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5 Statistics About Business Entities That Will Make Your Jaw Drop

With LLCs popping up in the 1970s (blending sole proprietorship with corporation) and the internet fast-attracting some 18 million 25 years later (1995, to be exact), accessing business information has only gotten easier. (Perhaps this is why first-time business owners now open shop at 27 instead of 35?) But how likely are you to succeed when you conduct a Kentucky secretary of state business search and then sign (or e-sign) those registration papers? Are all small businesses doomed from the start? Is the IPO status still a gold star for corporations? And, can your business weather the economic ups and downs? Read on to find out: here are 5 jaw-dropping stats about business entities.

1. Despite Economic Ups and Downs, around 20% Businesses Still Survive

According to USA Today, only around one-fifth of new businesses survive past the first-year mark. Meaning, 80%, more or less, bow out at (or before) year 1— whether due to cash flow issues, failing to attract the (right) target audience, marketing strategy gone wrong, you name it. Surprisingly, this statistic has been the same for the past 20 years. So, don’t blame the times —or the economy. Yes —also surprisingly— USA Today claimed that the 20% figure doesn’t change despite economic ups and downs. However, we have our suspicions—the housing collapse of ’08 did (temporarily) turn the real estate industry (and market) upside down. But given the millions of other business owners, perhaps the percentage dip may have only been small? Still, what we’re trying to say is business failures and successes may not have much to do with shifting economic conditions.

2. Over Half of Small Businesses Don’t Make It Past Year One

Some grim —but realistic— news for new sole proprietors. However, that does mean a handful do go on to year 2. Some possible reasons why small business owners close shop includes poor cash flow management, insufficient product or service, lack of funds, outperformed by the competition, and out-of-sync team.

Some Hope for New Sole Proprietors and Single-Member LLCs

If you can weather year one, as USA Today states, year-by-year your survival rate becomes more consistent. And, around years 5-8, expect even more consistency, as the rate for businesses in general nearly flattens. That’s not to say you’ll not lose (or gain) customers —and may even deal with a merger or acquisition, let alone transition to another business entity.

3. Corporations Aren’t That Stoked to Go Public: Only 3,671 IPOs Last Year

Compared to the 1990s and early 2000s, IPOs are not the golden star they once were, and the numbers show: 1996 saw a whopping 7,322 IPOs while 2017 had a meager 3,671. The reasons are several, (as Investopedia notes): corporations that go public must deal with more expenses, more reporting, and more regulation. Plus, besides everyday business to-dos, corporations have to juggle quarterly earnings and conference calls with investors. What it boils down to is more work and less reward. So, don’t expect every C corporation to go public —or other business entities like LLCs and S Corps to transition to C Corps just for the IPO status.

4. GDP Is on The Up and Up: A 31-Point Jump from 1996 to 2017

What does GDP have to do with business entities? As The Economist mentions, the IPO slump hasn’t seemed to affect stock value. This is another point for the IPO road not taken. So, C corporations may not have to worry about plummeting stock if they go the private route.

5. Have 499 Employees? You’re a Small Business Owner

Often, we may think of small businesses as your one-man or one-woman shop —also called nonemployer businesses. (And there’s reason why; in 2010, roughly most (75%, to be exact) small businesses were nonemployer.) Needless to say, the Small Business Administration considers any business with 499 employees or less a “small business.” That said, Basecamp, famous cloud-based software company with 52 employees and revenue exceeding $25 million: small business.

Which Brings Us to Another Misconception About Small Businesses…

The size of a business does not determine how much revenue it brings in annually. Vermont-based company, Rhino Foods and Pennsylvania clog business, Dansko are just two small businesses that have large purse strings despite hiring fewer than 200 employees. To be exact, Rhino foods has over $50 million in revenue while Dansko tops out around $120 million. Even perhaps more surprising, several nonemployer businesses have broken the million-dollar ceiling —Science of Skill business owner, Daniel Faggella, being one of them. What this shows is, depending on your business, growth doesn’t always mean more employees —or employee.

Bonus: Running Two Businesses Under One LLC or Corporation

While not a pure statistic per se, we couldn’t help but add this jaw-dropping fact to the list: technically, business owners can own and operate multiple businesses under one LLC or corporation. While potentially complicated, it can work. The trick? Register each business as an individual doing business as (DBA). In other words, let’s say you own a technology startup that sells a SaaS product. But you want to expand and own a company that sells technology curricula too. You can file the technology startup as the LLC and the technology curricula business as a DBA. Needless to say, you don’t have to stay within industry, as long as there’s a designated LLC or corporation and the other businesses are DBAs. At the same time, you can also own and operate multiple LLCs and corporations. Each business would be its own separate entity. Care to share any other business statistics? Are you a successful small business owner? Have advice for being in the 20%? Be sure to comment in the comments section below.

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