80pc of new start-ups are destined to fail

21 Oct 2010

Almost 80pc of new start-ups will fail due to insufficient technical, managerial and entrepreneurial skills.

These statistics were announced at a seminar to launch details of Europe’s first dedicated third-level franchise centre of excellence.

The launch of Franchising Acceleration Start-Up Training (FAST) took place at the Limerick-based National Franchise Centre (NFC) – where former vice-president of US multi-national Avocent International, Kieran MacSweeney, said that while recessions are typically a breeding ground for start-up companies, the majority will struggle unless they put the necessary skill sets in place.

Entrepreneurial and managerial skills are key

“Typically, 40pc of businesses without the complete entrepreneurial, managerial and technical mix will fail in the first year of operations. Within five years, more than 80pc of them will fail and 80pc of those that survive the first five years will fail in the second five.

“Therefore, after 10 years, only 4pc are left and 96pc will have failed. This shows that the start-up model in its current typical format, driven by technicians/practitioners, is failing to a large degree.”

Speaking at the seminar, however, MacSweeney said that entrepreneurship must be encouraged in every possible way.

“Most new businesses are not started by entrepreneurs but by technicians or practitioners who enjoy the hands-on work themselves. The reality, however, is that 80pc of these will fail because they don’t have the necessary blend of entrepreneurial and management skills, as well.

“Where the National Franchise Centre comes into its own is that it will increase the success rate of these start-up companies to 80pc by aligning the skill sets of candidates to the right franchise for them and by helping them adopt the successful business format franchising methodology at the outset.”