Studies show that most start-up businesses don’t make it past the five-year mark.
That does not even account for earthshaking events like the 2020 pandemic, which has shuttered hundreds of thousands of businesses. According to Yelp, 55% of companies that are included on its web site have closed for good, as of the end of July.
“Even as total closures fall, permanent closures increase with 72,842 businesses permanently closed, out of the 132,580 total closed businesses, an increase of 15,742 permanent closures since June 15,” Yelp reports. “This also means that the percentage of permanent to temporary business closures is rising, with permanent closures now accounting for 55% of all closed businesses since March 1, an increase of 14% from June when we reported 41% of closures as permanent."
"Overall, permanent closures have steadily increased since the peak of the pandemic with minor spikes in March, followed by May and June," the company states.
The good news, if there is any in that scenario, is that the virus will eventually subside and new business start-ups will emerge from the economic rubble.
What that happens, there should be ample opportunity for funding and consumer support for new ventures, as so many existing business have disappeared, leaving the playing field open for new competitors.
If you’re thinking of opening a business in 2021 or 2022, start by prioritizing a “survivalist” mindset that gets you through the first several years of existence. The more years you cross off the calendar, the stronger your chances of not only surviving, but thriving, in a new business climate.
To help out, Jen Gouldstone, a serial entrepreneur and founder of GardenStreets.com, a plant-tech company located in Belmont, Mass., walks us through the key elements that vastly improve the odds of your new startup making it through the emerging growth phase and into fruition as a successful company down the road.
Here are the strategies that helped Gouldstone to get to profitability with her multiple startups – in her own words:
1. Know the market, know the customer, know yourself and lastly, know your competitors, in this order. Pick a market that is growing because it's very hard to fight the economy or macro-trends. Know your customer so you can offer them what they want. Know yourself so you can hire for what you're not good at. Know your competitors but don't obsess over them.
2. Focus on cash flow and people. In the early years, cash is king.
Develop your core product or service, but see if you can get early cash flow to help support your business. The best kind of cash comes from happy customers. Hire good people who are flexible. Make use of the gig economy to avoid fixed costs as much as possible without sacrificing quality.
3. Figure out why you're starting this company. A strong mission combined
with a passionate founder in a growing market is a magnet for talent and
4. Mistakes are unavoidable regardless of the stage of the company, but startups have less ability to recover from big mistakes. Read your contracts and legal documents especially when dealing with long term or large deals.
Those are hard to recover from if they fail.
Gouldstone’s single tip to a new startup owner is to “adopt a growth mindset.”
“If you don't know now, you will later,” she says. “As long as you're learning, you’ll improve and if you improve enough, you will succeed.”