Do 50 Percent of Small Businesses Really Fail?

Posted by on Mar 07 2007

Legend has it that 50 percent of all small businesses fail.

According to an article on MSNBC, two-thirds of small businesses make it past the two-year anniversary. However, only 44% reach their four-year anniversary. Ouch.

The news isn’t all bad. Built into this model are 10 industries that seem to have the highest risk. Failure rates are not consistent across all industries. (See article for this list of 10 industries.)

According to most sources, it seems like the same things bring down a business: lack of business and marketing skill (both planning and implementation of plans), poor cash flow, and heavy debt. Factoring in the risky industries, it may be that some industries are way above that 44% survival rating, while others are drastically below it.


3 comments for now

3 Responses to “Do 50 Percent of Small Businesses Really Fail?”

  1. Juan

    I’m glad that people are beginning to understand that the failure rate of small businesses is mainly industry driven. There are many small business owners who enter high risk industries for one simple reason: high risk usually means high returns. The failure rate among high risk small businesses is probably much higher than that of low to moderate risk small businesses, and it probably lifts the overall failure rate well above where it would be if the majority of small businesses were low to moderate risk.

    08 Mar 2007 at 3:43 pm

  2. Barry Zweibel

    Hi Karyn ~ Michael Gerber (E-Myth Revisted) cites that more than EIGHTY percent of small businesses will fail within the first five years! Ouch! Industry differences notwithstanding, that’s still an incredibly sobering statistic.

    14 Mar 2007 at 3:56 pm

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