Material and Method

External and internal factors which effect businesses

Schumpeter has emphasized in his work that the role of the entrepreneur as prime cause of economic development era which was the first decades of the last century, small businesses were both a vehicle for an entrepreneur and source of both income and employment (Schumpeter 1912). Post Fordist System of management is marked with entrepreneurs. Entrepreneurship and therefore the entrepreneur, is at the core of what makes an enterprise succeeds, whether you call it an entrepreneurial firm, a small business, a family business, a home-based business, or a new business (Thurik, R, and Weneekers, S 2001). If we were to make a framework for this study for success and failure of small businesses or any other types of business we would focus on the important factors. According to Wilken (1979) individuals pursuing a new business venture go through three stages of entrepreneurship, namely raising idea, start-up activities and finally, activate the business. There are a lot of factors which are behind the formation of a new business venture and its subsequent success and failure. These factors include the internal factors (personalities of entrepreneurs, their motivation, efforts, taking risk and so on..) and external factors (economics and infrastructure conditions, inflation, market information, supply and demand for products and services, banks system and so on..) The internal and external environment of the small business both together will affect the base of developing a new business. a) These two main factors together will start-up activities influence the entrepreneurs decision to initiate a business. The commencing and first year of a new freshly started

business is critical stages in determining the success or failure of a new business. In this stage it is really important that the entrepreneur must compromise internal and external factors, keep good organization, and keep the structure of business in good condition.. b) If the entrepreneur is able to make a reasonable compromising, than they will successfully continue their business. At the same time in order to survive they are supposed to struggle hard with different external, internal and compromising activities. If they could come over the raised problems they will survive, otherwise they would go bankrupted which means that business will end up a huge failure. Figure 1: External Factors and Internal Factors results.

The success and failure of a business is often dependent on overcoming a series of potential barriers.

Survival rates and failure rates of small businesses

New research from the U.S. Bureau of Labor Statistics suggests that most failures of American startups will occur in the first two years of their existence. After that, the rate of business failure slows. The data show that, across sectors, 66 percent of new establishments were still in existence 2 years after their birth, and 44 percent were still in existence 4 years after. (See chart 1.) It is not surprising that most of the new establishments disappeared within the first 2 years after their birth, and then only a smaller percentage disappeared in the subsequent 2 years. These survival rates do not vary much by industry. The following chart shows business survival rates by industry sector. Interestingly, the sector with the highest survival rates is education and health services. The sector with the lowest survival rates is the information industry. Of course, this study tracked new business startups from between March of 1998 and March of 2002 the height of the dot com boom. (Small Business Trends)

Chart 2 (Small Business Trends) The figure shows that the most of the new firms drop out of the market with in the first year and around 40% to 50% survive to last more than 4 years. Small Business Survival Rates (Small biz stats and trends) Small Business Openings & Closings in 2008: There were 627,200 new businesses, 595,600 business closures and 43,546 bankruptcies. Seven out of 10 new employer firms survive at least two years, and about half survive five years. Findings do not differ greatly across industry sectors.

Start-up failure rates The Real Numbers (start-up failure rates)

The figure illustrates the percentage of small businesses which survive and fail over 10 years of time.

If you look at this image it shows that the most percentage of failed businesses is in the first two years of new businesss life. Most of the businesses drop out in the first year and after that easily others drop off as well only the competitive ones stay in the game.