There are many reasons why most small businesses fail. One of them is the lack of business acumen of the business owner. For example, the business owner may be the only senior level person in the company, so they’re not able to oversee their employees or supervise the business’s financial and management processes. In addition, the business owner may not have the time to hire the right people. This puts the business at greater risk of mismanagement.
While most small businesses survive the first year, many do not. The reason that one in three small businesses fail is lack of funding, or working capital. Business owners often have an idea for a new product or service, but they are unaware of the costs and revenues associated with running a business. This lack of funds can put a business out of business. Only about a third of small businesses make it to their fifth year.
Despite these statistics, there are still some factors that can lead to a business failing. According to the Bureau of Labor Statistics, only 21.5% of small businesses survive their first year and only half make it to the fifth fiscal year. The same cannot be said for restaurants. But in general, most small businesses fail before they even reach the second year, and only one-third make it to their tenth year.