Running a small business can be grueling, and all that hard work doesn’t always lead to success. Roughly 30% of small businesses close in their first two years, and only 50% make it to the fifth year. Risk of failure is even more pronounced in some industries. It’s hard to find reliable data about business failure rates broken down by specific types of business, but Innovation, Science, and Economic Development Canada tracks how many businesses enter and leave the marketplace each year in various industries. Based on those numbers, the following industries have the highest rates of failure.
The real estate, rental, and leasing sector sees significantly more companies going out of business every year than new businesses opening their doors. In 2013, 6,530 businesses opened in this sector, while a stunning 7,430 closed. This industry includes real estate agents, leasing specialists, property management companies, and similar businesses. If you’re brave enough to jump into this industry, strong sales skills are a big plus. You should also be skilled at analyzing industry demands and screening tenants and buyers. To be successful, you need responsible renters or eager buyers as clients.
A net total of approximately 900 retail businesses close every year. The industry includes everything from trendy clothing boutiques to fruit markets, and challenges vary based on the type of retail establishment you decide to open. To boost your chances of success, consider focusing on customer loyalty and retention, especially in shops with traditionally narrow profit margins, such as grocery stores. If you sell non-perishable items, don’t just rely on your local client base. To increase revenue, make a website and spread the word about your products online.
Negotiations are the heart of a successful wholesale business, and entrepreneurs who understand the art of the deal tend to thrive in this industry. You may also want to keep an eye on efficiency and timeliness. When you sell products quickly after buying them, you pay less in warehouse costs and you can move quickly to the next deal.
The agriculture, forestry, fishing, and hunting industry also has more closures than new businesses annually. A lot of this imbalance can be related to the shift from family farms to large-scale operations. If your dream is to run a small farm, you should differentiate yourself from the competition with a unique approach. For example, instead of exclusively farming wheat or canola, start a small poly-cultural farm under the community supported agriculture sales model. Alternatively, consider joining a co-op, so you can maintain your independent business while sharing equipment and resources with other farmers.
The manufacturing industry also has more businesses closing than opening each year. To be competitive in this cutthroat industry, you need to be as productive as possible, have a well-connected supply chain, and focus on standardizing your assembly line. You may also want to consider agile manufacturing so you can be more responsive to customers. As a small business owner, you will face challenges regardless of your industry. To prepare, you should spend some time researching the most common stumbling blocks in your niche, and you should make plans to avoid those disasters. A bit of preparation and a strong dose of tenacity can be essential for success.