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New Business Survival


Steve asked:

My wife and I are currently creating a business plan for a "Bakery/Cafe" in an Ontario city with a population of less than 100,000.  We are doing a lot of research while creating the plan (it is a lot of work but will definitely be priceless when completed).  One of the responses given on this site suggests that 80% of new businesses fail with 5 years and that 80% of the remaining will also fail within the next 5 years.  That would leave 4% of new business surviving beyond 10 years.  Seems daunting to open your own business.  What have those 4% done correctly?  I want to make sure we are one of them!


You have asked an excellent question, one that many authors and experts have attempted to answer over the years. It has also been the main question we have tackled at CanadaOne over the last 8 years, as our goal is to help entrepreneurs gather the information they need to succeed in business.

What enables one entrepreneur to succeed when so many fail?

Having spoken to many different entrepreneurs I've observed that every business owner has had to overcome his or her own unique challenges that are often very individualized. It is often the business owner's ability to manage resources and solve problems (while avoiding pitfalls!) that brings success.

When you start your business you will have a set pool of resources. How will you invest them?

Most entrepreneur have fixed start-up capital. Will you save a bit of money by compromising on location? Or will you spend more on location and furniture and find other places to cut back on your expenses? What about your human resources? How are you going to attract great employees and how will you manage them so that a trip to your cafй is a pleasure for all your customers?

There is no "perfect" answer to these questions, but the answers you choose will have a direct impact on your ability to succeed in business.

There have been many examples of cafйs that have taken a unique approach to build up a loyal clientele. Some sell a unique collection of luxury products like specialty sauces. Others fill their walls with local artwork and have local entertainment in the evenings. One cafй on the east coast even sold antiques. One way to learn about what might and might not work would be to research cafйs in other communities and simply ask the owners if they would be willing to give you advice.

This is one thing that seasoned entrepreneurs seem to do well: identify best practices in their sector and then put together their own unique plan using the success factors of similar businesses in their own and other communities.

Out of the box thinking also seems to be a common trait amongst successful entrepreneurs. For example, you may find that you have a slow time. Can you find alternative income opportunities during that time?

As I mentioned earlier, many authors have attempted to answer your question. From the many entrepreneurship books that I have read over the years a few ideas have stood out.

One idea, which comes from the book The Rhythm of Business, is that all businesses evolve organically and the entrepreneurs who learn to adapt and change as needed are those who will succeed.

Another idea that is quite compelling comes from The E-Myth Revisited. (Here "e" stands for entrepreneur and not electronics.) In this book author Michael E. Gerber tackles your question directly. He examines the difference between franchise businesses, which have a very high success rate and looks at what those businesses have done right to achieve their success.

Ironically, while the two books I have mentioned work very well together they provide completely different outlooks. One recommends that entrepreneurs need to learn to grow organically, while the other emphasizes the importance of working on your business, not in it and developing systems that will ensure success. I would happily recommend both.

The Rhythm of Business
Author: Jeffrey C. Shuman with David Rottenberg
Publisher: Butterworth-Heinemann
ISBN: 0750699914

The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It
Author: Michael E. Gerber
Publisher: Collins
ISBN: 0887307280

It's not possible to provide you with a complete answer; if there were a simple formula business owners could follow to ensure success then there would not be such a high failure rate. Still, it sounds like you are already taking some of the important first steps - research and planning - that many entrepreneurs skip over. It sounds to me like you are off to an excellent start already.

I wish you the best of luck with your new business!

About the author

Julie King is the co-founder and managing editor of CanadaOne, Canada's first small business portal.

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