What is the Survival Math on Your Small Business?

Starting a business is risky business. 

Last year, 1,054,052 small businesses were born in the US. What are their odds of success?

The US Bureau of Labor Statistics has data for 19MM small companies born over the past 30 years. 

But here’s the kicker: McDonald’s is FOUR TIMES BIGGER than its nearest competitor, Wendy’s. QSR Magazine reports that McD’s system generated about $53Bn in the US last year. Wendy’s did $12.5Bn. BK pulled in a neat $11Bn.

How ‘bout those ratings darlings? Well, In-N-Out made $2.2Bn. And Five Guys made $2.3Bn.

What’s going on? If McD’s rates so poorly with people, why are they so massive?

About half make it past their 5th birthday. And 1 in 5 make it to legal drinking age (21).

But “survival of the fittest” applies too: the odds of living for another year hit 90% after 4 years, and plateau at around 95.5% after 17 yrs.

There are, of course, things you can do to increase your odds of success.

(And this dataset doesn’t cover big companies, or those in the rest of the frickin’ world.)

But it’s good to know the base rates.

Odds are, they apply to you too.

Some Lessons:

🔸 Know your base rates. Your business isn't exemplt from the odds just because it's yours. 

🔸 The longer you stay alive, the better your odds of another year become.

🔸 Don't confuse a tough first few years with failure. Building a durable business takes time..