's important to note that not many people talk
about how many companies continue to operate in zombie mode, or how many are
just small side businesses that don't really generate much revenue, but
continue to exist for tax purposes (ex. my friends and I pretty much all have
a business we use for occasional contract work).

[1] [https://s3.amazonaws.com/startupcompass-
public/StartupGenome...](https://s3.amazonaws.com/startupcompass-
public/StartupGenomeReport2_Why_Startups_Fail_v2.pdf)

------
tremguy
Why couldn't you just let the back button be for god's sake? It makes no sense
to override it like that.

------
tim333
The stats must vary a lot depending on how you define starting a business and
failing. I made an app for example and it didn't go anywhere but I wouldn't
call that starting a business.

~~~
erikb
Of course the actual life of the business idea and team is broader and not
100% the same, but it makes sense to count the days you are actually
incorporated. You sign the papers with your government that your corporation
starts on day X and died on day Y. So this data can be used to calculate your
business's life time.

~~~
gamerDude
I was thinking about this as well. But, I think that is a bit of a problem. I
had a startup that failed, but I didn't close it for a couple years with the
hope that I would jump back in. I ended up starting a totally different
company instead, but that first one survived for 4 years while it was really
only around for 2. Since taxes are really easy when you aren't making any
money, I didn't really have any reason to officially shut it down.

You got to wonder how often the case is that someone delays a year because
there wasn't any reason to make it official.

~~~
erikb
Now I get what you mean. Yes, it's likely that corps are dragged along for
some time even if there is no business happening. It's true that it would be
hard to find out about a company that was closed after 3 years but was already
dead in the middle of the first.

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fweespee_ch
The claim that failure rates are the same YoY on the third slide is wrong.

The original Forbes article didn't claim a constant failure rate and it stands
to reason a business that fails in the first 18 months simply failed to find
market fit. That being the case, the survival rate would likely go up each
year rather than down. [i.e. 18 months? 80% of the original total 36 months?
90% of the original total. Obviously not real numbers but it gets the idea
across.]

------
ytzvan
Nice presentation? What tool do you use to builded? D3.js from scratch or
another one?

~~~
harvejs
yep, it's built on d3.js with custom animations and transitions

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rwhitman
This has worse problems with credible authority than the Forbes article
they're debunking. Forbes is at least a journalistic publication, this is
clearly content marketing with an agenda to promote.

~~~
takno
The stats for the UK were taken straight from the referenced ONS report and
used in correct context. It also seems like a bit of a stretch to describe
Forbes as journalism anymore

EDIT: obviously the suggestion they make that the claimed 80% failure rate is
every year rather than just the first one was spurious, but overall a near 60%
failure rate over 5 years would be enough to put me off getting a loan, so I'm
not sure any marketing spin they are attempting actually works

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booblik
How a marketing piece gets to the top of HN? I wouldn't take it too seriously,
as it is a commercial for the publisher, encouraging taking buisiness loans,
telling people it is quite safe.

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pluma
There's actually similar common wisdom in Germany that most entrepreneurs fail
in their third year because of how taxation works (having to pay taxes for the
first two years plus having to pay an advance on taxes for the current year)
and many beginners forgetting that they will have to pay taxes from their
income.

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SeanDav
OT: Interesting UI - What is being used?

~~~
me_bx
By looking at the page's source code: seems to be a custom visualization
created using d3.js.

Experience could be improved by allowing to navigate between the "slides"
using space bar and by scrolling [0]...

[0]: How To Scroll -
[https://bost.ocks.org/mike/scroll/](https://bost.ocks.org/mike/scroll/)

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chmike
This ratio has not much meaning because it really depends of the context which
is unspecified. Consider software projects where people just throw ideas at
the wall to see what sticks. The ratio could be much worse than that.

------
Kinnard
What's does it mean for a business to fail/survive? That's not clearly
defined.

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wpietri
That super-shiny interface made me entirely skeptical of everything they said.
To me, the visual experience screamed "marketing BS". Anybody else have the
same reaction?

