Lies, Damned Lies and Small Business Statistics

"There are three kinds of lies: lies, damned lies, and statistics."

This quote commonly attributed to Mark Twain, who popularized it in the US, but the phrase was actually coined by former UK Prime Minister Benjamin Disraeli. The quote however, may actually be even more relevant in this time of economic hardship as people try to spin the vast amounts of information available to us to support their perspective. Today, I found just that sort of a deceptive statistic:

"The survey, conducted by Herndon, Va.-based Network Solutions and the University of Maryland Robert H. Smith School of Business, polled 1,000 small-business owners in December 2008 and January 2009. Of those surveyed, 69 percent closed the books in the black last year."

It would be fantastic news, if that were even remotely true. It would be easy to use statistics to back this up (85-90% of small businesses fail within 5 years according to various sources), but wouldn't that defeat the purpose? I think anecdotal evidence and logic are enough to disprove this silly assertion.

Obviously 1,000 business owners isn't nearly enough of a sample size to make a valid judgment about a huge portion of our economy. The census estimates there are more than 20 million small businesses, but that number itself is quite misleading because the term "small business" itself is very loosely defined. The current working definition is any firm with less than 500 employees, which is an enormous range. The difference between a 450 employee business and a 4 employee business is beyond substantial. Is a firm with several hundred employees actually small? Even if you choose to use that broad small business definition, profitable is another vague term without proper grounding. Even if they were in the black, take one look at the stock market and you'll see that losses far outweigh any gains made by "small businesses".

This is an attempt to instill confidence in the masses, who are virtually traumatized after watching their investments halved in the last few months. I'm all for improving investor confidence but it's paramount that any encouragement be rooted in fact. The last thing people need is more deception.

Jon Pyle is the Director of Business Development and Senior Business Consultant for Barber & Barber Associates. Email him at jon.pyle@barberassociates.com for more small business insights.