Starting a business is no easy feat, and many entrepreneurs find themselves closing their stores after a few years. The most common cause of small business failure is cash flow problems, meaning they have more money going out than coming in. The information industry has the highest failure rate in the country, with 25% of these companies going bankrupt during the first year. The transportation and storage industry, as well as the construction industry, have the highest rate of small business failure. However, some businesses have a much lower rate of failure.
The real estate and rental and leasing industries have the next lowest failure rate, with only 15% of these companies going bankrupt in the first year. This is often due to the fact that these companies provide essential services to their communities, which may not have had those services before these companies opened. These types of establishments usually register failure rates of 15% in their first years of operation, and 60% usually reach the fifth year of operation. Overall, governments can help local business owners by reducing red tape, fees and opening time. Successful business owners find that balance when they can “play it safe” in some areas and take calculated risks in others.
Entrepreneurship is far from easy, and many lack the business acumen or experience needed to manage rapid business growth or unexpected business interruptions.
