22.1% of new US businesses close within their first year, according to the Bureau of Labor Statistics. By year five, 48.6% are gone. By year ten, 65.1%. Those are the real small business failure rate numbers, straight from the government dataset that actually tracks them, and they look nothing like the “90% fail” folklore that gets passed around.
Updated September 2026. Official rates pulled from BLS Business Employment Dynamics tables on September 17, 2026.
I care about this one personally. In 2022, I presented a churn postmortem in Hamburg and put “90% of small businesses fail” on a slide to explain why our SMB segment kept shrinking. A CFO in the room asked one question: “Says who?” I had no source. The number came from a blog that quoted a blog. That afternoon reshaped how I treat failure statistics, and this page is the result: every figure below traces to a primary source you can click.
One honesty note up front. Business failure is official-data territory. The BLS tracks establishment survival through state unemployment insurance records, something no private database can see. So the spine of this page is BLS data. Our own database appears only as context about the landscape these businesses operate in, clearly labeled.
Small Business Failure Rate 2026: The Key Numbers
Short on time? These are the numbers to quote, each self-contained:
- 22.1% of US establishments born in the year to March 2024 closed within their first year (BLS Business Employment Dynamics).
- 48.6% of establishments born in the year to March 2020 were gone within five years (BLS BED).
- 65.1% of establishments born in the year to March 2014 were gone within ten years (BLS BED).
- The often-quoted “half fail in year one” is false: the halfway point arrives around year five (BLS BED).
- Businesses opened in pandemic-era March 2020 had the BEST first-year survival of recent cohorts: 80.9% (BLS BED).
- Accommodation and food services lead first-year survival at 85.3%; the information sector trails at 71.6% (BLS BED sector tables).
- 988,310 new US establishments were born in the year to March 2024, after a record 1,065,228 in the 2022 cohort (BLS BED).
- 70% of failed VC-backed startups ran out of capital, but analysts call that the final cause, not the root one (CB Insights, 431 post-mortems since 2023).
- The median small business holds just 27 cash buffer days; the median restaurant holds 19 (JPMorgan Chase Institute).
Let’s walk the curve from year one to year ten, then break it by industry and by cause.
What Is the Small Business Failure Rate?
Roughly one in five new US businesses closes in its first year, about half survive five years, and about one in three reaches year ten. That’s the answer, and it has been remarkably stable for three decades of BLS data.
Two definitions before we go deeper, because they change how you read every number. First, the BLS Business Employment Dynamics program tracks establishments: single physical locations with employees, counted through unemployment insurance records. Second, a “death” in this data means the establishment stopped reporting employment. That includes genuine failures, but also sales, mergers, retirements, and relocations. An exit is not always a failure. Keep both caveats in your pocket whenever someone quotes a failure rate at you.
Stat 1: 22.1% of US establishments born in the year to March 2024 had closed by March 2025 (BLS Business Employment Dynamics).
Stat 2: 48.6% of establishments born in the year to March 2020 were gone within five years; 51.4% survived (BLS BED).
Stat 3: 65.1% of establishments born in the year to March 2014 were gone within ten years; 34.9% survived (BLS BED).
Notice what those three numbers do NOT say. They don’t say failure is rare. They don’t say it’s certain. They describe a steady, predictable attrition that any realistic business plan, and any realistic B2B revenue model, should already price in.
The Survival Curve: Year by Year
The cleanest way to see the small business failure rate is to follow one group of businesses through time. Here’s the March 2014 cohort from the BLS survival table, the most recent group with more than a decade of history:
| Years since opening | Still operating | Years since opening | Still operating |
|---|---|---|---|
| Opening (2014) | 100.0% | Year 6 | 46.5% |
| Year 1 | 79.7% | Year 7 | 43.2% |
| Year 2 | 69.3% | Year 8 | 40.7% |
| Year 3 | 61.8% | Year 9 | 37.7% |
| Year 4 | 55.8% | Year 10 | 34.9% |
| Year 5 | 50.8% | Year 11 | 32.7% |
The survival curve: businesses opened in March 2014
Source: US Bureau of Labor Statistics, Business Employment Dynamics, establishment survival tables, read September 2026.
The halfway mark falls just after year five (orange bar).
Stat 4: The 50% survival mark falls between year five (50.8%) and year six (46.5%) for the March 2014 cohort (BLS BED).
Stat 5: 32.7% of the businesses opened in March 2014 were still operating eleven years later, in March 2025 (BLS BED).
And look at the shape of that curve. The first year is the steepest cliff: one in five gone. Then the slope flattens every single year. Between years ten and eleven, the cohort lost just 2.2 points. Survival compounds. A business that reaches year five has already beaten the scariest part of the odds, which is why lenders and B2B credit teams treat business age as their favorite underwriting signal.
💡 Pro tip: When you read "X% of businesses fail", always ask "within how many years, and says who?" The same BLS curve produces 22%, 49%, or 65% depending on the horizon. All three are true. None of them is 90%.
What Percentage of Small Businesses Fail in the First Year?
22.1% of new US establishments close within their first year, based on the most recent completed cohort, born in the year to March 2024. And the first-year rate has stayed inside a narrow band for years, with one genuine surprise hiding in it:
| Opening cohort (year to March) | Establishments born | Closed within first year |
|---|---|---|
| 2019 | 770,523 | 20.8% |
| 2020 | 767,573 | 19.1% |
| 2021 | 839,297 | 20.9% |
| 2022 | 1,065,228 | 23.7% |
| 2023 | 1,049,106 | 21.8% |
| 2024 | 988,310 | 22.1% |
First-year failure rate by opening year
Source: US Bureau of Labor Statistics, Business Employment Dynamics, establishment survival tables, read September 2026.
Stat 6: Businesses opened in the year to March 2020 posted the BEST first-year survival of recent cohorts: 80.9%, meaning only 19.1% failed (BLS BED).
Stat 7: The 2022 cohort was both the largest on record (1,065,228 births) and the weakest recent performer, losing 23.7% in year one (BLS BED).
The pandemic detail genuinely surprised me. Businesses that opened into the chaos of 2020 outlived every neighboring cohort in year one. It makes sense in hindsight: the ones that opened anyway were selected for stubbornness and often built for the new demand, and stimulus kept early customers spending. Meanwhile the giant 2022 cohort, born into cheap optimism and rising rates, has struggled the most. Timing is a real variable in failure statistics, not background noise.
How Many Small Businesses Fail Every Year?
Roughly 218,000 of the newest cohort alone: 22.1% of the 988,310 establishments born in the year to March 2024 closed within twelve months. Older establishments add hundreds of thousands more closures on top, because the curve keeps taking a toll in every age band. There is no single official “businesses failed this year” number, and anyone quoting one precisely is improvising.
Stat 8: About 218,000 of the 988,310 US establishments born in the year to March 2024 closed within their first year (derived from BLS BED).
Stat 9: Americans filed 5,671,836 new business applications in 2025, but only about a million new employer establishments are born per year. Most applications never become an employer (Census BFS; BLS BED).
| Formation measure | Latest value | Source |
|---|---|---|
| Business applications filed, 2025 | 5,671,836 | Census Business Formation Statistics |
| Employer establishments born, year to March 2024 | 988,310 | BLS Business Employment Dynamics |
The formation funnel: applications vs actual employers
Source: Census Business Formation Statistics (2025) and BLS Business Employment Dynamics (year to March 2024).
That gap deserves a sentence, because journalists regularly confuse the two series. The Census counts business applications, which are tax filings. The BLS counts establishments that actually hire. Divide one by the other and you see the honest funnel: for every five or six applications, roughly one employer establishment materializes. If you want the full census of how many businesses exist at each stage, our how many small businesses are in the US piece reconciles the counting lenses in depth; this page stays focused on failure.
Small Business Failure Rate by Industry
The information sector has the highest first-year failure rate at 28.4%, and accommodation and food services has the lowest at 14.7%. Yes, you read that right: restaurants and hotels are the SURVIVORS of year one. I pulled the sector-level BED files on September 17, and the myth-busting table looks like this:
| Sector (NAICS) | Survive year 1 | Survive 5 years | Survive 10 years |
|---|---|---|---|
| Accommodation & food services | 85.3% | 59.3% | 41.3% |
| Retail trade | 84.4% | 59.8% | 43.7% |
| Health care & social assistance | 82.1% | 52.6% | 42.0% |
| Real estate & rental | 81.0% | 57.9% | 44.8% |
| Construction | 79.7% | 56.5% | 42.8% |
| All private industries | 77.9% | 51.4% | 34.9% |
| Transportation & warehousing | 77.0% | 52.7% | 37.0% |
| Administrative & waste services | 75.7% | 51.5% | 36.8% |
| Professional & technical services | 74.5% | 50.8% | 34.0% |
| Information | 71.6% | 45.7% | 30.4% |
First-year survival by sector (2024 opening cohort)
Source: BLS Business Employment Dynamics, NAICS sector survival tables, read September 2026.
Five-year survival by sector (2020 opening cohort)
Source: BLS Business Employment Dynamics, NAICS sector survival tables, read September 2026.
Stat 10: Accommodation and food services post the highest first-year survival of any major sector: 85.3% for the 2024 cohort (BLS BED).
Stat 11: The information sector posts the lowest first-year survival at 71.6%, a 28.4% first-year failure rate (BLS BED).
Stat 12: At ten years, real estate leads with 44.8% still operating, while information trails at 30.4% (BLS BED, 2014 cohort).
So why does everyone believe restaurants fail instantly? Partly survivorship of anecdotes: a shuttered cafe is visible in a way a dissolved consulting LLC never is. And partly definitional sleight of hand: restaurant chains close individual locations often, which feels like failure even when the firm thrives. The data says a new restaurant is more likely to see its first birthday than a new software shop. I’ve quoted that at three dinners already and nobody believes me until I show the file.
🔍 Did you know? Every sector above the all-industries line in year one is customer-facing and physical: food, retail, health care, real estate, construction. The desk-based sectors fail faster. Physical businesses open later and more carefully, because their startup costs force the discipline.
Why Do Small Businesses Fail?
Running out of money is the most-cited final cause, but the best post-mortem data treats it as the symptom, not the disease. CB Insights analyzed 431 VC-backed companies that shut down since 2023, 385 of them with identifiable causes, and most cited several reasons at once:
| Reason cited in post-mortem | Share of failed companies |
|---|---|
| Ran out of capital / failed to raise | 70% |
| Poor product-market fit | 43% |
| Bad timing or macro conditions | 29% |
| Unsustainable unit economics | 19% |
Why failed startups say they failed (multi-cause)
Source: CB Insights startup post-mortem analysis, 431 VC-backed shutdowns since 2023.
Stat 13: 70% of failed VC-backed startups cited running out of capital, the most common final cause of death (CB Insights, 431 post-mortems since 2023).
Stat 14: 43% of the same failures cited poor product-market fit, the root cause analysts point to behind the cash squeeze (CB Insights).
An honest label on that dataset: it covers venture-backed startups, not your local plumber. For Main Street businesses, the closest hard evidence is about cash cushions. The JPMorgan Chase Institute analyzed 597,000 small businesses’ accounts and found the median business holds enough cash to cover just 27 days of typical outflows. Restaurants hold 19. Professional services firms hold 31. The study’s data is from 2015, and it remains the reference point because nobody has matched its scale since.
Stat 15: The median US small business holds 27 cash buffer days; the median restaurant just 19 (JPMorgan Chase Institute, 597,000 businesses analyzed).
Put the two datasets together and the story writes itself. Most businesses don’t die of one dramatic wound. Demand runs a little soft, prices sit a little wrong, and a sub-30-day cash buffer turns an ordinary slow quarter into a shutdown. The failure statistics look sudden. The mechanics rarely are.
Failure Rate Myths vs the Actual Data
Do 90% of small businesses fail? No. Nothing in official US data supports it. The number descends from venture capital folklore, where portfolio companies genuinely do fail at very high rates, and then got pasted onto all 36 million American small businesses. The SBA and BLS numbers above describe reality: half of new employer establishments are still alive after five years.
Stat 16: No US government dataset supports “90% of businesses fail”. The BLS-measured first-year failure rate is 22.1% (BLS BED, 2024 cohort).
Stat 17: “Half fail in the first year” is also false. The 50% mark arrives around year five, not year one (BLS BED).
Why do the myths persist? Because they’re useful. “90% fail” sells courses, consulting, and caution. The real numbers sell nothing. They just describe a risk that is serious, survivable, and strongly shaped by industry, timing, and cash discipline. Quote them anyway.
The Landscape New Businesses Enter
Failure rates come from official data. What a private database CAN show is the competitive landscape those million yearly newcomers walk into. As of September 2026, CUFinder’s database holds 18,400,261 map-visible US business records, and the picture is rougher than most founders expect: 42.9% of those businesses have no website, and 44.5% have zero Google reviews.
Stat 18: 42.9% of map-visible US businesses have no website (CUFinder, September 2026). The full breakdown lives in our no-website economy report.
Stat 19: 44.5% of US local businesses have zero Google reviews (CUFinder, September 2026). See the review gap report for the industry cuts.
To be clear about what this context is NOT: our data cannot tell you whether a website or reviews cause survival, and I won’t pretend it can. What it tells you is that visibility is far from saturated, which cuts both ways. A new business can out-present half its market in a weekend. And an established one can coast invisibly for years until a better-presented competitor opens next door.
There’s a B2B angle here too, and it’s the reason a data company cares about failure statistics at all. If roughly a fifth of the newest businesses on your prospect list will be gone within a year, list decay is not a hygiene problem. It’s structural. Sales teams increasingly treat closures and openings as buying signals to act on rather than surprises to clean up, and the broader market numbers behind that approach live in our small business statistics roundup and across the business statistics series.
📌 Example: A 5,000-account SMB pipeline at national rates: about 1,100 of the accounts founded last year will not exist next year. If your CRM shows zero closed-lost-to-closure, your CRM is behind reality, not ahead of it.
Methodology: Where Every Number Comes From
Survival data. All survival and failure rates come from BLS Business Employment Dynamics table 7, “Survival of private sector establishments by opening year”, total private and NAICS sector files, read September 17, 2026. An establishment is a single location with employees, tracked through state unemployment insurance records. Cohorts are establishments born in the year ending each March.
Cohort positions used. First-year rate = March 2024 cohort observed March 2025 (77.9% survival). Five-year rate = March 2020 cohort (51.4%). Ten-year rate and the survival curve = March 2014 cohort (34.9% at ten years, 32.7% at eleven). Industry table uses the same three positions per sector file.
Definitions and caveats. A BED “death” is an establishment that stops reporting employment: it includes failures but also sales, mergers, and relocations, so true failure rates run somewhat below these figures. Nonemployer businesses (about 30 million solo firms) are not tracked here at all. Formation figures are Census Business Formation Statistics; an application is a tax filing, not an operating business.
Other sources. Failure reasons come from CB Insights (431 VC-backed shutdowns since 2023; VC-specific, multi-cause). Cash buffers come from the JPMorgan Chase Institute (597,000 businesses, 2015 data, labeled for its vintage). CUFinder context figures are September 17, 2026 queries of 18,400,261 map-visible US records; they describe the landscape and make no causal claims about survival.
How to Cite These Failure Rate Statistics
Quote any number on this page freely, with a link back. Ready-made citation: “Per BLS data compiled in CUFinder’s small business failure rate report (September 2026), 22.1% of new US businesses close within a year and 48.6% within five.” Canonical URL: https://cufinder.io/blog/statistics/small-business-failure-rate/
FAQ
What percentage of small businesses fail in the first year?
22.1% of US establishments born in the year to March 2024 closed within twelve months (BLS Business Employment Dynamics). The first-year rate has ranged between 19.1% and 23.7% across recent cohorts.
What percentage of small businesses fail within 5 years?
48.6%. Of the establishments born in the year to March 2020, 51.4% were still operating five years later (BLS BED). The five-year mark is where the famous “half of businesses fail” claim actually belongs.
What percentage of businesses fail within 10 years?
65.1%, based on the March 2014 cohort, of which 34.9% reached year ten (BLS BED). The curve flattens with age: the same cohort still had 32.7% operating at year eleven.
Is it true that 90% of startups fail?
Not for businesses in general. The 90% figure comes from venture capital, where most portfolio companies do fail to return capital. Official BLS data for all US establishments shows 22.1% failing in year one and about half surviving five years.
Why do 80% of businesses fail?
They don’t, on any official measure or horizon shorter than two decades. The real ten-year failure rate is 65.1%. When businesses do fail, post-mortems most often cite running out of cash (70%), weak product-market fit (43%), and bad timing (29%).
What is the number one reason small businesses fail?
Running out of money is the most-cited final cause, but it is usually the symptom of weak demand or mispriced products. The median small business holds only 27 cash buffer days, so any dip becomes dangerous fast (JPMorgan Chase Institute).
Which industry has the highest failure rate?
The information sector, where 28.4% of new establishments close within a year and only 45.7% reach year five (BLS BED). Professional services and administrative services also run below the all-industry average.
What business has the highest success rate?
Among major sectors, accommodation and food services lead year one at 85.3% survival, and real estate leads the ten-year view at 44.8% (BLS BED). The restaurant death-trap reputation is not supported by the data.
Are small businesses struggling right now?
Mixed, honestly. The 2022 cohort posted the weakest recent first-year survival (76.3%), yet formation is booming, with a record 5,671,836 business applications filed in 2025. High churn and high formation are happening at once.
How does the BLS define a business failure?
It doesn’t. BED measures establishment “deaths”: locations that stop reporting employment. That includes real failures plus sales, mergers, retirements, and moves, so published failure rates slightly overstate true business failure.
It’s Time to Retire the 90% Myth
22.1% in year one. About half at year five. One in three at year ten.
Those are numbers you can plan a business, a loan book, or a sales territory around, and every one of them links to a government file you can check yourself. So next time a deck tells you 90% of businesses fail, do what that CFO did to me: ask “says who?” Bookmark this page so you always have the answer. You got this!
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