Small Business Failure Rate is 90% Wrong

The 90 percent failure rate statistic is a myth.

BNET posted an article to share some truth about this American legend. 70 percent of new firms that have at least one employee survive for at least two years. Roughly half go on for five years.

And even the 30 percent failure rate after one year may be an overstatement. That’s because other studies have shown that most firms that close their doors were profitable at the time.

One alternative to starting a business is getting a job. It turns out that going to work for someone else is roughly as likely to be short-lived as going to work for yourself. The Bureau of Labor Statistics looked at American workers’ average tenure on the job and found that, even when considering only more stable, older workers, 31 percent of the jobs they took ended in less than a year.  Not only that, but 65 percent of the jobs ended in fewer than 5 years. The future seems equally uncertain.

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