Finding your way in the cutthroat jungle of small business is incredibly hard. There’s simply way too much competition out there.
Customers demand top-notch service in the blink of an eye. Nothing short of amazing will do.
With that in mind, it should come as no surprise that success is elusive.
You’re probably wondering:
What percentage of small businesses fail?
I’ve gathered the most recent statistics and facts to help you find an answer to that question.
Let’s get to it.
But before digging deep into every interesting stat, let’s have a look at some important fascinating facts first.
Gives you pause, doesn’t it? We’ll explore in depth the main reasons why new businesses fail.
But first, let’s have a look at the state of the field.
According to US Bureau of Labor Statistics, it’s never too late to start a new small business. Contrary to popular opinion, it’s not really a young man’s game. You don’t need all that much money or an office, either.
Home office and co-working spaces have become increasingly popular over the last few years.
But don’t get all that excited just yet.
If you were wondering what percentage of small businesses fail within the first year, this stat is for you. They say it gets better with age, but that’s clearly not the case when it comes to small businesses. Even if you’ve been around for a while and think you’re well established in your niche, there’s a pretty good chance you might go under.
Popular reality TV series like Kitchen Nightmares will have you believe most restaurants inevitably fail in the absence of a celebrity chef’s magical intervention.
The stats reveal that’s clearly not the case, even if Gordon Ramsay might find that hard to swallow (pun intended). In any event, I doubt he has the latest data on what percentage of new small businesses fail.
If you were wondering what percentage of small businesses fail because they ran out of cash, you now know the answer. While it’s the second most common reason, it doesn’t really come close to the lack of market need. Just because you think you have a brilliant product, it doesn’t mean customers are going to buy it with open arms.
How long do most small businesses last? It varies.
While you don’t need a lot of money to start, it’s not always easy to get investment later on.
Investors are often reluctant to back up risky ventures. You’ll need solid proof of concept or excellent collateral to persuade them to part with their hard-earned cash. Preferably both.
(Source: Small Business Association)
The bank of mum and dad doesn’t just help university graduates pay off their student loans. It also helps potential entrepreneurs fund their small businesses. But not everyone is that lucky. This helps explain why 90% of small businesses fail.
(Source: Small Business Administration)
It’s no coincidence that the highest number of small businesses failed in 2009, at the height of the financial crisis.
Here’s the good news:The rate of closure has been decreasing steadily since 2009. Click To Tweet
(Source: The Balance Small Business)
It might seem surprising at first, but the small business climate is clearly better north of the border.
The business failure rate of microenterprises1Businesses that have between one and four employees is slightly lower than that of other small businesses. That’s why their contribution to what percentage of small businesses fail in Canada is lower.
So, what are the leading risks to small businesses? Let’s find out.
Cybercrime poses the most serious threat to small businesses across the globe, and the UK is no exception. These stats are key to understanding what percentage of small businesses fail in the UK. Small business cybersecurity concerns persist well into 2019.
(Source: PR Newswire)
Two-thirds of small businesses fall prey to cybercriminals.
This is huge!
In case you’re wondering “how can small businesses avoid failure,” the answer is by investing in cybersecurity. Hackers don’t target only giant enterprises like Facebook and Google – even your dry cleaning businesses might suffer.
But it’s not all doom and gloom.
Here’s the good news:
(Source: American Express)
The number of female business owners has skyrocketed over the last two decades.
During the last twenty years, the employment growth rate for women-owned businesses was twice that of all businesses.
(Source: American Express)
Female small business owners are particularly successful in the service industry, which impacts what percentage of small businesses fail. In contrast, male entrepreneurs tend to dominate manufacturing, mining, management consulting, and wholesale trading startups.
(Source: American Express)
It should come as no surprise that predominantly rural states like West Virginia and Nebraska, whose economies rely on male-dominated industries like mining, agriculture, and forestry, are not the ideal setting for female-owned small businesses. Nevada is an exception due to the fact that it profits from the entertainment and gambling businesses.
All in all:
Location plays a crucial role in what percentage of small businesses fail in the first year.
When was the last time you bought a shirt from an independent retail store? You probably can’t remember, right?
The thing is:
Those of us who aren’t fashion aficionados tend to buy our clothes from Amazon or eBay. It’s a lot faster and cheaper and saves you the hassle of going to the mall. A couple of clicks and you’re done.
That’s why clothing retail stores are feeling the heat. That’s also what helps determine what percentage of small businesses fail in the first 5 years.
Do most small businesses fail? The stats show they do indeed.
Should that discourage you from opening a small business?
Not necessarily. There are plenty of excellent online business degrees that can help you out and ensure you won’t be contributing to the statistics on what percentage of small businesses fail in the first three years.
And on that positive note:
Look, I get it:
Making your way as a small business owner in this day and age can be tough. Every day, we read about what percentage of small businesses fail in the first year in the USA. The competition is fierce, and it’s difficult to break even or stay in the field in the long run.
You’re also likely to face a number of challenges, such as creating a sound business plan, finding the right employees, and securing much-needed investment.
But it’s not all bad news:
The fact that more small businesses are opening than closing is proof that reports of the death of entrepreneurship are greatly exaggerated.
And now that you know what percentage of small businesses fail and why, you’re already well on your way to success. Go get ‘em, tiger!