October 21, 2014

Business Failure Rates Highest in First Two Years

New research from the U.S. Bureau of Labor Statistics suggests that most failures of American startups will occur in the first two years of their existence.

After that, the rate of business failure slows.

“The data show that, across sectors, 66 percent of new establishments were still in existence 2 years after their birth, and 44 percent were still in existence 4 years after. (See chart 1.) It is not surprising that most of the new establishments disappeared within the first 2 years after their birth, and then only a smaller percentage disappeared in the subsequent 2 years. These survival rates do not vary much by industry.”

The following chart shows business survival rates by industry sector. Interestingly, the sector with the highest survival rates is education and health services. The sector with the lowest survival rates is the information industry. Of course, this study tracked new business startups from between March of 1998 and March of 2002 — the height of the dot com boom.

Business Failures
Click to view larger image

36 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

36 Reactions

  1. It would be interesting if the US BLS could break those numbers down further to reflect the number of business start-up failers who were underfunded and I’m not talking about those folks that realized down the road they were going to run out of money,but those that were doomed from the start.

  2. Ooops. I meant failures not failers. My bad.

  3. I have personally had a chance to study more than 400 of the world’s leading business leaders and entrepreneurs. And I have found 4 massive mistakes that new business owners are making that answer why so many of these businesses are failing, but also why so many of these businesses never break past 6 figures annually.

    • Doug, are you selling a book about the 4 massive mistake new buiness owners are making-…would like to learn more…do you have a blog or so. Thanks.

  4. Hmmm, not sure about those numbers. They are almost ten years old and much has changed. Those numbers were well before the major changes in technology, the recession, etc. I would need to see more recent data.

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