The statistics surrounding the survival rate for small businesses have long been subject to fervid debate. Depending on who you're talking to, the predicted life span for a startup can elicit grim to cautiously optimistic responses. One commonly cited figure is that half of all businesses go under in the first year while 95 percent fail within the first five years. According to a study done by the Small Business Administration, two-thirds of all new small business survive the first two years but only 44 percent will still be operating by year four.
Common culprits for failure include undercapitalization, cash-flow crises, and overexpansion. Then of course there are a host of external factors that nobody can predict -- let alone adequately plan for -- such as volatile credit markets and unstable economic cycles.
To gain insight into specific practices that enable small companies to keep going and growing even during difficult times, BusinessWeek profiled three entrepreneurs who have reached benchmarks in their companies' life cycles: three years, five years, and 10 years. Their stories and strategies follow.
Year Three
BYD Ranch & Kennel
Bryan, Tex.
Founded 2007
After 20 years doing business administration for a number of small businesses, Miriam Rieck decided to go out on her own and open a dog and horse boarding kennel in Bryan, Tex. In 2007 Rieck and her husband plunked down $100,000 from their savings to purchase a 45-acre ranch and built BYD Ranch & Kennel's facilities. Rieck says she differentiates it from her competition by limiting the number of runs so that she can devote more attention to the animals. The practice resonates with customers. "My clients are like an extended family and their animals are like their babies."
Rieck says working directly under the owners of those earlier companies helped prepare her. For one, Rieck says she recognized the importance of defining boundaries between your private life and business life, a line that can often blur when you own your own business. Moreover, she says, "during the crucial first years I learned you really always need to recycle money back into your business instead of taking money out of it. A new business needs to stay fresh, especially in an industry with animals. The property can look dirty and dingy really fast. People consider their dogs like children and they want them taken care of like they are at home." Rieck says she reinvests profits to keep her facilities in good shape. And, she says, "It's important not to cross the line and take money meant for the business and make it your personal income." (continued...)
© 2009 Business Week Online under contract with MarketWatch. All rights reserved.
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