Canadian new business survival rates | General financial discussion | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

sp_Feed Topic RSS sp_TopicIcon
Canadian new business survival rates
June 12, 2021
10:38 pm
Norman1
Member
Members
Forum Posts: 4397
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Loonie said

Let's not glamorize the role of entrepreneurs. Statistically, a very large proportion of small businesses fail, even without pandemics, for a variety of reasons (my recollection is that it's over half within two years fail but haven't confirmed this). …

Globe & Mail John Heinzl recently quoted these statistics from section 3.1.2 (New Firm Survival Rates) of
Canadian New Firms: Birth & Survival Rates over … 2002–2014:

Average Survival Rate, Canada
Number of years after birth Survival rate
T0 100%
T+1 98%
T+2 89%
T+3 78%
T+4 70%
T+5 63%
T+6 58%
T+7 54%
T+8 50%
T+9 46%
T+10 43%

Heinzl also noted that surviving does not mean thriving: "Even among companies that make it, many limp along for years and never achieve the ambitious goals set out in their business plans."

June 12, 2021
11:03 pm
HermanH
Member
Members
Forum Posts: 224
Member Since:
April 14, 2021
sp_UserOfflineSmall Offline

I've seen more than enough that exist only to pay the landlord and others that earn barely enough to (badly) pay the owner a wage, often near or below minimum levels with no return on investment.

June 13, 2021
1:32 am
Loonie
Member
Members
Forum Posts: 7498
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Interesting, but doesn't give good data for those truly small business start-ups, those with fewer than 20 employees, which I believe is the majority.
The stats are buffeted by those with more employees, which tend to be more successful. if you eliminate those, the results would be more stark.

The reason I cited 20% failure rate is because that's what we were told by the bank when we started our business and incorporated. I believe it was Scotia at that time. But that was about 35-40 years ago.

June 13, 2021
4:57 am
Bill
Member
Members
Forum Posts: 2633
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Everything dies. But even businesses that live for only a while have provided jobs to people (thus also tax revenue to the society), provided revenue to suppliers, etc. during the time they're operating.

I know a guy who started a number of businesses, for about 20 years now he's employed humans in several countries thus providing a good life for lots of folks, many in relatively poor countries. He's got rich, useless kids who will, if he dies unexpectedly, unless they're smart enough to sell the businesses no doubt run them into the ground, they'll fail. That won't erase all the wealth that will have been created for many families during the decades before the businesses' demise.

June 13, 2021
8:36 am
Norman1
Member
Members
Forum Posts: 4397
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

The averages are indicative. However, I suspect they vary substantially depending on the industry and even location.

There's no minimum training for starting up a business. CRA will issue a business number to anyone who applies.

Some people put lots of thought into it and try to determine if there is really a long-term, viable need to serve. Others? Not so much.

I remember one person started a sports equipment store because he had always dreamed of opening and running one! There was no lack of sports equipment stores in town. Looked up his store a few years later. It was gone.

Co-worker said she opened a lingerie store in one of the malls. Strange business decision as the mail already had at least two lingerie stores. One of them was Victoria's Secret! She closed the store after a year or so. Likely ended up, as HermanH wrote, paying the landlord and not having anything left but unsold lingerie.

One new restaurant came and went in less than six months. Beautifully decorated venue. But, food was terrible. I went to the bathroom a few times to spit out the food.

It looked like the dimwit who opened the restaurant blew most of the money on interior decorating and didn't have any money left to hire someone who could cook!

June 13, 2021
9:10 am
Bud
Member
Banned
Forum Posts: 1375
Member Since:
February 20, 2018
sp_UserOfflineSmall Offline

Many small businesses gorged on benefits this past year cews for multiple employees cerb sprinkling loan grants rent subsidy and other goodies. Few were complaining outside the fake news. Some made out like bandits. Many ripped off taxpayers. Kelly put on a helluva show. Don't feel sorry for the holding cos. Many in the highest bracket invest their personal savings in corps. and pay the lowest rate. They faught CRA over it and won. Few if any get audited that's what the fight was about I believe enforcement. Dividend tax credit it's only fair lol.

June 14, 2021
9:47 am
RetirEd
Member
Members
Forum Posts: 175
Member Since:
November 18, 2017
sp_UserOfflineSmall Offline

As has already been noted, the table of survival rates was not exclusively for SMALL businesses. And, while those failing businesses do provide some benefit to employees and owners, that money can in large part come from those suppliers and employees that are left unpaid when the business folds. And of course customers who have paid for goods and services they never received.

In fact, fraudulent bankruptcies are a perennial concern of financial regulators - operators who set up a business. get loans or investments, buy merchandise on credit, then drain the business with their own salaries/bonuses, or even routing money to other businessed or their co-conspirators own.
When things go to zero, someone always takes the loss.
RetirEd

June 14, 2021
10:40 am
MG
Member
Members
Forum Posts: 169
Member Since:
February 16, 2013
sp_UserOfflineSmall Offline

The numbers could also be distorted if the government is using dissolution date to determine survival rate. I had a corporation which earned revenues for about 3 years. After that, I only had small amounts of investment income, fully taxed at 50%. It took me another 7 years to finally dissolve the corporation, mostly because I was just slowly drawing down my retained earnings as dividends. I also found the income tax filing onerous. So the government might say I survived for 10 years but really that is somewhat misleading.

Please write your comments in the forum.