As far as we can tell, there is no statistical basis for the assertion that nine out of 10 businesses fail. It appears to be one of those nonsense facts that people repeat without thinking too clearly about it. Here are some basic questions to ask when assessing such a factoid:
- What’s the time frame? Two years, five years, 10 years? That can make a big difference.
- Does “fail” mean that it goes out of business because it was not financially viable? Or does that also include data about successful enterprises that merge with another company?
- Wouldn't failure rates be different for some industries than others? Does it make sense to lump all businesses together?
There have been a number of studies that have looked at this issue. Basically, after four years, 50 percent of the businesses are open. As time goes on, the success rate decreases, but it never gets to a failure rate of “nine out of 10.”
COURTESY THE WASHINGTON POST. .....
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