There are common misconceptions about business failures. You’ve probably heard some of the old standbys, such as “Nine out of 10 new businesses fail within three years.” There can be problems with these different studies. Some are out of date, some focus on businesses with employees, and some forget that a lot of businesses are created and then killed for tax reasons.
Small Business Statistics for Canadians
- Almost 98% of Canadian businesses are small companies.
- More than a third of small businesses are not optimistic about the future.
- Small companies employ over 10 million Canadians.
- Small and medium-sized companies contribute over half of Canada’s GDP.
- The revenues of many small Canadian companies have decreased in recent years.
- Almost 20% of small businesses with less than 20 employees expect sales to decrease.
- Over 20% of small businesses are worried about cash flow.
- 5% of small businesses do not survive their first year.
- Over 70% of Canadian small businesses fail because of management issues.
- 58% of small business owners believe a work-life balance is crucial for long-term survival.
Why Small Businesses Fail
There are many things that contribute to the success or failure of a company. The most common factor is the failure to research the market before starting a business. According to CB Insights, 42% of small businesses fail because they have not researched the market and are selling a service or a product that customers are not interested in.
29% of small companies have to close because they run out of money and 67% of small business owners are using personal funds to try to keep the business running, which is not a strategy that can be applied in the long term.
Other reasons that contribute include not having the right team (23%), being out-preformed by their competition (19%), pricing issues (18%), ignoring the customers’ needs (14%), lack of focus (13%), and failure to make necessary changes (7%).
What Small Business Owners See as Important to Survival?
One of the key factors for survival is spending time away from work. 58% of small business owners believe having a healthy work-life balance is crucial for the long-term survival of their business.
Many small businesses also believe that having the right and up-to-date technology is important, with 86% of small companies investing in technology. 49% are using mobile apps to connect with their customers, while 32% of the companies offer a mobile payment option.
Summary
Small businesses in Canada are vital to the country’s economy with 98% of all businesses classified as small or micro businesses. Together with medium-sized companies, they contribute over half of the country’s GDP.
Even though 73.9% of small companies in Canada employ less than ten people, the combined employment contribution of small businesses is significant with 10.3 million Canadians working for small companies.
Canadian companies with less than twenty members of staff are the least likely to have an optimistic view about their future or to expect their sales to increase. They are also the most likely to worry about their cash flow or to seek external financing.
Despite the failure rates for small businesses having fallen since the 1970s, many small businesses still do not reach the end of their first year in business and only a third stay operational for ten years. While many factors combine to contribute to the failure of a business, the main reason is the lack of preparation and getting to know the market first.
Source: https://madeinca.ca
Class Discussion:
Discuss what reduces the chance of failure and what you would recommend to help avoid failure in your business. Examples may include:
- Business planning
- Experienced management
- Professionals (investors, advisors, bank, etc.)
- Seeking advice and counselling
