Do most businesses really fail in their first year? I analyzed the raw data and was surprised at what I found | Ep. 78 | Business Podcast
Summary
We’ve all read statistics about entrepreneurs that say most of their businesses fail in the first year.
I decided to do some research of my own to see if this widely used statistic is true.
I went to the U.S. Bureau of Labor Statistics, pulled the raw data and did the analysis for myself.
Listen to this episode to hear what I found, I believe you’ll be surprised.
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Hello, friends. Welcome to the show today. We’re talking about business survival rates. We’ve all heard the statistic that gets thrown around that 50% of businesses go out of business within the first year or two years or three years.
Five years. And the thing about it is, we all know that as statistics or anything gets repeated, it gets changed. It gets watered down and doesn’t always reflect the actual statistics. So I pulled the numbers to see for myself what the real story is. Let’s not waste another second. Let’s get to that real story. Welcome to build the business success secrets.
The only podcast that provides straight talk for entrepreneurs. Whether you’re an entrepreneur, starting with an idea or growing your business, this show is for you. We’ll teach you how to build a strong mindset, powerful body and profitable business so you can achieve success. And here’s your host, Brandon See White, because I was trying to get to the bottom of what the real data is around business survival rates. I kept reading articles that all referenced other articles, and that article referenced another article, but no article actually referenced the raw data so I decided to get to the bottom of it, and I went to the Bureau of Labor Statistics and pulled the real raw data from them. Now you could argue that the Bureau of Labor Statistics upstate their data over time, which they do.
But the interesting part is when you pull the raw data and you see it for yourself, then you really see firsthand what’s happening and you can see the corrections. Over time, The data that I pulled went back to 1994 and all the way to 2000 and 19. Now, with Covid, they haven’t gotten to the bottom of what that data looks like.
I wrote to them and ask them to get an update so that at least we can see we hear a ton of stuff in the news. But regardless, what I’m really looking to understand, for all of us, is what is the bottom line? What is the survival rates? And when you really look at the data which I’m looking at right now, the raw data in the first year of business, most businesses actually make it, so they survive that 1st 12 months in the 2nd 12 months. So 13 to 24 months over all over all, the course from 1994 all the way to 2000 and 19, or actually about 2017, is where you start to see the cohorts make sense. There is actually about a 78% survival rate. So by your first year, only 25% of the companies generally die by the third year. About 66% are still in business by the fourth year, about 60 by the fifth year.
Actually, about 53% of businesses are still in business by year six. It only slightly decreases. After your six. You’re looking at about 50%. Then it goes down to about 43%. 8 years is 40 ish. Nine years, 37%. After 10 years, 35% of the businesses are still in business, which, actually, if you think about 10 years a really long time with a lot of things that can happen and in 10 years is usually some sort of economic cycle. There’s maybe not a recession, not a depression. But something changes.
We had the housing crisis. We had the doubt. Com crash. We had covid. If you look back in history, you’ll see cycles in and around 7 to 12 years. But on average, at least in my lifetime, that’s happened around 10 years. Interesting thing is, after 15 years, there’s still about 26% of the businesses are still in business. And if you go out 20 years, 21% are still in business. Now the other thing you have to take into account is a business might have sold a business might have on purpose shutdown.
Maybe the owner retired and there was no buyer or they know market for what they had. They made a bunch of money. They close it down. So all I really wanted to understand this. And I hope this helps you understand, so that when you hear this statistic out there that 50% of the businesses fail. It’s what a ton of marketers out there want you to know. But I would argue we shouldn’t focus on the ones that fail. We should focus on the ones that make it and actually looking at the data here from the source. I don’t know what other source to look at, but the U s Bureau of Labor Statistics right from the government who is tracking all of this data?
I actually know a person who works in the statistics department. He used to intern for me for one of my companies, and I know he’s super smart, is an economics major, and I know the research is as valid as it can be. So it looks like we all have a really good chance to survive and actually make a lot of money. Contrary to what is out there, that doesn’t mean that there’s not huge risk. I mean, the fact is is that about 53% after five years are still in business. That’s not super, but it’s it’s not bad. It really isn’t so there you have it. If you’re interested in checking it out, you can go to BLS dot gov. That’s B as a business l is in. Labour s is in statistics dot gov And if you type in the search entrepreneurship chart, it should bring you up or entrepreneurship, and the U. S. Economy Search that at BLS dot gov.
You will get a PdF chart that you can find from 1990 for all the way to 2015, and then there will be a small link. But there is a link there that you can pull the raw data and then you can pull that down. I put it into an Excel spreadsheet and built some charts just to be able to record this podcast. So check it out. And the good news is, survival rates are better than what we’ve all read. We’ll see you soon. Yeah, thanks for being generous with your time and joining us for this episode of Build a Business success Secrets.
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