Small Business and 12,000 Years of Lessons Learned 

Successful business owners make running a business look so easy. Make no mistake, no one was ever born with expert business skills. Success is a science, learned by mastering its formulas and the constructs of its many systemic relationships. Until recently, it was thought there was only one business science.

Attempting to fuel economic growth, government has been easing requirements for starting businesses and increasing access to resources. The result has been surprising as the small business economy keeps shrinking. Research discovered that small businesses are not struggling to start, they are struggling to survive, after they start.

To understand the cause, we needed to answer the question – why after 12,000 years of evolution of economic evolution were local businesses now struggling. Little did anyone realize that the development systems that evolved with business markets and organized the apprenticeships that educated and developed business owners had slowly vanished.

With the emergence of what we call “big” business in the 1860’s, there was also a new science with new formulas. Old “smaller” business was a local economic entity that evolved around processes mastery, skilled labor, and economies of scope. The new “bigger” business, was a regional and then national economic entity, growing from smaller local business, was evolving around process factoring, arbitraged labor and economies of scale.

From the very beginning, the paths of the two business economies were divergent. Following the development of business schools 150 years ago, the system for developing business talent, once comprised of craft guilds, merchant guilds and chambers of commerce, was completely disrupted. Today, with more than 400 business schools in the United States, the average annual cost of a business education $20,000. Unfortunately, local business owners are rarely able to take the time get a two-year degree, let alone spend four years to become experts in the science and formulas of big business before launching their entrepreneurial endeavor.

So, it is not surprising that data from the U.S. Bureau of Labor Statistics, indicates 20 percent of small businesses fail within their first year. By the end of their fifth year, roughly 50 percent of small businesses fail. After 10 years, the survival rate drops to approximately 35 percent and after 20 years only 20 percent of the original businesses remain.

Survey after survey of failed business owners list lots of reasons for their failures, in depth research indicates that 90 percent of business failures were due to the owners’ lack of knowledge, skill, and experience.

Business owners that were re-exploring and re-discovering on the job, the principles and practices of business success, burned through their capital before they learned the formulas and mastered the science of success. In other words, they don’t know what they don’t know.

In support of this findings, independent research by the United States Small Business Development Center concludes that 90 percent of small businesses getting assistance from an established source of expertise were still in business after five years.

We can turn around the failure rate. Because small business success is more about working smarter, not harder, the completion of a fundamentals of business program must be central to permissions granted to operating a business. It must include information the business owners and managers need to understand their rights, authority, responsibility, and accountability to the public, before the business is licensed to experiment on an unsuspecting public.

Because such a program will advance the health, fitness and resilience of businesses and the economy, it should be developed in collaboration with those resource providers who will benefit from working with more informed business owners and managers. The successful completion must demonstrate understanding and be recognized by public and private institutions on state and local level.