Why do 9 of 10 new businesses fail 
within their first two years?

We cannot be sure, because owners of failed businesses cannot be reached. Failed business no longer exist. So, anyone who claims to know why businesses fail could not have found out by visiting and examining unsuccessful businesses. Questioning owners about why their businesses failed is more for therapeutic value than for collecting meaningful data.

However, from information about why businesses succeed, we can rationalize that failed businesses did not operate the same way as those that succeed. 

Owners of successful small businesses can be reached and are proud of their success. They say that keys to their business success, in decreasing order of importance, area

• Business knowledge 
• Market awareness 
• Hands on management 
• Sufficient capital 
• Hard work 

As a result, we can speculate that businesses fail because owners lack standard business knowledge, product market analysis, personal ability to manage, and sufficient money. Most entrepreneurs work hard even to the extent of substituting working harder for working smarter. Knowing where the pitfalls are that contribute to failures is the first step toward avoiding them.

Standard business knowledge and experience that team management members must possess are in the areas of:

• Finance
• Accounting
• Legal
• Management
• Office Management
• Personnel
• Insurance
• Marketing
• Sales
• Customer Service

Contact us for more information on these subjects.

Businesses without enough expertise to meet specific business needs will probably fail. Each business requires its own blend of expertise, based on product sales, marketing media, number of employees, operating expenses, inventory, product manufacturing, customer service and profit expectation.

A Small Business Incubator says:

Nine out of ten new businesses fail in their first year, usually because of lack of training in standard business practices or because of undercapitalization. But business startups that collaborate with an incubator have a very high first-year survival rate - nationally, about 87% of them are still in business. What's more, an average of 84% of the companies that have graduated from an incubator stay in their communities. At SBA we work with our clients to help them avoid the pitfalls that make failure inevitable.

Also see http://www.sbae.org

Small businesses are started and managed by entrepreneurs, who by definition are "highly motivated" and typically lack training in some standard business practices. Almost all entrepreneurs use their personal resources for their major source of business capital. Entrepreneurs with little more than a great idea and limited funds are asking to fail.

Gardner Business Solutions has been in business since 1996, which puts us beyond the five year milestone that qualifies businesses as successful. Also, GBS is successful in several Internet businesses, one of which, according to VISA and MasterCard, is a very risky Internet business. We sell prepaid phone cards over the Internet and deliver phone card PINs by email without having experienced any more than one chargeback during 2000.

Since 1996, our biggest challenge and greatest reward has been dealing with customers. During that time, we have firmly resolved that the customer is not always right. As a matter of fact, regarding technical products the customer is rarely right. Quite a revelation when all sales advice says that the customer is a business' life blood and is always right.

Well, that advice was not developed from Internet sales. Further, high maintenance customers are unprofitable for Internet businesses, should not be tolerated and can be be easily eliminated. 

It is still true that the cost of acquiring a new customer is five times the cost of keeping an existing one in the brick and mortar world, but probably not on the Internet. Regardless, we don't want high maintenance customers. They drain our energy and take the fun out of operating a business.

We agree that the typical unhappy consumer tells eight others of his or her unpleasant experience. But, where are they? An unhappy customer is a real problem for a small business in a small community and less of a problem for a small business in a large, densely populated community. How much of a detriment is an unhappy customer on the Internet? 

GBS customers are not very centralized. So, unless one of our customers refers a friend, our customers are probably not going to know each other. That is not an excuse for treating customers badly.

But it is a reason for taking out the trash.

GBS receives about 25% of our new customers from word of mouth. So, our discrimating against high maintenance customers, who appear to us to have become irrational when we teminate them, does not seem to have hurt our sales. We know that every business has more dissatisfied customers than it thinks. So, we get rid of high maintenance customers. They are by definition unhappy.

GBS offers our customers many ways to communicate with us so they can tell us of any problem or difficulty ordering or using our products. We are aware that 9 out of 10 dissatisfied customers don't complain and that 7 out of 10 just don't come back! 

Therefore, we send out newsletters to let them know how to use our products and how to select the best value product for each customer. Each GBS customer has his or her own ordering page that decreases ordering time and effort as well as improves security of each customer's credit information. Each established customer receives his or her purchase immediately by email. We realize that if we don't take care of our customers, our competition will.

We have learned to resolve customer problems and difficulties on the spot, so that we lose only those customers who we chose to let go. We have demonstrated what some business schools teach...that small businesses can challenge larger, established businesses by becoming more responsive to consumer needs. 

We subscribe to the belief that each company, regardless of its size or the price of its products, needs an effective strategy for managing consumer complaints and inquiries. GBS has found that effective complaint management enhances our company's reputation, builds consumer confidence and loyalty, and attracts new customers.

GBS has experienced effective complaint management resulting in increased sales, better products, improved personnel performance, and satifactory business economics even though small businesses are hit hardest by a weak economy or a recession. 

A few years ago, Stanford University research reported that nine out of ten new businesses fail during their first two years of operation, while nine out of ten franchises survive and prosper. Most business people start out with a good concept, a lot of energy and a little money. During the critical first twelve months new business owners have ample opportunities to make mistakes due to inexperience.

Buying an existing business is one way to avoid all new business risks.
Business success is proven. There are no start-up problems. The business already has customers, employees, suppliers, etc.

We developed a customer service policy for each of our products, because one policy does not fit all. We custom fit our basic customer service template to each of our products. Our policy works so well that we have been tempted to franchise it, provide incubator type assistance or sell an existing business policy, modified to fit another Internet business. 

Each new product GBS takes on is fitted with custom business and customer service policies. They are tested and refined for each set of circumstances.

There are benefits in knowing the areas where new businesses might need improvement now instead of after they have been started. Experience is not necessarily the most efficient teacher. GBS can evaluate marketing and sales territory, standard business knowledge and customer requirements, then provide feedback for any product.

If you would like a policy estimate, please provide information:
Product, marketing and sales territory, business expertise, name, address, phone number and email address. We will get back to you with feedback.

Small Internet Businesses taken as a whole are really big business:

Of 11 million businesses in the U.S., 10.8 million are small. And, the smallest firms created 24 times as many industrial innovations as the largest firms. 

In 2000, Internet companies were responsible for 5.5% of the $25.57 billion of US direct retail sales. That is $1.41 billion.

According to the US Small Business Administration small businesses contribute 39% of the gross national product, create two thirds of our country's new jobs and are responsible for more than half the nation's technological inventions. If these numbers occur in other countries, small business influence world wide is enormous, Impact of a small business may be small, but as a group small businesses are one of the largest influence on the world economy.

Small businesses are encouraged in a free society, are regulated by governments less than large businesses and attend to customers more personally. Small business owners know their customer are responsible for their profitability.

While large businesses spread responsibility around, small businesses concentrate responsibility in a few key people who must develop multiple skills, take risks and rapidly implement plans resulting from quick decisions to stay profitable.

Contact us for more information on these subjects.