If it’s true that the majority of small businesses fail in the first year, why should small accounting firms bother cultivating them as clients?
According to the Small Business Administration (SBA), 79.9 percent of businesses started in 2015 were still in business in 2016. In the previous years of 2005 to 2015, the average was 78.5 percent, while about half of all business startups make it to five years and a third last 10 years or more.
What about the businesses that didn’t last? Other data quoted by the SBA indicates two thirds were closures, while the final third may have been mergers or outright purchases -- meaning the acquired firm stopped reporting. That’s not necessarily a failure.
What Industries are Higher Risk? Lower Risk?
The website smallbusinesstrends.com reported on businesses with the best startup survival statistics in 2016. They observed the three best industries were finance, insurance and real estate, averaging a 58 percent survival rate after four years.
Here are some profit margin examples:
- Accounting, tax preparation, bookkeeping: 18.4 percent
- Real estate agencies and brokerages: 15.9 percent
- Auto rental and leasing: 14.55 percent
- Law offices: 14.48 percent