We have all heard this statistic, or variations on it before. It's quite a scary fact when you consider the implications, especially if you have started or are about to start a new business.



But the bad news does not end there:

?A further 22% of Businesses Fail in the second 5 years?

So even if you manage to survive the first 5 years, the odds are still against you continuing your business past the 10 year mark.

So what is the cause for such a high rate of failure in new businesses?

Lack of research into the market? Negligent business owners? Lack of funding? Changing market conditions? Staffing Issues? Or just plain Bad Luck?

All of these things contribute to the problem in some way. I don't think that any of them are the primary cause. Not one of them would be involved in every case. A more in-depth study would reveal that a more fundamental problem is responsible.

Businesses are generally started and run by people with quite a lot of hands on experience with the work of the business. Quite often they have spent 5, 10 or even 20 years working in the industry. You would think that this experience would allow them to be successful with their own businesses.

?Only 10% of new Franchises Fail in the first 5 years?

Interesting! So maybe we can work out why small businesses fail by looking at why Franchises succeed. What is it that (Business Format) Franchises have in place that allows them to boast such improved survival rates.

Under a Business Format Franchise the franchisor grants the franchisee a licence to operate as an ongoing business. The agreement allows the franchisee to trade under the name of the franchisor. They are given access to an entire package, comprising all the elements necessary to teach a previously untrained person how to run the business.

The Business Format Franchise establishes an integrated system of doing business that includes:

A proven system for successful operation of the business. Initial and ongoing training in the operations of the business. Ongoing Assistance with marketing, business and technical operation of the business.

?It's all about Business Systems?

So the difference is that a Business Format Franchise supplies their new operators and staff with well defined tested and documented Business Systems. A turnkey way of running the business, turn the key and it works, every time, exactly the way you expected.

The new Franchise operator has the Business Systems in place from day one to run their business. They have the documentation allowing them to rapidly train their staff. They also have a management and reporting structure allowing them to track the Key Indicators in their business.

?What do you need to do to ensure you don't become a Statistic??

To ensure that you survive and are one of the successful businesses you need to develop your business by modelling the Business Format Franchise.

Develop Business Systems that describe and document exactly what needs to be done to run your business.

Train your Employees in the operation of your Business Systems. Design your Organizational Structure to allow you to measure monitor, track and control your business.