Some Interesting Statistics About the State of Business Today!

Posted on 03/26/14 1 Comment

Studies and surveys conducted by universities, government organizations and the media are revealing some startling – and occasionally stark – statistics about the state of business in America today.

Among the more incredible realities facing business owners today is the fact that, as the last of the Baby Boomers retire over the next 13 years, the number of privately-held businesses sold in the US will increase over 15-fold.  While, on average, 23,776 such businesses have been sold annually in the US over the past 30 years, that number will statistically increase to 378,000 per year over the next 13 years. This massive influx of supply will create a buyer’s market and all but commoditize the value of businesses that are not operating at peak profitability.

The sale of a business usually represents the largest paycheck in the life of a business owner. It is critical to plan ahead and start taking the steps necessary to ensure that your company is operating at optimal profitability in order to ensure the maximum value at time of sale.

30338791The State of Small Business

Another interesting statistic comes from IDC, a subsidiary of the International Data Group. They’ve found that small businesses (defined as businesses with fewer than 100 employees that are not home-based) represent 99.7% of employers in the United States. 60-80% of new net jobs yearly come from this group of businesses. And according to Forbes, small businesses employ 50% of the American working population. And yet many small business owners don’t know how to delegate or inspire their employees to maximum performance.

The Small Business Association reveals that there are approximately 23 million small businesses in the United States (a 49% increase since 1982), making up an astounding 54% of all sales generated in the country. But many small businesses struggle day in and day out, especially when faced with larger corporate competition. Harder still is the struggle of small businesses with disorganized business plans or strategies that are not executed efficiently or effectively.

Also according to surveys conducted by the Census Bureau, the average lifespan of an American small business is 11 years, with 66% lasting at least 2 years, 49.6% lasting at least 4 years, and 39.5% lasting at least 6 years. In a tough economy, those numbers have been difficult to sustain.

The State of Start-ups

Small businesses are not the only ones facing challenges in America today. Start-ups must leap over a number of hurdles in order to succeed. According to Inc., when starting a new business surveyed entrepreneurs said the following factors contribute most to success: prior experience (58%), learning from past failures (40%), learning from past successes (39%), the management team (35%) and availability of capital/financing (23%). Of course, without a sound business strategy and managed accountability, there’s little chance for any start-up to grow.

But Forbes says an amazing 543,000 new businesses start up each month, come hell or high water. As awe-inspiring as that statistic is, a depressing counterpart is that more employer businesses shut down each month than start up. Perhaps a ray of hope is that according to research comprised of data from Entrepreneur Weekly, Small Business Development Center, Bradley University and the University of Tennessee, 55% of start-ups within the massive services industry are still operating after 4 years.

According to the same research, within the first 3 years of business, 25% of start-ups fail in year one, 36% fail in year two and 44% fail in year three. By year ten, 71% of start-ups have shuttered their doors. The top 5 reasons for start-up failure are going into business for the wrong reasons, taking poor advice from family or friends, pure bad luck, entrepreneur burn out and pressure from family or financial commitments.

Start-ups are subject to the same tough economy as other businesses – perhaps even more so than established companies. The Bureau of Labor Statistics reports the number of start-ups less than a year old has fallen steadily since 2006, with just 500,000 in their 2010 snapshot. And the number of new jobs created by start-ups has fallen sharply too, reaching just under 2,500,000 in 2010 (compared to the peak of over 4,500,000 in 2000).

Also according to the Bureau of Labor Statistics, by 2008, the closure of businesses began to outweigh the quarterly establishment of new businesses – and that trend, sadly, has held.

The Solution to Business Woes

What does this all mean? It means strategic and operational changes are necessary to help existing businesses survive and reach maximum valuation, give start-ups the boost they need to acquire funding or achieve acquisition, or provide distressed companies with a clear path to turnaround. Those changes can be made through the single most effective system of executing any business strategy, the Critical Factors Management System.

Developed by David Kinney, whose Fortune 500 management training and 30 years of business experience make him particularly qualified to guide businesses back on track, the Critical Factors Management System presents the most efficient way to maximize business value. The system helps business owners identify the factors that are critical to the success of their business. It also not only allocates accountability for those critical factors to appropriate members of management but considers the psychology necessary to inspire them to hold themselves accountable for the execution of the critical factors on an ongoing and consistent basis.

Within a short period of time, established business owners see the profitability of their companies consistently increase, allowing them to sell for maximum value or acquire funding for growth initiatives. Turnaround companies see a turnaround, not only in profitability, but in the attitudes of their workforce as the system inspires greater productivity among all personnel. And start-up stage entrepreneurs find themselves with the right plan to attract investors or bring their existing start-up to an attractive point for acquisition.

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