Which Types Of Businesses Are Likely To Fail – And Which Will Succeed?

No matter how hard you try, however, there are some businesses that appear almost doomed to fail from the beginning – not due to mismanagement, but rather, as a result of the economy and inferior business concepts. In this article, a look at the types of businesses that might fail, and which are likely to succeed.

Business Failure and Survival Rates

According to data from the U.S. Bureau of Labor Statistics, one fifth of small businesses are set to fail within their first year. In a businesses’ fifth year, about 50% have failed, and towards their tenth year, only a third of businesses are left.

Some of the major examples of businesses that have a high

failure percentage are: information, mining, quarrying, oil, and gas industries. In the information industry 24.7% of new businesses failed within the first year in 2019, while the mining, quarrying, oil, and gas industry, the failure percentage rate was 23.8%.

Information businesses include publishing, software, film/video, audio/music, broadcasting, Internet publishing and data processing.

If you’re looking at business in a field that is new to you, here are some industries to be wary of.

Technology Consulting Business

Because of the numerous technological advancements being made from year to year, an information technology business would be many people’s first idea when thinking about starting a business.

However, despite the emerging technologies of today, IT consulting businesses have one of the highest failure rates. The reason for this may be because of the large number of big players in this niche. A new business will need an aggressive promotion and advertisement campaign to get seen, and will likely have to operate at lower prices to attract customers.

Independent Restaurants

If you don’t have a passion for cooking and service, restaurants may be a tough one to sustain. Independent restaurants are one of the businesses that suffer a higher than average failure rate, estimated to be about 60% over the last five years.

This is because restaurants have a lot of costs, and having a restaurant for a business means that there are many daily tasks to take care of: the continuous supply of food, the workers, the cooks, and just about everything else. Handling the inventory is already a big task in and of itself.

Aside from that, another aspect to focus on is establishing a brand for your restaurant.  For a new unknown restaurant, that is one goal that must be attained – and it’s not always an easy road to get there.

The restaurant industry is not for the weak. Depending on the owner’s skills and experience, the business could either thrive or it could fail.

Retail Stores

While there are plenty of retail stores that make it big, there are also some that fail to keep up with the success of others. Retail stores may also be a challenge because of the large number of competitors around.

Apparel, shoes, goods, and grocery stores have a higher percentage of failure rate as opposed to other average small businesses. Physical stores also require a higher cost due to expenses such as rent, particularly if the location is in a highly desirable area.

Plumbing, Heating, Air Conditioning Services

Another business group that is highly likely to fail is plumbing, heating, and air conditioning services. Despite these business owners possessing a very large skill set, data still show that it is one of the highest business services with a high failure rate.

One reason for this is that while owners of these businesses have great skills, they often lack the capabilities of great management. Of course, just like any other business, technical skills aren’t always enough – good marketing and sales, financial management, and customer service also play a significant role.

Direct Sales Business

Businesses that rely on the business owner to directly sell services to the consumer also have a higher-than-average failure rate in the small business realm. It is worth noting that these types of businesses typically require just a small amount in start-up capital.

They often promise consumers or businesses quick results. However, they frequently attract business owners that have no patience in successfully starting a new business. Direct sales rely heavily on the owner’s determination and business acumen for success. Not a lot of business owners have these qualities, though, which leads the business to its failure.

More Successful Sectors

When it comes to new businesses, there are certain industries where a start-up is less likely to fail.

Statistics from 2019 show that businesses in the agriculture, forestry, and hunting industries have a 12.0% failure rate in the first year.

Following this is the real estate and rental industry at 14.7%. The retail trade industry also performs great in business with a failure percentage of only 15.3%. Arts, entertainment, and recreation industries as well accumulate a small failure rate of about 17.4%. Lastly, the manufacturing industry has only a 17.8% failure rate, meaning these businesses are likely to survive for a longer period.

The Hard Truth in Running a Business

Not a lot of people have what it takes to run a business. The truth is, depending on the management of a business and the business concept itself, it can either fail or thrive. While there are businesses in certain fields that have tendencies to fail, there are also the same businesses in that same exact field that enjoy great success.

There is always a set of abilities that contributes to the reason why businesses skyrocket. It is not all about trying, but trying efficiently and effectively is a must. Some of the reasons why businesses fail is lack of preparation, insufficient funding, or not creating a sellable business.

While the type of business also plays a big role in its success or failure, what indeed makes an impact is the management skill set of the owner.