Discuss the current small business start up success and failure rate in the U.S. market

Over the years, the trends in new small business success rates pretty much stayed the same. The success rate for new businesses remains to be unattractive and the failure rate can still cause quite a scare. During 2008, it has been recorded that there were 627,200 new businesses set up in the US. However, there were also 595,600 business closures and 43,546 bankruptcies. At this time, seven out of 10 new businesses survive for at least 24 months, and only half of the 7 businesses survive in the succeeding five years.

25% of the new businesses that open close right after the first year of operation. Despite the high numbers of the closed and bankrupt new businesses, the statistics, in a way, pose as a challenge and a source of inspiration rather than provide discouragement for budding entrepreneurs. In the US, the estimated 29. 6 million small enterprises employ over half of the country’s private labor force. These 29. 6 million small businesses also represent 97. 3% of the exporters and 99. 7% of the employer firms in the US.

Come to think of it, the small business start up success and failure statistics in the US serve as an inspiration for budding entrepreneurs to work hard, learn the market they are about to enter, and work vigilantly to achieve success. 2. Discuss the red flags for a small business related to business failure and bankruptcy. Most new businesses fail because the people behind it entered the business for the wrong reasons. Even worse, they invest their money to open new enterprises for no good reason at all. You may also be interested in reading “Are entrepreneurs born or made essay”

One red flag to watch out for when it comes to small business is the motivational fit and the reason for entering the business of the entrepreneur. If the person is not whole hearted, or he is not passionate in running the small business, chances are he will fail. Small businesses will have a better chance of achieving success if the entrepreneur has love and passion for making the business grow and if he has the right physical and motivational fit. This means that he has the needed mental and physical strength required in making the small business grow.

Other red flags would be lack of management talent and inadequate resources. Commonly found in people who jump into the water without giving it much thought, small businesses are doomed to sink to failure if the one driving the ship is not skilled enough to manage it. Management skills are important in making the business successful. Of course, sufficient capital is important to fund the start-up operations. A number of new enterprises fail because the business owner does not have enough capital to fund the operating expenses.

This is gives rise to the importance of proper financial planning prior to starting a new business. 3. Discuss the precautions the owner and management team will take to ensure the success of the new venture. The management team will depend on the skill of its people. This means, a precaution will be done is carefully selecting the people to hire in the organization. As mentioned above, one red flag is the lack of management talent. Everyone in the organization, including the management team, must be on the same page when it comes to how to run the business.

To do this, a series of meetings and seminars will be done to unite everyone and to train them to make sure that there is sufficient talent to manage the business. Also, a careful recruiting process will be followed to make sure that only those who are qualified will be able to join the organization and the management team. Caution will also be taken in executing the marketing mix strategies. In the sea of competitors out there to gain market share, management should be very careful on which target they will tap and how they will tap it.

This will be done with proper research and understanding of the target consumers and the right set of strategies as to the pricing, promotion, and distribution of the product. Caution will also be done in planning the financial aspect of the business. Careful financial planning and projections of future outlays will be done to make sure that the business will not run out of working capital a few months after the business is started. 4. Discuss who the investors and lenders will be protected from financial loss in the new venture.

Shake to drink Milk Company will make debt funding its last choice as a source of funding. Majority of the funding will come from the investment made by the business owners. This method will not only eliminate the costs of debt financing as no interest will be paid, the business is ensured that the owners contributing their own money will work hard to make sure that their investment will reap due rewards. Shake to drink Milk Company can be opened as a corporation wherein the incorporators will contribute capital and their share of the earnings will be based on their capital contribution.

To protect the personal assets of the investors in case of financial losses, the company will not run after their personal assets, only to the extent of their capital contribution. 5. Discuss the business succession plan to ensure that the new venture continues to exist. By-laws will be drafted to ensure that there will be people who will continue to run the business even after the original owners have already perished. First, proper training and exposure will be done to everyone in the management team and in the organization to make sure that everyone is fit or has adequate potential to run the business.

Continuous training of employees is important to make sure that everyone is ready to proceed to the next level of management responsibilities. Second, the organizational chart will be followed and a screening process will ensure that only highly qualified people will get to climb to the top of the organization. References Shane, S. A. (2008). The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By. New Haven: Yale University Press http://www. score. org/small_biz_stats. html