Why do young businesses die? What is the “dead line”? And what makes some businesses survive beyond the decade, while most do not?
According to a report from the U.S. Small Business Administration (SBA), about 20% of new businesses fail in their first year, 45% cease operations in their fifth year, and 65% disappear after 10 years. These numbers are not only a warning to anyone thinking about starting a business, but also open up a series of important questions:
“Death Zone” <3 First Years – When Dreams Collide with Reality
The first three years are the biggest challenge for any business. Common reasons for failure during this period include:
a. Lack of a real market
Many businesses are founded on a “good idea” instead of a “real need”. They do not conduct adequate market research, resulting in the product/service being launched not being well received by customers.
b. Wrong business model
Some startups imitate foreign models without adjusting them to suit the Vietnamese market. Others do not have a stable cash flow, and their model relies too much on burning capital instead of creating real value.
c. Weak operational skills
Founders are often technical, passionate about their products but lack experience in management, finance, human resources, and marketing – the vital elements of running a business.
d. Lack of working capital
High initial costs, unstable revenue, and prolonged negative cash flow cause many businesses to go bankrupt before they reach break-even.
“Stability Trap” in Years 5-10 – When Businesses Forget to Innovate
Getting through the first three years does not mean success. The 5-10 year period witnessed a wave of “late failures” in 65% of businesses, the main reasons include:
a. Hot, uncontrolled growth
When businesses start to have good revenue, they often expand too quickly: opening more branches, hiring more people, increasing operating costs… without a proper management system. Loose management leads to internal crises.
b. Not keeping up with market changes
Customers are changing more and more, new competitors appear continuously. Many businesses are loyal to the old way of doing things, not investing in technology, user experience or brand, leading to elimination.
c. Loss of motivation from the founder
After 5-7 years, many founders fall into a state of “running out of energy”, or are distracted by other goals. The corporate culture fades, the long-term vision is no longer clear.
d. Not preparing for transfer or expansion
The business develops thanks to the individual leader without building a succession system, without professionalizing the team. When expanding, internal problems are exposed and the stable structure is broken.
Lessons from businesses that have survived the decade
While most fail, there are still names that have endured for decades, even becoming icons. They often have things in common:
- Focus on customers, constantly learn and innovate.
- Build a strong team, not dependent on an individual.
- Tight financial management, effective cash flow control.
- Know how to “stop halfway” to restructure, not afraid of change.
Starting a business is easy, surviving is hard
Starting a business may be a bold leap, but surviving and growing is a journey of perseverance, awareness and constant innovation.
The numbers from the SBA are not meant to extinguish the dream of starting a business, but to remind you that: success is not about the first glorious year, but about whether you survive in year 10.
