Are most small software businesses doomed to failure?

Continuing the discussion from The Comparative Advantage of Knowledge Workers:

I suspect this is a troll, but I can’t help myself.

While statistically this might be true at some level, I feel like it’s trivially easy to weed out software businesses that are far more likely to succeed. There’s a big difference between “Facebook for cats” and “boring, relatively simple SaaS that replaces spreadsheets at 3 companies I’ve worked at, and another 10 I’ve spoken to.” A stat like 99% of all small software companies fail surely is heavily weighted with stupid ideas. (Necessarily so: you can fail at a business in a weekend, but succeeding will take years.)


I saw that and began writing a reply but then gave up because it was pointless.

When you run a company you begin to learn that broad brush statements like that are a total irrelevance because of their generality. So much depends on context, both in terms of things you can’t really control (the economic state of your niche) and those you can (your own risk management, due diligence etc).

Furthermore, it depends on what is meant by failure. Some people might consider anything less than selling for £xM+ a “failure”. Some people may consider never making a sale a failure. I’d be inclined to agree with the latter but it’s about what your goals are. The former is much more likely end in failure, but again that depends on the market.

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… and the context in that post was “is the outsourcing of the marketing better than not to?”. The point about the statistics is that this factor is not the biggest one determining the final outcome. Among those who outsource from the very beginning and those who don’t the success ratio is probably about the same.

Not sure what made you taking it personal. These are just numbers.

About every software developer dreams to have “their own thing”, and probably about every 9 out of 10 give up after creating a project directory and making the first screen of the application. If you take those into account, I do not see why 99% is an outrageous number.

It’s still an irrelevant comment to make. It’s like guessing how old you are going to live given the average life expectancy… it’s just an average. It doesn’t help make a decision, whether or not you step back and say “well over my sample 99% failed”. Or rather, it doesn’t help make an informed decision.

I went and deleted that part of the answer.

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Apologies if I’ve caused offense. My use of ‘troll’ was careless. I meant more along the lines of ‘I suspect this is not meant as a serious and final response to the original question.’