Small business failure rate

The honest survival curve

The Bureau of Labor Statistics tracks every new business in the US through its Business Employment Dynamics program. The data tells a sobering story: roughly 1 in 5 new businesses don't make it past year one, half are gone by year five, and only 1 in 3 reaches the 10-year mark.

These numbers have been remarkably consistent for two decades — the 2020 COVID shock barely moved the long-run survival curve once 2021–2022 PPP support unwound. Failure is the base rate, not the exception.

Which industries die fastest

Survival rates vary dramatically by sector. Construction and information businesses have the lowest 5-year survival (under 40%). Health services and finance have the highest (over 55%). Restaurants — often cited as having a 90% failure rate — actually survive at about 45% over five years, similar to most service businesses.

• Health care + social assistance — ~56% 5-year survival
• Manufacturing — ~52%
• Wholesale trade — ~51%
• Retail trade — ~49%
• Restaurants + accommodation — ~45%
• Construction — ~38%
• Information — ~37%

Why the "90% fail" myth persists

Press articles often cite Bloomberg's "80% of businesses fail within 18 months" or Forbes' "9 out of 10 startups fail." Both are misleading: they conflate venture-backed startups with all small businesses, and they confuse closure (which can mean voluntary sale or retirement) with failure (creditor loss).

The actual default rate measured by SBA-backed loans is around 17% lifetime. Closure without default is roughly 30% of business exits. Most small businesses don't fail — they fade.