March 23, 2017

STARTUP STATISTICS – The Numbers You Need to Know


STARTUP STATISTICS - The Numbers You Need to Know

We’ve collected these startup statistics for small businesses from a variety of sources.

Last updated: October 23, 2016

GENERAL STARTUP STATISTICS

  • 51 percent of owners of small businesses are 50-88 years old, 33 percent are 35-49 and only 16 percent are 35 years old and under.
  • 69 percent of U.S. entrepreneurs start their businesses at home.
  • According to the National Association of Small Business’s 2015 Economic Report, the majority of small businesses surveyed are S-corporations (42 percent), followed by LLCs (23 percent).
  • While around 9 percent of all American businesses close each year, only 8 percent are opened.
  • 51 percent of people asked, “What’s the best way to learn more about entrepreneurship?” responded with “Start a company”.

STARTUP FAILURE RATE STATISTICS

  • A bit more than 50 percent of small businesses fail in the first four years.
  • In fact, of all small businesses started in 2011:
    • 4 percent made it to the second year
    • 3 percent made it to the third year
    • 9 percent made it to the fourth year
    • 3 percent made it to the fifth year
  • Leading causes of small business failure:
    • Incompetence: 46 percent;
    • Unbalanced experience or lack of managerial experience: 30 percent;
    • Catchall category (includes neglect, fraud, and disaster): 13 percent; and
    • Lack of experiences in line of goods or services: 11 percent.

STARTUP FINANCE STATISTICS

  • The vast majority of startup funds (82 percent) came from the entrepreneur himself or herself, or family and friends.
  • 77 percent of small businesses rely on personal savings for their initial funds.
  • 40 percent of small businesses are profitable, 30 percent break even and 30 percent are continually losing money.
  • Having two founders, rather than one, significantly increases your odds of success as you’ll:
    • Raise 30 percent more money,
    • Have almost 3X the user growth, and
    • Are 19 percent less likely to scale prematurely.
  • 82 percent of businesses that fail do so because of cash flow problems
  • 27 percent of businesses surveyed by the NSBA claimed that they weren’t able to receive the funding they needed.

INDUSTRIES WITH THE BEST STARTUP STATISTICS

  • The industries with the highest success rates were finance, insurance, and real estate — 58 percent of these businesses were still operating after 4 years.
  • 15 most profitable small business industries by net profit margin (NPM) are:
    • Accounting, tax preparation, bookkeeping and payroll services: 18.4 percent NPM
    • Management of companies and enterprises: 15.5 percent NPM
    • Offices of real estate agents and brokers: 15.19 percent NPM
    • Automotive equipment rental and leasing: 14.55 percent NPM
    • Legal services: 14.48 percent NPM
    • Offices of dentists: 14.41 percent NPM
    • Electric power generation, transmission and distribution: 14.02 percent NPM
    • Lessors of real estate: 14.01 percent NPM
    • Offices of other health practitioners: 13.30 percent NPM
    • Offices of physicians: 13.01 percent NPM
    • Commercial and industrial machinery and equipment rental and leasing: 12.58 percent NPM
    • Religious organizations: 12.41 percent NPM
    • Management, scientific and technical consulting services: 12.05 percent NPM
    • Specialized design services: 11.4 percent NPM
    • Office administrative services: 11.3 percent NPM

INDUSTRIES WITH THE WORST STARTUP STATISTICS

  • Of all startups, information companies are most likely to fail, with only a 37 percent success rate after four years.
  • 15 least profitable industries in the US by net profit margin (NPM) are:
    • Oil and gas extraction: -7.6 percent NPM
    • Support activities for mining: 0.6 percent NPM
    • Beverage manufacturing: 0.8 percent NPM
    • Grocery and related product merchant wholesalers: 1.9 percent NPM
    • Lawn and garden equipment and supply stores: 2.0 percent NPM
    • Miscellaneous durable goods merchant wholesalers: 2.3 percent NPM
    • Petroleum and petroleum products merchant wholesalers: 2.4 percent NPM
    • Grocery stores: 2.5 percent NPM
    • Automobile dealers: 3.2 percent NPM
    • Building material and supplies dealers: 3.2 percent NPM
    • Continuing care retirement communities and assisted living facilities for the elderly: 3.3 percent NPM
    • Other motor vehicle dealers: 3.3 percent NPM
    • Home furnishings stores: 3.3 percent NPM
    • Furniture stores: 3.3 percent NPM
    • Beer, wine, and Liquor stores: 3.4 percent NPM

Bottom Line

If you want to start your own business, don’t let the startup statistics above put you off. After all, you’re more likely to succeed if you’ve failed than if you’ve never tried:

  • Founders of a previously successful business have a 30 percent chance of success with their next venture, founders who have failed at a prior business have a 20 percent chance of succeeding versus an 18 percent chance of success for first time entrepreneurs.

Startup Photo via Shutterstock

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Matt Mansfield


Matt Mansfield Matt Mansfield is the Tech Editor at Small Business Trends where he is responsible for directing and writing many of the site’s product reviews, technology how-to’s and lists of small business resources.

5 Reactions

  1. The harshest stat on there for me was that 46% of businesses fail because of incompetence. Ouch!

  2. As a longtime entrepreneur and mentor, if I knew what it took to be successful, and all of the success vs failure stats before starting my first business I never would have done it. I always tell young entrepreneurs “Stats are for losers”…successful entrepreneurs don’t pay attention to them. It is just a readymade excuse to explain away flawed strategies and poor work ethic. The most important stat any entrepreneur should know is how many hours a day they have wasted on things that don’t drive revenue. If you take the 46% and extrapolate what those founders did with their time and energy you will always find a common thread. Gravitating to business activities that don’t grow your customer base. Spending prime time customer hours on things that don’t add value to your bottom line. Many entrepreneurs are not prepared to do “anything” necessary for their dream to thrive. Not willing to properly educate themselves on their market, competitors and product placement. Just looking to be the next Startup Billionaire but going into the startup with a 9-5 employee mentality. I can’t tell you how many entrepreneurs say when asked “why are you starting a business?”….answers like I just really think I can….I have a great idea for a_____and know people will buy them…and my all time favorite, I got burned out in Corporate America and always wanted to be my own boss….It’s a ton of this in that 46%. Change your mindset…change the statistics.

  3. Robert,

    The reason is that many entrepreneurs are competent at the one thing they started their business for; it’s the other 647 things that must be in your skillset to succeed in business that trip them up. One thing that successful entrepreneurs grasp early on is how to accurately asses their own strengths and weaknesses. They then hire or outsource to complement their weaknesses or those areas where their time is not best spent.

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