We hear a lot of numbers about survival rates, so it’s gratifying to see some quality statistics from Statistics NZ, via this MBIE infographic.
It measures 3 year survival rates, and to me three years is about the time it takes to figure out whether a business is going to enjoy sustainable growth or not. Obviously businesses that are successful are more likely to employee people, and with more people employed the chances of failure are a lot lower.
Start-ups can take faith from the 1-5 employees line, where 69% of these businesses are still alive after 3 years. Even for zero-employee new companies, like Powerkiwi or MyTours* over half survive for over three years.
So what’s stopping you starting a business and employing some staff? Chances are you will succeed.
*Until this year – we now have our first employee.
“Survival” is a pretty poor metric for founders, and only a passable metric for investors. These figures include Zombie companies which are limping along barely able to justify the founders’ time.
From an investor’s point of view there’s some option-value to having the company continue to hop along, it doesn’t consume a lot of a time and who knows? Maybe they’ll stumble across an accidental gold mine. But that’s pretty unlikely.
From the founder’s point of view a Zombie company is much much worse. We focus on founders who started something and later got crazy-rich, however we all know at least one person slaving away on a company which barely pays the bills in the hope that “one day we’ll have the hockey stick and I’ll be rich”. If you’re capable of running a company, chances are the opportunity cost of your time flogging the equine-cadaver is a considerable salary or consulting fee. Or even the return you could get from your next venture.
Survival isn’t a goal, success is, and we shouldn’t delude ourselves into thinking we’ve achieved something just because Korda Mentha haven’t locked the doors.
I agree – we all need very strong discipline around Zombies. If they are making money and have happy customers with no effort, then sure, keep them going. If they are doomed, then it’s time to pull out the shotgun.
‘Survival rates are high so why not start something’ speaks straight to my motivation center! Thanks for another gem of encouragement Lance. Keep them coming please :)
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