Validation of Given Failure Rate Data for Process Industry Applications



Rates of Failure for 5 Industries (and How to Survive)

Beat the Odds

So, you say you want to start a business. What are its chances of survival? What types of businesses are voted “Most Likely To Succeed”? More importantly, what skills can you acquire to make sure your business is one of them?

Creating a viable business model helps. But it's also important to stay on top of cash flow, says small business expert Mike Michalowicz, author of “Profit First: A Simple System to Transform Any Business From a Cash-Eating Monster to a Money-Making Machine.” He observes that the mismanagement of cash flow is a common downfall for business owners across multiple industries. His recipe for success: purposeplus profit. It's the second part of that equation that's often missing in many business ventures. 

In fact, one 2014 analysis listed seven pitfalls as the major causes of small business failures; six of them related to poor money management skills. Starting and owning your own business can be incredibly rewarding. A study by the Global Entrepreneurship Monitor described business owners as among the happiest people on the planet. But one thing is clear: Your business depends on cash. 

I spoke with successful business owners from five different industries with high rates of failure to find out how they beat the odds.

PR &Communications

PR&Communications

TheOdds:47percentchanceofsurvival(afterfiveyears)
AccordingtotheU.S.Census,service-basedbusinesseshaveabouta47percentchanceofsurvivingtheirfirstfiveyears.TheBureauofLaborprojectstheneedforpublicrelationsspecialiststogrowby12percentfrom2012-2022.There'sclearlyaneed,buttherateoffailure(almostoneintwo)canbedaunting.

IndustryveteranInnaShamisLapinsaysittakessuperiorcommunicationskillstosurvive.Withnearly20yearsofexperience,andaclientrosterthathasincludedMarthaStewart,Vogue,ElleDécor,ElizabethArdenRedDoorSalon&Spa,SprintPCS,andCrunchFitness,Lapiniswellpastthefive-yearmarkwithherfirm,theAvantGardeCommunicationsGroup.

Lapinpointedoutthatunliketraditionaladvertisingwhereclientsofanadvertisingagency“paytoplay”bypurchasingadvertisingspaceonbillboards,TV,magazinesandwebsites,thepublicrelationsindustryisa“crazybeastofuncertainty.”PRworkisdependentuponunpredictablefactorslikemarkettiming,messaging,trendsandnotoriouslyfickleeditors.PRcompaniescannotalwaysguaranteeresults,socommunicatingthisindustryfact,whileremainingskillfulenoughtosellyourservicesandclosedealswithoutscaringcustomers,isanessentialtalent.

AlthoughtheBureauofLaborpredictsgrowthinthisarea,Innabelievesthemarketissaturated,whichmeansyouhavetostandoutfromthecrowdtosurvive.Buildingandnurturingrelationshipswithclients,editorsandcolleaguesisvital,asisstayingaheadoftrendsandkeepingupwithanynewformsofmedia.

HowToSurvive:ManagingClientExpectation
InnaadvisesnewPRagenciestocarefullymanagetheirclient’sexpectationswithhonestyandcandidfeedback.ShealsoadvisesPRagenciestoonlytakeonbrandstheyfeelpassionateaboutandbelievein.Agreeingtorepresentajunkfoodproductwhenyouyourselfarepassionateaboutfarm-to-tableeatingisarecipefordisaster.Stayinginlovewithyourclients,theirproductsandthePRindustryasawholeisthekeytohavingalong-termsuccessfulbusinessintheindustry.

Restaurant&Hospitality

TheOdds:49percentsurvivalrate(afterthreeyears)
ThereisapopularsayinginNewYorkCity: “Ifyouwanttoloseamilliondollars,openarestaurant.”Andforgoodreason.AccordingtotheNationalRestaurantAssociation,30percentofnewrestaurantsfailinthefirstyear.Ofthosethatsurvive,another30percentcloseinthenexttwoyears.

AccordingtoKurtKnowlesJr.,athird-generationentrepreneurinoneofthemostprominentrestaurantlegacyfamiliesinNewJersey,businessesinthisindustryfailduetotwomainelements:cash-flowmanagementandrelationshipbuilding.Becausefoodcostsfluctuatedaily,it’shardtonegotiatelong-termcontractswithfixedpricing—ahugechallengewhenitcomestobudgetingandcash-flowforecasting.Couplethiswiththefactthatfoodisperishable.Knowlesnotesthatit’seasyfornewrestaurateurstofailsimplybecausetheydonotactivelyparticipate,daily,inthecash-flowmanagementoftheirbusiness. 

HowToSurvive:SecureQualityRelationships 
Thechallengessurroundingfoodcostsispreciselywhyqualityrelationships,withstrongtermsfromvendors,arekeytosurvival.Thisisparticularlytrueintheeventandspecialoccasionindustrywhereentrepreneurshavehighupfrontcoststopurchasefoodandalcohol,butmayexperiencealongercash-flowcycle(thetimeittakestocollectthemoneyfromthecustomer).Althoughhavingacontractthatrequiresadeposithelpsoffsetsomecosts,itrarelycoverseverything.Ownersshouldbepreparedfordelaysingettingfinalpayments,particularlyifworkingwithlargecorporationswhenitsometimestakes90to120daystobepaid.Havingstrongrelationshipswithvendorswhoarewillingtoextendlenienttermshelpstomitigatethesehiccupsinthecash-flowcycle. 

Polished,professionalandpolite“frontofthehouse”employeesarealsoessentialtoarestaurant'ssuccess.Valets,hosts,waitstaffandfoodrunnerscanmakeorbreaktherestaurantexperienceforcustomers.Knowlesbelievesthe“hospitalityfactor”isaninnatetalentapersonhas;itcannotbetaught,unlikeotherrestaurantskillssuchashowtosetatableproperly,clearaplateorpunchafoodorderintoacomputersystem.Likeotherexperiencedentrepreneurs,heunderstandsthatthereisabenefittokeepingemployeeslongterm—findingandtrainingpeopleisacostwhichcanbeeasilyoverlooked.Creatingapositive,stableworkenvironmentkeepsemployeeshappy.Hesaysbuildingsolidrelationshipswithhisstaffthroughmeetings,conversationsandcompetitivebenefits(includinghealthcare,ararityinthehospitalityindustry)iscriticaltohisrestaurant'slongtermsuccess. 

Knowles'sadviceforfreshlymintedrestaurantorhotelowners:Knowyourmarginsandyourmarket.Studyyourindustryandcompetitorsandrunforecastingmodelstoseewhatpercentagemarginsyouneedtokeepinordertostayalive.Don’tofferafinediningexperienceinapub,oronlypub-worthyfoodinanelegantatmosphere.Yourproduct—thefoodandexperienceyouoffer—isyourmostvaluableasset.

Education

TheOdds:56percentsurvivalrate(afterfouryears)
Whenweheartheterm“education,”it’seasytodefaulttothinkingaboutgovernment-ownedinstitutionssuchaspublicschools.Butnon-government-runeducationalservicesrepresentahugeindustry.Fromtutoring,whichasaglobalprivatemarketisprojectedtosurpass2billionby2019,toeducationalgameslikethewildlypopularCraniumwhichwassoldtoHasbroin2008formillion,tothewidevarietyofextracurricularactivitiesforkidssuchasmusic,danceandinstrumentinstruction,theeducationindustryishuge.Andtheaforementionedareasdon’teventouchonthecorporateeducationandtrainingcomponent—anotherprominentareaofthismarketsegment.Nevertheless,allbusinessesundertheeducationumbrellahavea56percentsurvivalrateafterfouryears.

HowToSurvive:RemembertobeaCEOandaTeacher
MelodyStevens,whofoundedTheAcademyofMusicandDanceinSpotswood,N.J.,14yearsagoandrecentlyopenedMozartsandEinsteinsPreschoolinBrooklyn,N.Y.,advisesdevelopingahybridskillset.Learningtobalancethe“nurturingteacher”component,whichiscrucialtohappystudentsandmoreimportantlyhappyparents,whilewearingaCEOcapcanbeachallengetothosewhohaverecentlyenteredthismarket.Sheadviseseveryonetostayawayfromthemostcommonmistake:keepingtuitionlowandpayingteachershighsalaries,whichmeansthatyouareleavingnoroomforprofit.Thisisasurefirewaytofail,andanamatuermistakeStevensoftenobserveswiththosenewtoherindustry. 

Anotherkeyfactorislocation.Convenienceforparentsiskey,butnegotiatingafavorableleaseorrealestatedealforyourfacilityiscrucialtolong-termsuccess.Shenotesthatoneofthekeyinvestmentsyoucanmakeintheearlystagesofyourbusinessistoinvestinatalentedrealestatelawyerand,perhaps,abroker. 

Tospotpotentialtroublecomingdowntheroad,Stevenspayscloseattentiontothedemographicsinherarea,andinparticulartopublicschoolenrollment.Knowingifhouseholdincomeisrisingorfalling,orifpublicschoolenrollmentisincreasingordecreasing,arecrucialpiecesofinformationneededtoplantheexpansionordownsizingofherbusinesses.

Manufacturing&Retail

TheOdds:54percentsurvivalrateand47percentsurvivalraterespectively(afterfouryears)
Wholesaleandretailbusinesshaveasimilarsurvivalratetoeducation,with54percentofwholesalebusinessesinoperationafterfouryears.Forty-sevenpercentofretailbusinessesremaininoperationafterthesameamountoftime. 

EmilyHoldridge,co-founderandownerofEverythingHappy,achildren’sretailcompany,saysthatnetworkingwithpeopleinherspecificmanufacturingindustryhasbeenvitaltohercompany’slongevity.Shespecificallysoughtoutother“softgoods”manufacturestolearnfromtheirexperiencesandgatherinformationontrends,fabricsandpricing. 

HowToSurvive:Streamline
Holdridgehasfoundthatmanyofherprofessionalpeers,manufacturersandretailcompanies,oftenwant tooffereverythingtoeveryone—adangerousundertakingthatcancausebusinessestobuckleduetoundercapitalizationorlackoffunding.Businessownersnewtothewholesaleandretailmarketoftenspendlargeswathsoftimeandhugeamountsofmoneydevelopingnewproductsandstockingawidevarietyofinventory.Thiscanputnewbusinessesinjeopardyfinanciallybytyingupcashinunsoldinventoryorspendingittodevelopnewproductsthatdon’thaveastrongsalestrackrecord.Heradvicetothosenewlyenteringthismarketistostreamline.Bykeepingyourproductofferingssimplified,andnotspreadingyourselftoothin,youcanbuilduptheconfidence,experienceandcashreservesyouneedforasteadyexpansion. 

Holdridgecautionsnewbusinessownerstokeeptheireyeontheprizeatalltime:sell,sell,sell.Sheadvisesagainstlettingyourfocusfaltertocreatingnewthingswhenyoualreadyhaveitemssittingontheshelforinwarehouses.Shesuggestsgettingdownrightcreativewhenitcomestomarketing,focusingonthestoryofthecompanyandtheproductstoincreasecustomerengagementandsales. 

Whenthingsgettough,findandposequestionstoanetworkinggroupsuchasSavorTheSuccessand7-FigureClubs.Don’tbeafraidtobuildyourownnetwork,too,saysEmily.Ifthereissomeoneinyourindustrywhoyouthinkcanhelpyou,sendanemailorpickupthephoneandaskforhelp.Surroundingyourselfwithinsightandintelligentpeerscankeepyougroundedandsolution-focusedwhenfacedwithseriousbusinesschallenges.

Construction

TheOdds:28percentsurvivalrate(after10years)
Overallwomen-ownedbusinessesarestillaminorityintheU.S.,butthisisnowheremoreapparentthanintheconstructionindustry,wherewomenrepresentonly9percentofownershipintheU.S.,and11.2percentinCanada.Theprospectsforaconstructionbusiness’ssurvivalaren’tbrighteitherwithonlya28.6percentsurvivalrateintheU.S.overaten-yearperiod.

WhenIrecentlysawKelseyRamsden,Canada’sTopFemaleEntrepreneurinboth2012 and2013(andaTEDtalkpresenter),speakatawomen’sbusinessconference,IfeltlikeIhadfoundaneedleinahaystack.KelseyownsBelvederePlaceDevelopment,aconstructionfirm,andTallusRidgeDevelopment,aresidentialprojectmanagementcompany,bothlocatedinKelowna,BritishColumbia. 

HowToSurvive:CultivateVendorRelationships
Kelsey,likemanyothersuccessfulentrepreneurs,saysmanagingyourcashfloweverysingledayandhavingqualityrelationshipswithyourvendorsandbankersshouldcarryyouthroughleantimes.

Whenshefirststartedtocutherchopsinherindustry,shesaidshemadethemistakeofgrindingvendorsdown,seekingoutthecheapestpossiblecan’t-you-save-me-one-more-pennypricing.Hersuppliersfinallyabandonedherbecausetheyfeltbulliedandwantedtobeinatwo-waypartnershipwiththeircustomers.Kelseynowspendsmoretimecultivatinghervendorrelationshipsbycommunicatingclearlyandunderstandingthatgettingthelowestcostonsomethingcomesatacost—thelostvalueofrelationshipsandqualityservicesandgoods.Thiscanprovetobeextremelychallenginginabusinesswherecustomersoftengowiththeconstructionfirmthatprovidesthelowestprice.Again,thismeanstherelationshipfactorcomesbackintoplay,butthistimeontheclientside.Ifyourconstructionfirmprovidesquality,reliableservices,thechancesarehigherthatyoucancountonrepeatbusinessandword-of-mouthreferrals. 

Whenencounteringacrisis,Ramsdenadviseskeepingyourbusinessaliveatallcosts.Cutcosts,getleanandlayoffpeoplequickly.Donotmakethemistakeoflanguishinginsorrowandfeelingguiltyaboutnolongerbeingabletoprovideforyourstaff’s livelihood.






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Date: 10.12.2018, 02:17 / Views: 71452