Starting a business has never been an easy task. If it was easy, and if continuing business operations was
a breeze, then the failure rate of young businesses wouldn’t be so high. But it is high and stubbornly
refuses to lower, indicating that it is no easier today than it was in the 1980’s when the US Small
Business Administration was formed to address the issue of business failures.

• In the United States, there are about 33,185,500 small businesses of fewer than 500
  employees. Small businesses employ 61.7 million Americans, which are 46.4% of all
  employees. From 1995 to 2021, small businesses created 17.3 million jobs, accounting
  for 62.7% of net jobs created since 1995. 1
  
• According to the Bureau of Labor Statistics, approximately 20% of small businesses fail
  within the first year. The failure rate increases to 30% by the end of the second year,
  50% by the fifth year, and 70% by the tenth year. 2

The complexity surrounding starting and operating a business increases yearly. It is difficult to know in
advance everything that is needing to be accomplished, what order the tasks should be addressed, and
how to distinguish one business from another in the marketplace. For these reasons, business initiation
and development are continuing processes, oftentimes an effort in weaving one’s way through the
barriers to reach stability. As difficult as this sounds, there are some areas of business development an
entrepreneur should understand. The statistics above are evidence that the effect of businesses are
fundamental drivers of the economy, even with the difficulties and barriers that are in place.
At the start, you and your business are inseparable, at least in your stakeholder and constituents’ minds.
One of the most difficult tasks for an entrepreneur who wants a stable continuous business is to
separate the business and personal lives. The ability to achieve this separation will help determine the
ability for the business to grow past a single-person entity and achieve the ability to cash-flow positive
as a full-time endeavor.

The structure you choose to build your business under matters. Successful businesses are found within a variety of structural forms, from a Sole Proprietorship through very complex Corporate forms. Forming
as one type of entity and changing it at a later date is allowable, as long as it makes business sense to do
so. That takes the pressure off of a beginning business to think a perfect solution needs to be arrived at
to house the business throughout its lifecycle. Still, making intelligent structural decisions for what a
person wants to accomplish in the medium term starts at the outset for successful growth.
Lacking clear definition of what the business is, what it produces of value to a customer group, how it is
managed and what the values and culture of a business are can keep a business at a standstill while
competitors who are better organized flourish. Taking the time at the outset to define what the
organization structure is, what the mission, the vision and the values of the company are sets the
business up with an identity that endures over time.

As difficult it is to imagine, especially by technicians and introverts, it is all about the people. It takes
people to be clients, customers, mentors, educators, partners and employees. Customer relations and
service excellence are critical to growing a business to make it profitable. Developing a great soft skill set
is fundamental. Understanding how to incentivize performance, how to manage the risks involved with
employing others, and keeping an eye on how you might retain the skilled employees you have is a large
part of continued success.

Get it right. If you are building a business and are looking for money to grow, be smart about how you
go about developing operations, systems, processes and documentation to achieve an excellent
organization. Great operations are more efficient, attract higher quality personnel, are able to achieve a
higher valuation at the time of sale, and are more profitable than poorly operating inefficient
businesses. Build excellence into your organization from the outset. Investors and lenders support
businesses that are organized to be successful.

Understanding what risks are caused through going into business or changing business operations is
fundamental to a good night’s sleep. Managing the created risks allows for avoiding the pitfalls of being
caught unaware and potentially suffering catastrophic loss. Structuring the entity properly and the
inclusion of operating agreements between partners and investors, defining management and position
responsibilities, having employee handbooks, insuring intelligently, and hiring and contracting well sets
a company up for success over the long run.

1 Frequently Asked Questions About Small Business 2023, U.S. Small Business Administration Office of
Advocacy. March 7, 2023.
2 Business Employment Dynamics, U.S. Bureau of Labor Statistics, U.S. Department of Labor.

Marshall Doak is the Director of the Southern Oregon University Small Business Development Center
and a supporter of innovation and the community that forms around innovation in the economy. In
private practice as owner of Managed Successions, LLC, he consults with businesses wanting to transfer
ownership and develops and manages projects for public and private organizations. He can be reached
through: mdoak06@gmail.com or 541-646-4126.