Over the years I have seen a lot of information on the life of a small business; I have seen various stats and information about starting a small business and what it takes to succeed. This week I reached out to the Small Business Administration to get some answers to some of these questions. I spoke to Ed Cadena the District Manager for the SBA in Las Vegas. I asked Ed the following questions:
I see different sources giving different figures for the percentage of small businesses that fail. Some say half of all small businesses fail within five years, others say 1 out of 5 fail every five years. Can you confirm overall how many small business in general fail within five years?
About half of all new establishments survive five years or more and about one-third survive 10 years or more. As one would expect the probability of survival increases with a firm’s age. Survival rates have changed little over time.
In my opinion one of the biggest reasons that small businesses fail is due to the lack of knowledge and/or education. I wrote an article last year called “Business Impossible! Why small businesses fail and what to do about it.” in which I stated, Just because you are a chef, doesn’t make you qualified to run a restaurant, there is much more to running a restaurant than just cooking, and that goes for all verticals in all industries. Would you agree or disagree with this assessment?
Absolutely. We are adamant; before you plan for anything, put together a business plan, who’s your competition? If you’re lining up a t-shirt in front of Wal-Mart you’re going to lose. You need to plan first. How much money do you need, how are you going to pay it back. As a business you have to make a decent profit; if you are not making money, it is a hobby.
I always say that businesses that are doing well and that are making money should not become complacent, their goal should be to continue to grow, if a business is not growing, it is either dying or will eventually die. Do you agree?
Absolutely… You need to know your client’s needs… You have to anticipate their needs and wants. The world has changed, as a business you need to change as well.
As in all things there is a lot of misinformation about what the SBA can and cannot do for someone. Does the SBA help small businesses obtain business loans?
Yes; we are a loan enhancement program. 3 c’s: capital, contracting, and counseling. Using SCORE , create a business plan, how much you need, what you need it for, how are you going to pay it back?. If you have cash flow and are credit worthy… The SBA guarantees the loan…
What are the main factors in someone qualifying for a small business loan with the SBA?
Be eligible and qualify. Eligible: be current on all taxes, student loans, etc… U.S. Citizen, can’t be a convicted felon. Qualifying – credit worthy, business cash flow.
What about a new business?
Yes we can help with a start up if you can find a lender… They look at do you know how to run the business? Are you qualified? No experience – likely will require 50% down. If you have experience… then we can help…
At the end of the day the SBA is looking for business owners they are educated and know their business. Being a bartender does not make you qualified to own and run a bar. Being a chef does not qualify you to run a restaurant. Educate, educate, educate… Make informed decisions. Check out the SBA in your area.