Starting a new business can be risky. If you’re starting this process, you’re probably aware that there’s a chance your new venture could fail. That’s a risk you just have to take in your entrepreneurial career, but what exactly are the odds? Today, let’s take a look at the failure rates of small businesses in the United States, and what you can do to prevent this.
How Many Small Businesses Fail?
The Bureau of Labor Statistics keeps track of the number of small businesses and how many of them fail. According to their data:
- 20% fail within the first two years
- 45% fail within the first five years
- 65% fail within the first 10 years
This means that only about ¼ of businesses will survive beyond 15 years. The data also varies based on what state you live in and what industry you’re doing business in.
The statistics seem daunting, but that doesn’t mean you shouldn’t start your business. After all, the economy is built on small businesses! Knowing why these establishments fail and how to avoid doing those things can put you in the percentage of successful businesses.
Why Small Businesses Fail
There are a ton of reasons why businesses don’t make it:
- Lack of funding or financial planning
- Not doing market research
- Being in a bad location
- Inability to keep up with inflation
- Issues with supply chain
- Not having a strong marketing plan or online presence
- Not adapting to the changing needs of the market
- Not meeting market demand
- Expanding too rapidly
- And just plain old bad luck