It’s reported that approximately four out of five small businesses fail in the first five years. Yet, according to business strategist Chris Green, author of Business By Design, these numbers do not necessarily add up when you look at census data worldwide.

In the US, for example, the United States Census Bureau says that in 2020 there were 8,000,178 establishments, of which 2,179,893 (or 27 per cent) had over ten employees. These business numbers remained relatively stagnant between 2019 and 2020 during COVID. Yet, establishments with less than ten employees grew by an astounding 44,445.

Similarly, the Office for National Statistics in the UK revealed that 38 per cent of businesses between 2016 and 2020 survived. However, if you look at the size of the companies, particularly those with more than ten employees, then between 2020 and 2021 alone, the number of businesses grew by 5,425.

Finally, according to the Australian Bureau of Statistics, of the 305,085 businesses that exited in the 2022 financial year, 298,831 turned over less than AU$2 million and 83 per cent of these turned over less than AU$200,000.

So, if your business turns over more than AU$200,000, you have an 83 per cent chance of survival year to year. If your revenue exceeds AU$2,000,000 per annum, you have a 98 per cent chance of survival year on year.

What is consistent between the US, UK, and Australia is that the likelihood of exits declines dramatically when businesses hit a specific size. The Australian and UK data, in particular, show that most exits happen in the high-risk startup phase of business. Still, once the business is established, growth increases significantly.

That means the odds of small business survival are good if you can crack the numbers.

3 signs you’ve hit the entrepreneurial ceiling

To do that, we need to look at why many businesses hit the entrepreneurial ceiling after the initial high-growth period. This imaginary ceiling blocks the path to success and sentences a business owner to chaotic activity and overwhelm.

So, what do we look out for, and how do we crack the ceiling for long-term viability and success?

1. Action with no strategy

As demand increases, a business moves into a high growth phase, characterised by saying yes to many customers. While at first, this seems excellent – your product or service is in high demand – small and medium-sized businesses struggle to balance supply and demand and hit capacity where they become reactive to customers, staff and suppliers.

American professor Richard P Rumelt talks about strategy as a means to “overcome difficulty and point organisational resources towards a specific direction” instead of being busy doing a lot of ‘stuff’.

Now is the time to deeply consider the strategic direction of your business and align your purpose with your actions. Why are you doing this, and how does it truly contribute to achieving the business’ strategic goal?

Questioning your activities through the lens of your purpose will take you off autopilot and stop you from defaulting to doing what you have always done the way you have always done it. If executed consistently, this direction by design, rather than by default, will lead to better outcomes.

2. Your business is reliant on you instead of your team

Creating a scalable business means having no individual elements dependent on one person. You must let go of the fear of the unknown and work towards making yourself redundant from your business (seriously).

This requires you to rethink the organisational structure of your business, align it with your strategic direction and invest in the right team to help you get there.

A balanced team with the capability to achieve the aspiration of the business, well-defined career paths for individuals, and the internal ability to meet client demands, has many of the resources needed to break through the entrepreneurial ceiling.

Get these elements of rethinking and growing your team right, and you will accelerate your business and personal growth, have confidence in your direction, stimulate a great team and create a wonderful business that people want to be part of. 

3. Working harder, not smarter

When you’re running a small business, there never seems to have enough hours in the day or days in the week. It’s endless, relentless, and often not what you envisaged when you created or purchased your business.

In our efforts to keep things going, it’s easy to become too busy to lead and give more and more of yourself to make things work instead of looking at ways to systemise and optimise the business’ productivity overall.

You must create a culture that embraces identifying and addressing operational issues and challenges. Having mechanisms to bring the problems to light and a systems-based solution to resolve them will provide a continuous-improvement environment. This allows you to put appropriate systems and rules in place to prevent the issue from happening again and continue to evolve your business systems.

Remember, you can afford to be brave as a small business, as the odds are actually stacked in your favour.

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