What is the main reason for businesses failing after 2 years? The actual answer might surprise you.

Chris Knight
Jun 29, 2019 · 5 min read

A project is a temporary endeavor undertaken with a definitive start and end to achieve a specific scope. Understanding that basic sentence ask yourself, “Aren’t all startups projects?”

I don’t know anyone who wants to be in startup phase perpetually. Launching a company takes careful planning, tactical decisions, abrupt pivots and constant adjustments. Dynamic does not begin to capture the attribute of a startup principal.

Understanding markets, liquidity and financial intricacies unlock nearly all doors. Money will fill your fuel tank or deprive you from starting. Operators such as WeWork spend billions in revenue attempting to efficiently manage multiple projects in a portfolio.

PROJECT MANAGEMENT & ITS APPLICATION

The other day I was asked a very interesting question on my flight to Toronto, Canada. My seat mate asked me,

“What made you decide to become a project manager?”

The person sitting next to me on my flight to Toronto is a management consultant. Her specialty focuses on consulting areas of business to increase profitability. She travels as frequently as I do. She is a very smart and insightful person. She had difficulty ascertaining what I did. That was definitely not my first time experiencing that reaction.

My diverse background means I have liberty of reviewing industries that include biotechnology, FinTech, robotics, construction and manufacturing. The Public Private Partnership (P3) application comes from developing countries wishing to incorporate these industries into their population. Often, developing countries have government sponsored programs for helping improve population welfare. Each priority is different. Typically priorities center on commerce, technology, infrastructure or education.

Attempting to narrow my career can be difficult if you are unfamiliar with project management. As a Project Manager I focus on the area that prohibits most businesses.

I am a professional Project Manager with focus on finance, economics and accounting. My favorite application to finance, economics and accounting is technology applications.

Every industry must confront finance, economic conditions and accounting requirements.

Finance and funding prevent most businesses from reaching their maturity.

STATISTICS DECIDING THE SUCCESS OF BUSINESS

There are 28.8 million small businesses in the United States, according to the U.S. Small Business Administration. US small businesses have 56.8 million employees. US small businesses (defined as businesses with fewer than 500 employees) account for 99.7% of all business in the US.

About two-thirds of businesses survive two years in business, half of all businesses will survive five years, and one-third will survive 10 according to the Bureau of Labor Statistics. The Bureau of Labor Statistics also tracked business survival across industries to conclude that these statistics remain consistent regardless of industry.

THE REAL REASON FOR FAILURE STATISTICS

The largest inhibitor for each business’ survival past startup stage is lack of funding through negative market cycles. Negative market cycles are events where businesses experience capital contraction in their revenue. Most businesses are influenced by market. The customer base of each industry correlates to country fiscal health, monetary policy, banking policies, financial investment, and performance of affiliate industries.

Affiliate industries are industries that positively or negatively impact a related industry. For instance, the steel industry will affect commercial construction firms. Higher prices of steel will result in less job availability for commercial contractors and less pay per job. Conversely, oil and gas price declines typically result in a boom in the plastic industry.

Most small businesses do not have financial backgrounds to forecast negative market cycles. There is often no plan for revenue contractions. As a result most small business owners are blindsided by revenue shocks.

During market contractions financial resources, funding, capital and leveraging economics properly allow businesses to survive market lows.

THE PUBLIC PRIVATE PARTNERSHIP (P3) APPLICATION FOR EVERYDAY BUSINESS

Many people are shocked to learn a Public Private Partnership (P3) can be as simple as offering incentives to open up a resort. Last time I checked there are multiple contractors building hotels across the United States without government sponsorship. Sometimes a P3 Project is a Research & Development Laboratory designed for pre-clinical medical research. Other times a P3 Project can be opening a clothing factory.

A P3 project is nothing more than a local country’s desire to stimulate some part of their economy. The business you can’t find funding for in the United States sometimes has vast amounts of capital available somewhere else.

True, conventional applications of P3 surround bridges, roads and electricity. False, the only P3 application is country infrastructure.

APPLYING THE VIEW AS A BUSINESS OWNER NOT A SOLE PROPRIETOR

The focus of a strong business owner should be to remain in industry, through booms and contractions, while prudently planning your capital resources to dynamically adjust to appropriate markets.

Do not limit yourself to one market. You will live and die with your single market.

Small business owner doesn’t mean mom and pops. Small business owner means companies under 500 employees with less than 2bn in revenue. There is a distinction between trade providers, sole proprietors, entrepreneurs and business owners. Trade providers, sole proprietors and entrepreneurs are wiped out in market cycles. Business owners thrive despite market sentiment.

A little bit of education can teach you how to survive these cycles. This article just touches the surface. If you are first starting, it’s my hope a few facts here enlighten you to broaden your view. Remember market cycles. Learn what other industry affects you. If you have a lube shop make sure you watch new car prices. High price spikes mean more people keep older cars outside warranty. Older cars are a lube shop’s bread and butter. Watch monetary policy. Look at the financial reports of your bank. Banks will take away your credit cards and purchase order financing if they experience heavy losses despite your great credit. Don’t get blind sided by market cycles. Prepare and plan.

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To your knowledge success!

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About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com

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Chris Knight

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Christopher is a Professional Entrepreneur with over 13 years of experience, a Master Project Manager, Financial Analyst, & Master Financial Planner

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