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Is Getting a Job Riskier Than Starting a Business?

Play at your own riskWe were recently walking through the retail business area of our campus – our campus “downtown” you might call it. In the middle of the main block, two storefronts in a row were boarded up.

It’s a reminder that small businesses fail. The dreams of two or more entrepreneurs were unrealized. Lives were disrupted. Money may have been lost.

The most cited number is misinterpreted

Like us, you’ve probably heard it over and over again. It usually goes something like this:

“Starting a business is risky. Ninety percent of all entrepreneurial ventures fail within the first year.”

Some people say two years or five years. It doesn’t matter; the number is daunting.

We think the origin of this number stems from The State of Small Business: A Report to the President for the year 1994. We got it via Entrepreneurial Finance by Janet Kilholm Smith and Richard Smith.

The 90% number so often quoted is a misinterpretation of the data. The research actually showed that nearly 91 businesses ceased operations for every 100 startups, on average for the five years from 1990 to 1994.

To understand the misunderstanding, let’s say 100 new jobs were created in the past year while 91 people got laid off. Would we say we had a 91% job loss rate? Or would we say the net gain is 9 jobs?

When it comes to jobs, net gains are reported. When the subject is startups, the failure rate is cited. Why the difference?

The actual failure rate of startups

Scott Shane takes a different approach in his excellent book, The Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By. His data shows that, if 100 entrepreneurial ventures were started today, the expected number of failures each year would be:

failure rate chart

While his numbers look a whole lot better, the odds are still stacked against startup entrepreneurs. But statistics are funny things.

The failure rate for employees

The Bureau of Labor Statistics recently released the results of a long-term study on labor market mobility. You can go to their news release if you want the details. In general, they showed that if 100 people started a new job today, only 67 would still hold that same job in a year. In five years, only 32 will hold the same position in five years.

So the survival rate for jobs is lower than the survival rate for startups!

We can hear the chorus of objections.

Some of these employees may have been promoted.

Others may have elected to take another job – maybe even a better one.

Of course, some were involuntarily let go.

Even then, many of them may have been eligible for unemployment.

In any case, they didn’t have money at risk like entrepreneurs do.

The number rarely discussed

Well said! However, it also highlights what we often ignore when we cite statistics about the failure rate of startups:

Some of the startup entrepreneurs may have ceased operations for a better opportunity – as an employee or an entrepreneur.

And then there’s the statistic we haven’t talked about yet. In fact, almost no one ever talks about it. Its source is the same as the 90% statistic mentioned earlier.

Only 9% of startups cease operations with unpaid obligations, on average.

Few entrepreneurs actually walk away owing money. They may have lost what they invested. However, no one else did. Suddenly, entrepreneuring doesn’t sound quite as risky as we are led to believe by popular lore

Freedom or security is the age old argument. It turns out there are risks in both employment and entrepreneuring. Successful entrepreneurs are masters at risk mitigation.

You can reduce the risk of leaving your job with a little advance preparation. Test yourself against these 10 signs you’re ready to quit your job and start a business. And check out The Entrepreneur Equation by the amazing Carol Roth.

Image in this post from nosheep

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A Makeover for Bigg Success

paintIf you’re one of our regulars, you probably immediately noticed our new look. With the help of the great people at Headway, we’ve gotten a makeover!

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georgeMost people may not be surprised to hear me say this, but I’ve never had a makeover, Mary-Lynn.

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marylynnYou’ve never gone to the make-up counter for the “before” and “after” thing, huh?

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george
Oh, well now that you put it that way!

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marylynnWell, I’ve certainly had my share of makeovers. From long hair to short. Back to long. Then to medium length hair.

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georgeIf I had hair, maybe I could do that! Another popular makeover is a home makeover. Here’s the way ours works. I move the furniture to a new spot per Mary-Lynn’s order. Then I generally move it back to where it was originally per Mary-Lynn’s order!

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marylynnYou can paint your rooms to give them a new feel. And for you, George, you just clean off your desk so you can see it again!

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Planned remodeling

In the retail business, there’s an unwritten rule that you should remodel your store about every seven years.

Your web site is your online storefront whether you’re in the retail business or not. There's a rule of thumb in web design that you should update your site every two years.

Whereas you might spend tens of thousands of dollars to remodel your bricks-and-mortar store, it costs relatively little to give your virtual store a makeover.

You don’t have to make drastic changes. You can add new tools or highlight things in which your site visitors might be particularly interested.

For instance, do you have a great resource page? Is it highly visible on your home page?

Do you publish a newsletter? Is it easy for your visitors to sign up?

Why the change?

We’re almost at the two year mark so we felt it was time to remodel. The look is different but the overall feel is not.

Another reason is that more people are accessing our site via mobile devices. Our old design wasn’t very friendly to these devices. You had to scroll through a lot of extraneous information to get to our post for the day.

Thanks to our graphic designer, Liz McMillen, we have an updated logo. It incorporates our tagline – Life on Your Own Terms – into Bigg Success.

Making Headway our Theme

We also had planned to upgrade to a premium WordPress Theme anyway. Our friends at Headway came out with their fantastic product at just the right time. (In the interest of full disclosure, we are now an affiliate of Headway.)

We do business with people we know and trust. Grant and Clay Griffiths certainly fit that description. They’ve done a great job with Headway and we expect it to be a bigg success.

Other people we know and respect are using the template too. There’s nothing like social proof! Chris Cree, Michael Martine – a.k.a. Remarkablogger – and John Haydon are all using Headway now for their blogs.

Headway makes it easy make updates to any site as it continues to evolve. It is easy to customize without having to know code. That’s a bigg time saver for any business owner looking to upgrade his or her site.

They have a great support forum that is both informative and robust. Clay and other Headway users do a great job of responding to technical and design questions.

Your thoughts?
Check out the “before” if you want and compare it to now. We'd love to hear your thoughts on the new design.

Do you like it? Any suggestions?

You can leave a comment, e-mail us at bigginfo@biggsuccess.com or leave a voice message at 877.988.2444 (BIGG).

Thanks so much for visiting the new Bigg Success site today. Please join us next time when we’ll discuss entrepreneuring your personal finances. Until then, here’s to your bigg success!

 

Direct link to The Bigg Success Show audio file:
http://media.libsyn.com/media/biggsuccess/00485-092109.mp3

(Image in today's post by ratnesh)