Business Failure Statistics: What the Data Says About Startup Survival
Starting a business comes with risk. That’s not news to anyone who’s considered entrepreneurship, but understanding the actual numbers can help you make better decisions about launching and running a company.
The statistics on business survival vary significantly by industry, location, and length of operation. According to data from the Bureau of Labor Statistics, roughly half of all new businesses fail within the first five years. But those aggregate numbers don’t tell the whole story. Here’s what the data shows about how many businesses fail and which types face the greatest challenges.
Key Findings
- 20.4% of businesses fail in their first year of operation. 49.8% fail within five years, and 65.3% fail within ten years
- The industry with the highest failure rate is mining, quarrying, and oil and gas extraction (30.8% fail in the first year, 59.8% fail within five years, and 75.5% fail within ten years)
- The industry with the lowest failure rate is agriculture, forestry, fishing, and hunting (6.9% fail in the first year, 29.4% fail within five years, and 47.0% fail within ten years)
- North Dakota has the highest first-year failure rate at 29.2%
- The District of Columbia (DC) has the highest ten-year failure rate at 72.7%
- Ohio has the lowest first-year failure rate at 16.9%
- Minnesota and Hawaii have the lowest ten-year failure rate at 58.1%
- The most common reasons for startup failure include running out of cash or failing to get funding, a lack of market need, and getting outcompeted
Business Failure Rates by Industry
| Industry | 1-Year Failure Rate | 3-Year Failure Rate | 5-Year Failure Rate | 10-Year Failure Rate |
| All Private Sector Businesses | 20.4% | 38.6% | 49.8% | 65.3% |
| Agriculture, forestry, fishing, and hunting | 6.9% | 17.7% | 29.4% | 47.0% |
| Mining, quarrying, and oil and gas extraction | 30.8% | 50.2% | 59.8% | 75.5% |
| Utilities | 13.4% | 28.6% | 41.9% | 52.8% |
| Construction | 16.7% | 31.5% | 42.5% | 57.4% |
| Manufacturing | 10.2% | 25.7% | 39.0% | 54.7% |
| Wholesale trade | 14.4% | 33.4% | 48.3% | 65.6% |
| Retail trade | 9.8% | 25.1% | 38.3% | 55.8% |
| Transportation and warehousing | 16.3% | 33.7% | 47.4% | 63.9% |
| Information | 19.2% | 39.2% | 53.2% | 70.0% |
| Finance and insurance | 14.5% | 31.7% | 43.8% | 61.6% |
| Real estate, rental, and leasing | 9.7% | 24.0% | 36.2% | 55.0% |
| Professional, scientific, and technical services | 18.4% | 37.0% | 49.7% | 65.7% |
| Management of companies and enterprises | 15.4% | 32.8% | 47.2% | 64.2% |
| Administrative and waste services | 17.7% | 35.8% | 47.8% | 63.0% |
| Educational services | 12.0% | 28.3% | 42.3% | 56.9% |
| Healthcare and social assistance | 15.4% | 33.1% | 42.7% | 63.6% |
| Arts, entertainment, and recreation | 10.5% | 26.2% | 41.1% | 59.2% |
| Accommodation and food services | 11.8% | 28.2% | 41.5% | 58.4% |
| Other services (except public administration) | 12.3% | 28.2% | 41.8% | 57.9% |
Source: Bureau of Labor Statistics
How many businesses fail in the first year?
According to BLS data, about one in five businesses fail within their first year of operation. The overall private-sector first-year failure rate is 20.4%. That means roughly 80% of new businesses survive the first twelve months. However, this average masks significant variation across industries. Mining, quarrying, and oil and gas extraction face the highest first-year failure rate at 30.8%, while agriculture, forestry, fishing, and hunting have the lowest failure rate at just 6.9%.
State-level data shows similar patterns, with first-year failure rates ranging from 16.9% in Ohio to 29.2% in North Dakota. The national average suggests that while starting a business is risky, most new ventures do survive their first year.
How many businesses fail in the first 3 years?
BLS data indicates that 38.6% of all private-sector businesses fail within their first three years. That means nearly two out of every five businesses don’t make it to their third anniversary. The industry variation becomes even more pronounced at this milestone. The information sector sees a 39.2% failure rate within three years, while agriculture maintains its position with the lowest failure rate at just 17.7%.
According to data broken down by state, three-year failure rates range from 34.6% in Massachusetts to 47.1% in the District of Columbia. The jump from first-year to three-year failure rates shows that surviving the first twelve months doesn’t guarantee long-term viability.
How many businesses fail in the first 5 years?
The five-year survival threshold is where the often-cited statistic about half of businesses failing becomes accurate. BLS data shows that 49.8% of all private-sector businesses fail within five years, meaning just over half manage to survive to this point.
Some industries fare much worse than this average. Mining, quarrying, and oil and gas extraction see a 59.8% failure rate by year five, while the information sector isn’t far behind at 53.2%. On the other end, retail trade maintains a relatively strong 38.3% five-year failure rate, and agriculture continues to show resilience at 29.4%.
State-level data reveals five-year failure rates ranging from 41.5% in Maryland to 57.3% in Washington. These numbers demonstrate that making it to the five-year mark represents a genuine accomplishment for business owners.
How many businesses fail in the first 10 years?
The ten-year mark separates businesses that have achieved genuine staying power from those that couldn’t sustain long-term operations. According to BLS data, 65.3% of all private-sector businesses fail within their first decade. Only about one in three businesses survives past ten years.
The industry breakdown at this milestone shows some dramatic figures. Mining, quarrying, and oil and gas extraction face a 75.5% failure rate at ten years, while the information sector sees 70% of businesses close by this point. Agriculture remains the most stable industry, though nearly half of businesses (47%) fail by year ten.
BLS data shows ten-year failure rates ranging from 52.8% in Utah to 72.7% in the District of Columbia. These statistics underscore that building a business that lasts more than a decade is no small task.
What types of businesses are most likely to fail?
The BLS data clearly identifies certain industries as having significantly higher failure rates than others. Mining, quarrying, and oil and gas extraction consistently show the highest failure rates across all time periods, with a 75.5% failure rate by year ten and 30.8% failing in just the first year. The information sector also struggles with high failure rates, losing 70% of businesses within a decade.
Other industries with above-average failure rates include wholesale trade (65.6% at ten years), professional and scientific services (65.7%), and finance and insurance (61.6%). These capital-intensive and highly competitive sectors face challenges that make long-term survival difficult. Transportation and warehousing also see elevated failure rates at 63.9% by the ten-year mark.
What types of businesses are the least likely to fail?
According to BLS data, agriculture, forestry, fishing, and hunting stands out as the most resilient industry by a significant margin. This sector has a first-year failure rate of just 6.9% and maintains the lowest failure rates at every milestone, with only 47% of businesses failing by year ten.
Several other industries also demonstrate stronger-than-average survival rates. Retail trade shows a relatively low first-year failure rate of 9.8% and a ten-year failure rate of 55.8%. Real estate and rental businesses also perform well, with a 9.7% first-year failure rate and 55% failing by year ten.
Arts, entertainment, and recreation (59.2% at ten years), accommodation and food services (58.4%), and other services (57.9%) all fall below the overall average for business failures.
Business Failure Rates by State
| State | 1-Year Failure Rate | 3-Year Failure Rate | 5-Year Failure Rate | 10-Year Failure Rate |
| Alabama | 19.2% | 37.6% | 48.1% | 63.6% |
| Alaska | 25.5% | 46.2% | 55.4% | 66.6% |
| Arizona | 21.7% | 40.3% | 51.9% | 65.7% |
| Arkansas | 22.2% | 42.4% | 53.7% | 68.2% |
| California | 19.2% | 36.0% | 47.5% | 65.9% |
| Colorado | 21.1% | 38.7% | 51.4% | 68.1% |
| Connecticut | 21.9% | 42.5% | 54.1% | 68.8% |
| Delaware | 23.4% | 42.9% | 54.4% | 70.4% |
| District of Columbia | 25.0% | 47.1% | 57.2% | 72.7% |
| Florida | 20.1% | 39.0% | 50.4% | 66.0% |
| Georgia | 21.6% | 42.4% | 54.2% | 67.9% |
| Hawaii | 20.6% | 36.7% | 51.5% | 58.1% |
| Idaho | 23.4% | 40.6% | 49.2% | 66.7% |
| Illinois | 19.6% | 36.8% | 47.6% | 61.6% |
| Indiana | 19.8% | 37.5% | 47.8% | 61.5% |
| Iowa | 18.7% | 35.7% | 45.5% | 60.1% |
| Kansas | 21.7% | 42.0% | 51.8% | 65.4% |
| Kentucky | 21.2% | 41.1% | 49.7% | 63.6% |
| Louisiana | 20.4% | 38.9% | 49.4% | 64.4% |
| Maine | 20.9% | 37.1% | 48.1% | 62.4% |
| Maryland | 20.8% | 38.4% | 41.5% | 65.4% |
| Massachusetts | 17.3% | 34.6% | 46.4% | 63.8% |
| Michigan | 19.2% | 37.5% | 51.0% | 64.3% |
| Minnesota | 19.7% | 35.5% | 44.0% | 58.1% |
| Mississippi | 23.4% | 38.4% | 48.9% | 64.1% |
| Missouri | 22.0% | 42.7% | 54.3% | 70.3% |
| Montana | 21.1% | 37.4% | 46.7% | 61.5% |
| Nebraska | 21.5% | 41.5% | 51.9% | 67.4% |
| Nevada | 21.9% | 41.4% | 53.2% | 67.1% |
| New Hampshire | 24.6% | 44.2% | 54.4% | 68.5% |
| New Jersey | 22.2% | 40.2% | 51.0% | 66.0% |
| New Mexico | 19.6% | 38.7% | 50.7% | 72.6% |
| New York | 19.7% | 38.5% | 51.9% | 66.3% |
| North Carolina | 21.1% | 37.9% | 48.9% | 62.8% |
| North Dakota | 29.2% | 44.2% | 53.6% | 67.2% |
| Ohio | 16.9% | 37.2% | 47.5% | 61.6% |
| Oklahoma | 22.3% | 40.3% | 52.4% | 68.1% |
| Oregon | 20.2% | 37.3% | 42.1% | 62.9% |
| Pennsylvania | 20.0% | 37.6% | 49.4% | 63.6% |
| Rhode Island | 23.6% | 42.8% | 53.0% | 66.7% |
| South Carolina | 19.9% | 38.5% | 51.2% | 64.3% |
| South Dakota | 18.8% | 37.3% | 47.8% | 61.2% |
| Tennessee | 20.9% | 40.1% | 50.5% | 67.2% |
| Texas | 20.0% | 38.7% | 49.1% | 63.4% |
| Utah | 23.6% | 38.8% | 50.2% | 64.5% |
| Vermont | 21.6% | 39.5% | 51.9% | 64.6% |
| Virginia | 22.0% | 42.6% | 54.4% | 69.6% |
| Washington | 20.8% | 46.4% | 57.3% | 70.3% |
| West Virginia | 22.2% | 40.9% | 47.8% | 62.0% |
| Wisconsin | 20.2% | 37.0% | 47.5% | 62.6% |
| Wyoming | 23.4% | 43.6% | 55.5% | 71.1% |
What states have the highest business failure rates?
According to BLS data, the District of Columbia consistently shows the highest business failure rates overall. DC has a 25% first-year failure rate, 47.1% three-year rate, 57.2% five-year rate, and 72.7% ten-year failure rate. Several other states also demonstrate significantly elevated failure rates.
New Mexico has the highest ten-year failure rate among states at 72.6%, though its earlier-year rates are closer to the national average. North Dakota faces particular challenges in the first year, with a 29.2% failure rate, the highest in the nation for that period. Wyoming (71.1% at ten years), Missouri (70.3%), Virginia (69.6%), and Washington (70.3%) all see roughly seven out of ten businesses fail within a decade. Connecticut, Delaware, and New Hampshire also rank among the states with the highest failure rates at multiple time intervals.
What states have the lowest business failure rates?
The BLS data shows that certain states maintain notably lower business failure rates than the national average. Hawaii stands out with the lowest ten-year failure rate at just 58.1%, well below the national average of 65.3%. Minnesota also performs exceptionally well, with a 19.7% first-year failure rate and only 58.1% of businesses failing by year ten.
Ohio has the lowest first-year failure rate in the nation at 16.9% and maintains relatively strong performance with a 61.6% ten-year failure rate. Iowa, Indiana, and South Dakota also demonstrate below-average failure rates across most time periods.
Massachusetts shows strong early survival rates with just 17.3% failing in the first year, though its ten-year rate of 63.8% is closer to the national average. Montana (61.5% at ten years) and Maine (62.4%) also rank among the states where businesses have better odds of long-term survival.
Most Common Reasons Why Startups Fail
While the statistics show how many businesses fail and which industries face the greatest challenges, understanding why businesses fail provides equally valuable insight. CB Insights conducted a comprehensive study analyzing startup failures to identify the most common factors that lead to closure. Their research, which examined hundreds of failed startups, reveals that most business failures stem from a handful of recurring issues.
Ran Out of Cash or Failed to Raise New Capital
Running out of money stands as the most frequently cited reason for startup failure in the CB Insights study. Cash flow problems can develop even when a business has a viable product and a growing customer base. Many founders underestimate how much capital they’ll need to reach profitability or the next funding milestone. Expenses often run higher than projected, revenue takes longer to materialize than expected, and the runway disappears before the company can become self-sustaining.
The challenge becomes particularly troublesome for startups that depend on external funding to scale. When a company burns through its initial capital and can’t secure additional investment, it’s left with few options. Some businesses fail not because their model doesn’t work, but because they couldn’t raise money fast enough to prove it. Others exhaust their funds trying to pivot or find product-market fit. Even profitable businesses can fail if they can’t access enough working capital to fulfill orders or manage seasonal revenue fluctuations.
No Market Need
Building a product that nobody wants is a fatal flaw that no amount of capital or talent can overcome. According to the CB Insights research, many startups fail because they’ve created a solution to a problem that doesn’t exist or isn’t significant enough for customers to pay to solve. Founders sometimes become so invested in their vision or technology that they skip the crucial step of validating whether there’s actual demand for what they’re building.
This disconnect between product and market can manifest in different ways. Sometimes the problem is real, but customers have already found adequate workarounds or don’t consider it urgent enough to warrant changing their behavior.
Other times, founders build features they think customers want rather than what those customers actually need. The result is the same: a business that can’t gain traction because it hasn’t identified a genuine market need or doesn’t address that need better than existing alternatives.
Got Outcompeted
Competition kills businesses that can’t differentiate themselves or defend their market position. Startups often enter markets where larger, better-funded companies already operate or where competitors can quickly replicate any innovation. The CB Insights data shows that many failed startups simply couldn’t compete effectively on price, features, customer service, or market reach. Getting outcompeted doesn’t always mean the business had a bad product. It means someone else had a better one or could deliver similar value more efficiently.
The competitive threat can come from established players with deep pockets and existing customer relationships, or from other startups pursuing the same opportunity with better execution.
Some businesses fail because they can’t scale fast enough to establish a defensible market position before competitors move in. Others lose key customers to rivals offering better terms or superior solutions. In crowded markets, being good isn’t enough. Companies need a sustainable competitive advantage, whether that’s proprietary technology, network effects, brand strength, or operational efficiency that others can’t easily match.
Final Thoughts
The statistics on business failure paint a sobering but informative picture for anyone considering entrepreneurship. While roughly two-thirds of businesses don’t survive their first decade, that also means one-third do make it past ten years. The data shows that your odds improve considerably if you choose the right industry, understand the specific challenges in your state, and avoid the most common pitfalls that sink startups.
Running out of cash, building something nobody needs, and getting outcompeted account for a significant portion of failures, and all three are partially within your control. The failure rates are real, but they shouldn’t discourage you from starting a business. They should influence how you approach it. Understanding these statistics helps you prepare for the challenges ahead and make decisions that improve your chances of being in that surviving third rather than the failing two-thirds.
