Do Businesses Really Fail?

image of the word failYou have probably heard the statistics about new businesses in the United States. They claim that 4 out of 5 new businesses will fail within the first 5 years.

You don’t need to be a math guru to understand those are not good odds. I have to wonder, did those businesses really fail or did they just give up too soon?

My personal answer to that question is that most people give up too soon. Unfortunately, people have no idea what they’re in for when they start a business. It’s easy to look at successful business owners and want the things they have now. What we don’t see is what it took to get there.

I can tell you that most successful business owners have gone through major failures and pain. I am no exception to this. The failures that I have experienced are embarrassing and humbling. There were many times when by all means I should have quit. But I refused, a common trait with entrepreneurs is to never give up no matter what.

Back to the question, did they fail or give up? I guess there is no way of really finding out without doing a survey, and who wants to talk about their ‘failed’ business. So I want to share a few speculations on what may have happened.


It took longer than planned

I think this is a big one, people often start a business and then think somehow clients will magically find them. Wouldn’t that be nice! I had a new business owner in my 90 Day Fast-Start Program get frustrated after two weeks because he had not signed a client yet! No surprise that he dropped out. Having a long-term perspective is very important when starting a cleaning service.

This is especially important for businesses that require a brick and mortar presence. Having enough cash reserves to meet the rent and other overhead of having a location is often miscalculated. New business owners are too optimistic about cash flow and profit. It’s easy to project enough money to cover expenses but the reality is it will take longer than you plan for.


It was harder than they thought

Did I mention that small business ownership is hard? Yeah, it’s brutal. Your friends and family will have no idea of what you are dealing with or facing. A small business owner often lives in a world of organized chaos. Finding clients and customers is just half of the battle. Fulfilling the orders, meeting payroll, collecting receivables, dealing with the government, it goes on and on.

We simply have not been taught what it takes to start a business. How long do you give a newborn to learn how to walk? If it takes longer than you think it should do you give up on them? “Well the kid is never going to walk, let’s move on to something else.” How ridiculous that sounds! You give the child as long as it takes, but can this same idea be applied to a business?

Well, sort of as it depends on how much cash you’re bleeding out each month. That’s why I stress to all new business owners, keep your expenses down! Work from home for as long as possible. Buy used equipment and don’t try expensive advertising unless you can really afford it. Take the amount of time you think you will need to become profitable, then double it. Some would even say more, like 10x if you’re a Grant Cardone fan.


They did not have enough money

According to the statistics, this is the number one reason why businesses fail. They simply did not start out with enough working capital. They figured that profits would start flowing much sooner than they actually did. Banks do not like to loan money to new businesses either. This has always been the toughest question to answer – where do new businesses get startup capital? More on this another time.


They were not cut out for business ownership

The truth is that most people are not cut out for business ownership. The masses want the security that a job provides, Most people do not have a high tolerance for risk either. Throw in dealing with the government, employees, cash flow and so on and they are maxed out quickly. It takes a special breed to own and operate a small business.


These are just a few of the reasons why businesses do not last, what are your thoughts? Please leave a comment below.




Scott Gibbens

6 Responses to “Do Businesses Really Fail?

  • Hi Scott!
    This is a great post! Currently I work as an oncology nurse, but on the side I started a baking blog that I hope to one day (in the next few years) turn into an online bakery delivery service! This information you provided here really helped me get an idea of the things I need to be thinking about in order to be successful in starting my business. There is so much that goes into starting your own business and the info you are providing definitely helps give insight to people wanting to start their own business. Great stuff!

    • Scott Gibbens
      9 months ago

      Hi Baily – I am glad that you found this helpful. I wish you all the best in your venture.

  • You really hit the nail on the head here. People just don’t understand how much time goes in to any small business, even the ones that hit the ground running. Making money and making profit are two different things. In growing my small business I don’t get frustrated by how long it takes to become profitable. However I get frustrated by my family. I’ll get all excited at the end of the month when a little money rolls in and my husband will say, “That’s it?”

    • Scott Gibbens
      9 months ago

      Hi Susie- I have to agree with you. I really understand. Keep going and never give up!

  • Hello Scott.
    I am from Cuba but living in Canada and I was searching ideas for my new cleaning company. I been trying to build a cleaning company about three years now, but my ideas still out of the real game, your videos encourage me to continue trying, I already subscribe my bussiness named Fresh & Shiny Cleaning Services company for Residential and Commercial, I did not get any contract yet but I am working on it, your advice was very helpfull and important because I see that I need to work inmediatelly in my website company.
    thank you so much for your videos. How can I get your megazing for reference in how to work eficiently in building my cleaning company?
    thank you for your videos advices, it is very nice of you to share your experience for free to help others.

    Marlenis Martinez

    • Scott Gibbens
      5 months ago

      Glad to help – good luck with your cleaning business.