5 Businesses With Lowest Probability of Failure

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Written by BusinessAlligators Support

Support Staff at BusinessAlligators is a team of business experts led by Shilpi Singh Trusted by over 100K readers worldwide.

January 9, 2017

Be it the task of starting a company or investing in a startup there is some risk involved in it, but the person who knows how to play with the tides and has the ability to turn them in his favour is the real entrepreneur. It not only depends on how good your idea is but also on how you carry it with the resources present with you. There is a very high probability that your startup or business will fail within 2 years. The survival rate of businesses is really low in the practical world.

Surveys tell us that only one out of 200 companies, that were started, is successful. So, what is the underlying cause behind this depressing number?

There is no such particular reason but a variety of factors involved which decide whether the business would prove to be successful or not. Although idea and money do contribute in a successful business but it is not everything, you have to look for other factors as well like setting the right team of people around you with the variety of skill-set that are required to build a successful startup.

Network and connections are requisite for a business to flourish. You should know that for a business to thrive you need the support of influential as well as resourceful people. In the modern era, there is so much competition that if you don’t learn from the strategies and mistakes of your competitors you are bound to make same mistakes and hence fail.

Other most common mistake that startups do is that they fail to examine the customer’s perspective towards the service or product. You should validate, measure, track, and optimise the data you receive from your client. Statistic Brain Research articulates that factors like incompetence (due to lack of planning, no experience in record-keeping), neglect, fraud, disaster, lack of experience, etc. are the major reasons behind this depressing number.

According to the U.S. Bureau of Labor Statistics research, about 50% of all new businesses survive 5 years or more, and about one-third are able to survive 10-years or more.

According to the Small Business Administration (SBA) report– close to 66% of small businesses will survive their first 2 years. It means that about one-third of total businesses will fail during the first 2 years. The SBA also expresses the fact that about 50% of businesses fail during their first year of establishment.

According to Statistic Brain report, 25% of the startups fail within the 1st year of establishment, 55% fail within the 5th year, 63% within the 7th year and within the 10th year, 71% startups fail. For more details, you can go through the article why startup fails.

There are some businesses which have the lowest probability of failure even amongst such odds. These businesses promise to withhold profit if carried out with determination and with the right set of mind.

1. Mining

With a survival rate of about 51% mining is a business which requires an adequate study of Ore Body (a solid material which comes out of the earth from which metals and other minerals are extracted). It requires excellent and experienced management along with high-quality resources and reserves to ensure economic survival.

The reason why mining businesses fail is that people tend to ignore the fact that density of data required to define a given category of the mineral resource is very essential.

Using best industry standards for evaluation of data, including Quality Control/Quality Assurance, is one of the tools to improvise your business. Comprehensive metallurgical test work should be done for ore characterization, bulk sampling and pilot plant testing.

To maximise cash flow you should optimise mine planning and use robust grade control. The thorough feasibility study should be done, using realistic market assumptions, strong social and environmental commitment, capital and operating costs from first principles, and a comprehensive, independent review.

Related- 9 Situation that Leads to Business Failure

2. Construction

Construction contracting makes up a survival rate of around 37%. People tend to believe that they can do all the work themselves, and thus, save cost but they fail to understand that delegation would distribute the work and hence bring out more efficient performance.

If you are interested in a construction business you should evaluate a contract for profitability factor before signing it. You should not have any unrealistic thoughts like having many contacts and as a result signing poor written contracts which seem impossible to meet.

Accounting is very important as it keeps track of the previous as well as future contracts. Poor equipment cost control and unpredictable changes like financial changes in the economy, weather changes, job site conditions, etc. can also affect the survival rate of this field of business.

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3. Real estate

40%, yeah that’s the number that estimates the survival rate of real estate business in this world. As interesting as this field appears, it is not able to provide profit to all of its owners as they tend to lack knowledge and experience which is a pre-requisite for success in this field.

Only 1% of the realtors tend to earn 40% of the commissions as other realtors lack the focus, diligence, education (either EQ or IQ wise). They can’t come over the fact that they are independent and don’t have any boss to give them order and hence have to take care of all the expenses like bills, insurance plan, retirement plan, taxes, etc. for which they don’t save enough money thus land up exiting this business earlier than they imagined.

Some people are fascinated by the idea to have a full-time job besides this business and they also want to chase shiny objects without looking for profitability but the truth is that not setting a clear goal or plan to motivate is a bad idea.

Networking is the key to success and database proves to be an asset for the realtor as it helps in keeping track of details of previous customers, deals, prices, etc. A realtor should not sacrifice client’s need for own profit or commission as it would lose him a future client and thus disturbing the essence of networking.

4. Retailing

The field of retailing makes a survival rate of roughly 41%. There are five major reasons that account for the failure of most of the retailing business.

The first factor is the out-of-control balance sheet. Growth is an affordable option only when you have done careful financial planning including debt-to-worth ratio and measurement of financial strength.

The second factor is expense management. Some costs are fixed (premises, permanent staff salaries, etc.) while some are variable where retailers can cut cost creatively by using cost-saving ideas to avoid unwanted expenses. Budgeting is a tool for keeping expenses down.

Another essential factor is the management of gross margins. A retailer should never compete with other retailers by lowering down its operation costs and needed margins, so as to lower its retail price. Out-of-control inventory is a unique factor which plays its role in determining whether the business will be profitable or not.

Inventory is the engine of the business which is responsible for customer satisfaction or the lack of it.

Last but the most important factor is the problem of being out of cash which leads to irregular payment to suppliers and lenders and borrowing more money with greater interest and finance charges. Profit is great but until you have the proper cash flow so as to buy the goods to meet obligations at all times, your business will not reach heights. A cash-flow budget is the best tool to keep into account all the flow of funds into and out of the store.

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5. Services

When we compare service industry with product industry, the service industry is taking a lead. The field of service, with a survival rate of near about 48%, knows no boundaries – if you have a desire to earn extra money, earning money from home, or operate a full-time business, irrespective of age, the service field has a lot in store for you. It provides its customer with something that is intangible, in this company aims in doing something rather than giving something to its customers.

Be it house moving services, grocery delivery, house cleaning, printing, lawyers, painting or any other type of service- this field covers it all. Networking is a key to success as it buys you clients and by delivering them service with additional features which they didn’t pay for, you earn their trust and probability of future service as well.

Develop a questionnaire to get the most knowledge about what exactly does the client want and remember that customer isn’t always right so you have to use your knowledge in a precise manner. Keep getting feedbacks and enrich your profile with the latest achievements or projects you have made.

The common mistake that most entrepreneurs make is that they forget that they are their own boss and thus have to take care of all the expense, so the whole income is not theirs to spend but some have to be applied to business for further growth. Make sure that the people you hire have technical and ethnic skills and the service you provide should assure a great quality.

Most people enter the world of business just because their family and friends advised them to but in reality, they don’t have that mindset required to be an entrepreneur. Lack of market awareness, pride, family pressure to earn money, lack of financial responsibility and awareness are some of the other leading management mistakes that force a person to leave the world of business earlier than he imagined. So, make sure that you have tied your laces and are well prepared before entering into this world!

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