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, which types face the greatest challenges, and how the picture is shifting as business bankruptcy filings climb for the fourth straight year.
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 (based on the March 2015 opening cohort, tracked through March 2025)
- The most recent cohort’s first-year failure rate is 22.1%, up from 20.4% a decade ago
- 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%
- U.S. business bankruptcy filings reached 25,960 in the 12 months ending March 31, 2026, an 11.4% increase over the prior year and the fourth consecutive annual rise
- Roughly 1.2 million private-sector establishments closed in 2024, resulting in 3.6 million lost jobs
- The most common reasons VC-backed startups fail are running out of capital (70%), poor product-market fit (43%), and bad timing (29%)
The often-cited “1 in 5 businesses fail in the first year” figure comes from BLS survival data that tracks a single opening cohort across ten years. That cohort opened in 2015. Businesses that opened more recently are failing faster in year one. The newest full-year read available, for the March 2024 opening cohort, shows a 22.1% first-year failure rate. Recent cohorts have run between roughly 21% and 24%.
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% for the 2015 opening cohort, meaning roughly 80% of new businesses survived their first twelve months.
That number doesn’t quite capture what’s happening right now. The most recent cohort BLS has published, businesses that opened in the year ending March 2024, saw a 22.1% first-year failure rate. The last four opening years have all run higher than the 2015 baseline, ranging from about 21% to 24%.
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 at 6.9%. State-level data shows first-year failure rates ranging from 16.9% in Ohio to 29.2% in North Dakota.
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 long-term business survival rate).
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.
Business Bankruptcy Statistics
Business failure and business bankruptcy are related, but they aren’t the same thing.
📖 Definition
Business closure happens when a company stops operating for any reason, including retirement, sale, relocation, or failure. BLS Business Employment Dynamics tracks closures at the establishment level.
Business failure typically refers to a closure driven by financial distress. There’s no single official count of failures, which is why the BLS survival data is used as a proxy.
Business bankruptcy is a legal filing under a chapter of the U.S. Bankruptcy Code. It’s tracked by the Administrative Office of the U.S. Courts and represents a small subset of total business closures.
Business bankruptcy filings in the United States have risen for four consecutive years. According to the Administrative Office of the U.S. Courts, business filings reached 25,960 in the 12 months ending March 31, 2026, an 11.4% increase over the 23,309 filings recorded during the same period a year earlier.
Chapter 11 filings, which allow a business to keep operating while restructuring debt, have climbed even faster than the overall business total. Commercial Chapter 11 filings were up roughly 37% year-over-year in the first quarter of 2026, according to filing data from Epiq and the American Bankruptcy Institute. Large-company bankruptcies reached 785 in 2025, the highest annual total since 2010, according to S&P Global Market Intelligence. That count covers public companies and larger private companies (public firms or private firms with at least $2 million in assets or liabilities, and private companies with at least $10 million).
📈 Trend Watch
Total U.S. bankruptcy filings bottomed out at 380,634 in June 2022, the lowest twelve-month total in more than two decades. Every quarterly report since then has shown an increase. The four-year climb reflects a combination of elevated interest rates, refinancing pressure on middle-market companies, and the wind-down of pandemic-era relief programs. Distress is concentrated rather than broad. Real estate, consumer goods, and energy and industrial companies accounted for the majority of Chapter 11 activity in 2025.
Most Common Reasons Why Startups Fail
Statistics on how many businesses fail explain the risk involved. Understanding why they fail tells you what to do to give your business the best chance at success.
The most current data on this comes from CB Insights, which analyzed 431 venture-backed companies that publicly shut down since 2023. The categories overlap, since most startups cite more than one reason for closing, so the percentages add up to more than 100%. Keep in mind, this is a study of VC-backed startups, which have different failure drivers than many small businesses on Main Street. A restaurant closing after eight years and a Series B software company shutting down after burning through $80 million are both “business failures,” but they don’t fail for the same reasons.
For venture-backed startups, here’s what the data shows.
Ran Out of Capital
Running out of money shows up in 70% of failed startups, which makes it by far the most-cited reason. It’s also the most misleading. CB Insights explicitly frames running out of capital as the final cause of death rather than the root problem. Companies rarely die because they’re bad at cash management. They die because they can’t sell fast enough to justify the burn, or can’t raise more money because investors have lost confidence in the underlying business.
“Ran out of cash” is what happened at the end. The interesting question is why the cash ran out.
Poor Product-Market Fit
Poor product-market fit (PMF) was cited in 43% of the shutdowns CB Insights analyzed. This is the actual root cause behind a large share of the cash flow failures. If customers don’t want what you’re building badly enough to pay for it, no amount of runway will save you. You’ll burn through it trying to convince the market to care.
PMF failure isn’t only an early-stage problem. CB Insights found Series B+ companies among the PMF casualties, meaning some startups raised significant capital and hit growth milestones without ever really nailing fit. Those companies tend to fall hardest, because the burn rate scales up alongside the round size.
Bad Timing
Bad timing appeared in 29% of the shutdowns. Some ideas are early. Some are late. Some launch into a macro environment that would kill any version of the company regardless of how well it’s executed. The 2023–2024 shakeout produced a lot of timing failures: startups that had raised at 2021 valuations and couldn’t grow into them fast enough when the funding environment tightened.
Unsustainable Unit Economics
Unit economics problems, meaning the cost to acquire and serve a customer exceeded what that customer was worth over time, showed up in 19% of the shutdowns. Companies with broken unit economics can look healthy for a while, especially if they’re growing fast on cheap capital. When capital gets more expensive, the math catches up.
Frequently Asked Questions
How many businesses fail in the first year?
About 20.4% of businesses fail within their first year of operation, according to BLS data tracking the March 2015 opening cohort. More recent cohorts have run higher. The March 2024 opening cohort saw a 22.1% first-year failure rate, and the last four opening years have all fallen between roughly 21% and 24%.
Is the business failure rate rising?
Yes, on two different measures. Recent BLS opening cohorts show first-year failure rates several points above the 2015 baseline. And U.S. business bankruptcy filings have risen for four consecutive years, reaching 25,960 in the 12 months ending March 2026.
What’s the difference between a business closing, failing, and filing for bankruptcy?
A closure is any business that stops operating, for any reason. A failure is a closure driven by financial distress, though there’s no official U.S. count of failures specifically. A bankruptcy is a formal legal filing under the U.S. Bankruptcy Code, and it represents a small share of total closures. Roughly 1.2 million establishments closed in 2024, while only about 24,000 business bankruptcies were filed that year.
What industry has the highest business failure rate?
Mining, quarrying, and oil and gas extraction has the highest failure rate at every time period tracked by BLS: 30.8% in year one, 59.8% at five years, and 75.5% at ten years. The information sector is second, with 70% failing by year ten.
What industry has the lowest business failure rate?
Agriculture, forestry, fishing, and hunting has the lowest failure rate by a significant margin. Just 6.9% fail in the first year, and 47% fail by year ten, well below the 65.3% national average.
What percentage of businesses survive ten years?
About 34.7% of new businesses survive to their tenth anniversary, based on BLS survival data for the 2015 opening cohort. Survival rates vary sharply by industry and state.
📋 Checklist
Before launching, pressure-test the assumptions the data flags as most fatal:
✅ Runway math. Model 18 months of expenses at zero revenue and see what breaks. Most failures called “running out of cash” started with an optimistic revenue ramp.
✅ Demand signal. Have real customers paid real money for what you’re selling? Interviews and survey responses aren’t demand. Purchases are.
✅ Unit economics. For every dollar of customer you acquire, how much do you get back over their lifetime? If you can’t answer this yet, know that you’ll need to before you scale.
✅ A defensible edge. In a crowded market, name the specific reason a customer picks you over the alternative. If the answer is price or “better UX,” dig deeper.
✅ Your industry’s baseline. Look up the failure rate for your NAICS code before you write the business plan. It won’t tell you whether you’ll succeed. It’ll tell you what you’re up against.
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.
