Check out this article from Jason Cohen: Starting a business isn’t as crazy and risky as they say. According to Cohen, popular ideas about failure rates for start-ups are based on misleading analysis of data. Statistics about business failures are muddled by two fundamental questions: (1) What is a business? and (2) What is a failure?
What is a business? There’s a big difference between a side business (a hobby or a casual source of extra income) and a primary business (main source of income) and yet statistics often lump these two together. Presumably failures are more common among side business, inflating the sense of how often serious businesses fail.
What is a failure? Common ideas about the frequency of failures are based on figures that simply track when a business goes out of existence. But a company can disappear for numerous reasons that are not failures. Maybe the company got bought out to the delight of the owner. Maybe the owner grew tired of the business and wanted to do something else. Maybe the owner retired. The figures are more encouraging when you sort out genuine failures from businesses that folded agreeably.
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