The Italian National Institute of Statistics (ISTAT) provides mortality tables, so a useful demographic resource for citizens to understand how life expectancy varies by age, region, province, etc. (conditional average). There is also the variation by occupation, educational qualification. Then there are also studies, not from ISTAT, that explain life expectancy as a function of lifestyle variables (physical activity, “vices,” etc.) controlling for certain variables (income, educational qualification, etc.). So we have this data for individuals. Is there anything for legal persons? Specifically for those with an economic purpose? Wanting social purpose as well.
Let’s say yes, although I note wide room for improvement. Unioncamere gives us conditional averages, for the year 2019, according to who (gender, age), where (region), what (sector or SIC code), how (company form) but not why, for that you need much more than descriptive statistics like conditional averages, or another source.
Of the aggregated average, 12.3 years, we do little with it. So too does knowing that in the North they last longer (12.9) and in the South less (11.7).
It helps, however, to know that for the duration of companies varies more by industry:
- 16 years for agriculture
- 15.7 years for industry
- 12.5 years for construction
- 11.8 years for services
- 9.2 years for tourism activities
It also helps to know that the duration of companies varies more by the legal form
- 11.4 years for sole proprietorship
- 12.4 years for corporations (LLCs and PLCs)
- 13.9 years for other forms
- 17.0 years for partnerships
I personally expected corporations to last longer than partnerships.
For an even more granular life expectancy, then by sub-sectors, but geographically circumscribed, I recommend looking at the Bologna chamber of commerce. Here we see, for example, that the record for longevity (21.8 years) is held by paper and printing companies, in the manufacturing macro-sector.
How do you feel looking at those averages? Personally sad and discouraged, because those reading this article most likely know how much body and soul entrepreneurs gave during those years. Yet it was not enough to have something that lasts half a lifetime, perhaps a twentieth-century expectation.
You have to be very careful about those years, though: we don’t know the distribution of that data, only the mean. And the mean and median (central value) are unlikely to coincide, so the representative value could easily be worse than illustrated. In fact, I am trying to recover the raw data.
Unfortunately, this is not just an Italian thing: the life expectancy for companies in the SP500, the U.S. FTSE MIB so companies that are generally large and seasoned in various respects, has gone from 32.2 years in 1965 to 21.4 in 2020. Surely we live in an increasingly precarious world, and unfortunately/luckily the market will select, with brutal psycho-Darwinian cynicism, more and more peculiar entrepreneur personalities capable of coping with such a period.
The data above may slide into fatalism and despondency, while for the ISTAT data we have various public and non-public institutions supporting it, which have studied how to increase individual life expectancy.
Can we understand how life expectancy, of companies, varies according to the why?
Unfortunately, we have more sources indicating the causes of failure for start-ups than companies, even in Italy, so we only find sources much more limited as to why the average lifespan is so short. So here, too, research can do a lot. If any economics majors are reading me, I’m giving them a thesis idea.
Schaap and Breiter in 2023 did a study, intended as a review of the scientific-economic literature, which however has no statistical validity.
They found recurrence in the following causes of failure and for each point I add how statistical advice from STATiCalmo can help:
- lack of cash flow
- A data dashboard, united to an automatic update of accounting data can prevent the problem, if of course the business model holds up
- Lack of job satisfaction of employees
- the statistician, or data scientist, can improve the work of the human resources manager
- internal weakness, external factors
- same observation as in the first point. For external factors, the same comments apply to data drift, in this case understood as demand drift and not adapting supply. On external factors you can find various insights.
- ethics/errors/fallibility/defects
- a statistical quality control dashboard can help minimally. Errors and defects may have a common cause, which you will see in 2 points
- organizational misalignments
- again, statistics can measure the problem, possibly by comparing against national averages. The solution comes from other disciplines
- lack of productivity and old companies
- it may be a problem of unfinished digital transformation, as it is not enough to have a site and a few social pages to call oneself one. Both problems may have a common cause
- business innovation versus leadership
- statistics can do little here either, for example, it can go the long way around by going from the psychometry
- Peter’s principle (incompetents become managers)
- same comment above. But this problem appears to be more prevalent from medium-sized companies upwards
- other variables
Do you know which company, in this case understood as an organization with no economic purpose, holds the secret to longevity? The Catholic Church. Not exactly a business, but it is about 2,000 years old. But to reveal why it is lasting so long, it takes not just STATiCalmo but a team, including historians, researchers of various kinds.
So how do you make your company last longer, besides not making the mistakes above? First, you need qualitative market research that shows how your company differs from your competitors. There are factors of companies that indicate resilience, doing checks in the literature. The Church certainly has at least one, but it doesn’t really turn out to be replicable: meddling with politics (temporal power). Which defense companies also do. However, these companies do not fall within STATiCalmo’s ideal clients because they do not belong to SMEs.
If you are interested in analyzing the palm of your company, from a statistical and not a chiromantic point of view, we can get to know each other through a free call from 30 to 60 minutes.