You’ve no doubt heard this (now infamous) statistic: half of all new businesses fail within the first five years, and only a quarter are still standing 15 years later.
But oddly, you never hear about what happened to “failed” first-time entrepreneurs. Did they ever try again?
A recent study by economists out of Stanford and the University of Michigan found that entrepreneurs who closed their first businesses are far more likely to be successful in their second business.
Entrepreneurship is a learned trait, not necessarily an innate talent, the researchers found.
Not only does the mere act of opening your first business give you more entrepreneurship skills, but failing actually gives you a leg up on successful first-timers!
“The more successful of these owners are those that open a business, close the business, and then open another one. That is, the new business that they open is more likely to survive if their previous business has been closed than if their previous business remains open."
Here are some other fascinating tidbits from the study:
- Businesses that opened during a recession were more durable (more likely to stay open longer), possibly because entrepreneurs only started businesses with a higher chance of success.
- Entrepreneurs tend to group together, suggesting they learn from each other, as when they are physically surrounded by other entrepreneurs (Glaeser, Kerr, and Ponzetto, 2006), or come from a family background of entrepreneurship (Fairlie and Robb, 2007; Lentz and Laband. 1990).
- Businesses opened in urban centers with a lot of competition are less likely to succeed.
Freelancers, have you found that failure taught you more than success?
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