It’s no secret that Seattle has seen booming growth over the last decade with many tech giants making Seattle their primary (or secondary) base of operations. Microsoft, Amazon and Google among many others. The tech industry alone accounts for 17% of Washington’s economy which currently ranks 12th in the United States (well above the average).
An unfortunate reality however is the unemployment rate which is a full percentage higher than the national average at 4.6%. Part of this can be attributed to the competition from larger companies in the area.
All this said, Washington state is home to over 600,000 small businesses that employ 1.4 million accounting for 99.5% of all Washington businesses. The most common industries include tech, real estate, and retail (followed by construction, transportation, and health care).
Small Business Failure Rate
Across the US, most small businesses fail within the first two years. 20% of small businesses fail within the first year, 50% in five years, and 70% in ten years. In Washington State specifically, health care specific businesses have the strongest survival rate with 60% surviving past the first five years. Meanwhile, the industry in Washington with the lowest survival rate is construction with only 35% surviving by their fifth year.
CB Insights surveyed over 100 businesses and why they failed, interviewing CEOs and managers to boil down the issues into 20 reasons. The majority (42%) of small businesses failed due to no market need. This isn’t specific to Washington State either. Many small businesses are built from people who leave their existing company to strike out on their own. The issue that arises with businesses borne out of this mindset is it’s not tackling a market need, it’s providing the same service but with a new, untested company without an existing reputation to fall back on. Where small businesses succeed is when someone leaves their existing company because they’re not targeting their market.
To speak more specifically, let’s say there’s a marketing agency that doesn’t focus on any “one” channel, but broadly on print, digital, and television. If the most senior digital marketers leave to found their own company and target solely digital, this can lead to a successful business as it focuses strictly on the intricacies of one channel knowing it provides the greatest ROI for their audience.
Ensure there’s a market need, that your product or service is solving a problem. That solution may be automation, simplifying the process of something complicated; it may be pricing, perhaps due to overpriced retail (Warby Parker as an example); or by new technology — in Seattle, this happened in the cannabis industry with online orders and CRMs that’s now expanding into other states.
One of the best ways you can ensure you’re set for success is working with a CPA early on. Our accountants specialize in a variety of small businesses and provide coaching and consulting services. We can not only help you structure your business, but manage the books so you have an accurate forecast and data-driven insights into your profits, expenses, and losses. We examine who is invaluable to your business and what business tech is actually an investment in your business vs a money pit.
Consult with our accountants to ensure your success in Seattle.