How Does Financial Support From The Government Affect a Business Failure?
Lately, we’ve seen some really great growth on the Global Failure Index (GFI), so, being the data nerds that we are, we just had to dig into it.
After analyzing all the great data entrepreneurs and business people from around the world have added, we found some surprising things.
The big one being that companies that received financial support from the government lived 8 months longer than their peers that didn’t.
We also found that it’s more common for companies that received this financial support to participate in incubation or acceleration programs – a whopping 43.75% of them. Contrasted by that, only 5.58% of companies that did not receive that support had incubator or accelerator support.
And that’s not all, it was found that companies who receive government support are also more likely to keep formal accounting processes – 57% of them to be precise. On the flip-side, of those companies that didn’t receive support, only 44% kept formal business accounts.
But it’s not all roses for the government supported businesses. Oddly enough, despite all this, they’re more likely to fail due to cash flow problems – 30% reported that their business failed because of cash flow.
And the businesses that didn’t receive government funding? Only 21% of cases reported cash flow as the reason.
Our hypothesis? Those that receive money from the government feel a certain safety net, and therefore focus less on building a business with a good clash flow quickly.
As always, thanks to everyone who has contributed to the GFI so far! And if you’ve had a business that closed down, we’d love for you to add your story to the GFI through this brief survey.
You have the power to help other entrepreneurs! Your data will become part of the Global Failure Index, and help the world make better decisions.