Start-ups Fail, Fail, Fail! – Well, not exactly. According to the Bureau of Labor Statistics, the survival rates for business start-ups not as grim as common perception suggests.
Business Survival Rates Tracked By Bureau of Labor Statistics from 1994-2010 Do Not Seem So Grim
It is not uncommon to see the stat that “9 out of 10 businesses fail” splashed across small business headlines foretelling doom for all but one fortunate entrepreneur who will succeed when nine of his or her contemporaries will fail. But, the “survival” percentage for business start-ups is much better than the doomsayers suggest, at least according to the Bureau of Labor Statistics (BLS). According to the data collected by the BLS from 1994 to 2010, approximately three-quarters of businesses that were in business for one full year stayed in business for another year, more than half stayed in business for a total of five years and over a third kept their doors open at least 10 years. That is a far cry from only one out of every 10.
But, 9 Out of 10 Businesses Eventually Fail, Right?
The BLS data tracked business survival rates for 17 years (1994-2010), and the “9 out of 10” stat does not hold true to the result. For those businesses that were in business for one-year in March of 1994 nearly 25% were still in business 17 years later (550,308 were in business for one year in March 1994 and 135,380 of those were open in 2010). Moreover, the survival rates were quite consistent over the years tracked, no matter what year the business was started in. In other words, no matter whether a business was started in 1994, 1999 or 2002, the stats show that approximately 55-60% of businesses were still operating four years later, 45% survived at least seven years and 36% saw a 10 year anniversary. These stats are not presented to suggest that there is anything easy about starting a business, and there are no guarantees any business venture will last even two months, let alone 10 years, but they certainly present a much more optimistic picture of opportunity for future entrepreneurs than the doom and gloom projections that are too often offered as the inevitable fate that the vast majority of start-ups are predicted to meet.
After Five Years 90% Chance Each Year Thereafter a Business Will Survive to See Another Anniversary
Another interesting take-away from the BLS data is that once a business passed its 5th year anniversary there was a better than 90% chance that that business would see another anniversary year after year. For example, of all businesses that had been in business for five years in March 1998, 90% were still in business a year later. And this trend continues year after year at 90% or better – e.g., 91% of businesses in business six years see a seventh anniversary; 94% of businesses in business nine years celebrate a 10 year anniversary; and so on. This suggests that once a business is successful for a few years and “survives”, it is much more likely that it will keep on “surviving” year after year. Though suggesting longevity in business is only about survival is disrespectful to business owners to say the least – therefore we prefer to frame it this way: Success breeds more success.