Sunday, June 9, 2013

The Facts of the Small Business Survival Rate

Back thirty years ago when I first wrote about small business, a hoary and horrible statistic was bandied about, even by some of the most experienced entrepreneurial pros: "80% of new businesses fail in their first five years." 

This "statistic" has appeared in more places than you can imagine, from the leading small business magazines, books, presentations by employees of SBDCs, the SBA, SCORE, Chambers of Commerce, even professors on the college level - who should know better than to quote un-sourced numbers.  It still shows up in small-business blogs today.

For some years, I searched for a source of that statisitic.  Never found where that number came from, leading me to believe that some self-appointed expert made it up.  To quote a character from the popular television show, M*A*S*H, "Horsepucky." 

Here is the truth about the survival rate of new start up businesses in the U.S. economy from two unimpeachable sources, The Marion Ewing Kauffman Foundation and the SBA.  First from Kauffman:
"By 2011, just over 55 percent of firms in the sample that started in 2004 had permanently closed. The overall survival rate for the 2004 startups was 44.6 percent by the end of 2011, compared with 49.3 percent for yearend 2010, which is comparable to survival rates noted by the Small Business Administration and other government agencies."*

And now from the SBA:

What is the survival rate for new firms?
"Seven out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more.
"Census data report that 69 percent of new employer establishments born to new firms in 2000 survived at least 2 years, and 51 percent survived 5 or more years. Survival rates were similar across states and major industries.
"Bureau of Labor Statistics data on establishment age show that 49 percent of establishments survive 5 years or more; 34 percent survive 10 years or more; and 26 percent survive 15 years or more."**

*  *  *  *  *
If you're serious about successfully starting a business of your own, research clearly shows that the better you prepare yourself, the greater your chances of success.
How do you prepare yourself?  According to the Dun & Bradstreet Business Failure index, 92% of all failures are due to one of two failures of the owners of the business:
  1. A lack of financial management skills and knowledge.
  2. A lack of marketing skills and knowledge.
The message is clear.  Whether you're a butcher, a baker, or a candlestick maker, to succeed as a business owner, you must know the basics of business management .
Listed here are a selection of good books to consider before you start your business.  Pick one or two, study them, and put together your plan.  You'll be able to hit the ground running with a head start on your road to success.
How to Start a Business
by Pecolia James Silver

Why Powell's Books?  Powell's Books is the world's largest privately-owned, single-site bookstore located in Portland.  In fact, Powell's City of Books is a major tourist attraction, drawing thousands of visitors daily from around the world.
*  *  *  *  *

* Source: An Overview of the Kauffman Firm Survey: Results from 2011 Business Activities, Prepared By: Alicia Robb and Joseph Farhat, June 2013. To access this and the derivative reports, click here: Kauffman Firm Survey 2011

** Source: U.S. Dept. of Commerce, Census Bureau, Business Dynamics Statistics; U.S. Dept. of Labor, Bureau of Labor Statistics, BED.  To view the SBA Frequently Asked Questions publication, click here:  SBAFAQ 



  1. Here you go...

    its a bit cumbersome but all the info is there on survival rates

  2. This comment has been removed by a blog administrator.

  3. Best Facts of the Small Business Survival Rate
    Remarkable read! You deserve
    appreciation for informative post!
    Remarkable post...

    social media platforms