Percentage of Businesses That Fail (2019)
Starting a new business can be tough, especially with no prior experience. Maintaining one is also very challenging.
According to the latest statistics on the percentage of businesses that fail in the United States, we see that of the 652,780 new businesses that were started in 2014, more than one-fifth (20.3 percent) closed after their first year in operation.
Considering the risks, challenges, and uncertainty involved in running a business, it should come as no surprise that the latest statistics show that more entrepreneurs are choosing to shut their businesses as the years pass.
As a matter of fact, the percentage of businesses that fail increases to 30.8 percent in the second year and 38.2 percent in the third year. By the fifth year in 2019, this figure reaches 49.1 percent.
That means that only around half of the businesses that started in 2014, or 331,969 of them, to be exact, were still surviving half a decade on.
Looking at it on a year-to-year basis, the average annual rate of business failure from 2015 to 2019 for companies started in 2014 stands at 12.54 percent. In other words, of the surviving businesses that started in 2014, 12.54 percent more of them fail each year.
Factors Behind the Rate of Business Failure
While there are many factors that contribute to new businesses failing, there are some that are more common than others.
These include insufficient market research, lacking a business plan or not sticking to one, and not having enough money to keep the business running.
To curb this problem, it is important to conduct thorough research and have a thorough and realistic business and financial plan before launching the business. These will help you prevent failure by providing a strong enough foundation to ensure your business persists through the initial tough years.
Other top reasons many new businesses fail within the first five years include subpar marketing, inflexibility, and overambition.
Once a business is up and running and sales start to flow in, the business owner must learn to be flexible and adapt to new trends. Expanding too quickly can also cause a business to fail, especially if new target audiences, markets, and products and services are involved.