54.6% of new U.S. businesses close within five years of opening, according to Bureau of Labor Statistics Business Employment Dynamics data tracking establishment survival. About one in five do not survive their first year, and only around a third make it to a decade in business. The pattern has held for years even as the number of new businesses keeps climbing.
If you are starting or running a young business, these numbers are not a reason to quit before you begin. They are a map of where the pressure points sit, so you can see which year matters most and which failure causes are actually preventable.
What percentage of new businesses fail in the first year?
About 19.6% of new U.S. businesses close before their first anniversary, meaning roughly 80.4% survive year one, according to BLS Business Employment Dynamics establishment survival data. That first-year failure rate has stayed close to one in five for years, making it one of the more stable figures in small business research.
Figure 1: Share of new establishments still operating at the one-year mark. Source: US Bureau of Labor Statistics, Business Employment Dynamics.
Most first-year closures trace back to cash flow, not a single dramatic event. A business that opens without enough working capital to cover a slow first quarter often runs out of runway before it ever finds its footing, well before any competitive or market problem has time to show up in the numbers. The businesses that make it past year one tend to have the basics in place early, including a real web presence: see our small business website statistics for how ownership of that channel has shifted.
Year one is the steepest single-year drop in the entire survival curve; every year after it is a smaller decline.
What percentage of businesses fail within 5 years?
54.6% of new U.S. businesses have closed by the five-year mark, leaving 45.4% still operating, per the same BLS establishment survival series. This is the figure most often quoted in small business advice, and it is frequently rounded down to “half,” which understates it slightly.
The five-year mark tends to be where an early customer base either becomes reliable revenue or never fully forms. Businesses that survive the first two years but still fail by year five are usually dealing with a market or margin problem rather than a startup cash crunch.
Figure 2: Establishment survival rate at each milestone year. Source: US Bureau of Labor Statistics, Business Employment Dynamics, cohort tracking.
A written terms of service does not prevent a market downturn, but it removes an entirely separate failure risk: unresolved disputes over refunds, liability, or account cancellations that drain cash and owner time at exactly the point a young business can least afford it. Businesses that formalize their terms and conditions early close off one avoidable source of costly disputes before they compound.
Half the battle is surviving to year five; the other half is making sure the causes you can control, like undocumented policies, are not the ones that take you out.
How many businesses survive 10 years or longer?
Around 34.6% of new businesses are still operating after 10 years, meaning about 65.4% have closed by that point, based on BLS long-run cohort tracking. Survival keeps declining after year five, but at a much slower rate than the drop between year one and year five.
By year 15, survival settles near 25.1%, according to the same BLS series. This longer tail includes businesses that outlive their original owner through a sale or succession, not just ones that keep the same founder at the helm the entire time.
The businesses that reach 10 years share a pattern: they usually crossed the five-year survival line with a repeatable, profitable customer base rather than continued reliance on founder capital or one-off contracts.
Long-run survival past year 10 correlates more with sustained profitability than with the industry a business started in.
What are the most common reasons businesses fail?
Running out of cash or failing to raise new funding is the leading cause, cited by 38% of failed startups, according to CB Insights’ analysis of founder-submitted postmortems. No product-market fit follows close behind at 35%, then being outcompeted at 20%, flawed pricing or cost structure at 19%, and a poor founding team at 18%. Founders could name more than one cause, so the shares do not sum to 100%.
Figure 3: Most-cited causes of startup failure, founders could select more than one. Source: CB Insights, startup postmortem analysis.
Several of these causes are structural and hard to fix after the fact, but a subset is closer to paperwork than strategy: unclear refund terms, undocumented service agreements, and cancellation disputes all fall inside the “pricing/cost issues” and general operational category that founders report.
Figure 4: Which failure triggers respond to documentation versus strategy. Source: synthesized from CB Insights failure-cause categories above.
Cash and market fit explain most closures, but documentation gaps are the one failure cause a business can close off in an afternoon.
Are more new businesses starting now than before?
Business formation and business failure are moving at the same time, not in opposite directions. The US Census Bureau’s Business Formation Statistics recorded 5.5 million new business applications in 2023, extending a surge that began in 2021 and has stayed well above pre-2020 norms every year since.
Figure 5: Business formation milestones alongside the survival window. Source: US Census Bureau, Business Formation Statistics.
More entrepreneurs are starting businesses than at any point in the last two decades, which means the five-year survival test described above is about to apply to a historically large cohort all at once.
Business survival by milestone year
| Milestone | Still operating | Have closed | Primary driver |
|---|---|---|---|
| 1 year | 80.4% | 19.6% | Startup cash flow |
| 5 years | 45.4% | 54.6% | Market fit and margins |
| 10 years | 34.6% | 65.4% | Sustained profitability |
| 15 years | 25.1% | 74.9% | Ownership transition |
Source: US Bureau of Labor Statistics, Business Employment Dynamics, establishment survival cohort data.
The Bottom Line
The single most useful number for a new business owner is not the one-year failure rate, it is the 54.6% five-year figure. Year one weeds out businesses that never had enough cash to begin with, but year five is where market fit and margins decide who stays. Survival past that point slows down considerably: by year 10 only another 10.8 points of businesses have closed, and by year 15 the curve is nearly flat. None of this eliminates the avoidable share of failure that comes from missing paperwork rather than a bad market. A current, clearly written terms and conditions document will not fix a weak product, but it closes off one of the specific dispute-driven failure causes that shows up in the data above.
Frequently Asked Questions
What percentage of new businesses fail in the first year? About 19.6% of new U.S. businesses close before their first anniversary, meaning roughly 80.4% survive year one, according to Bureau of Labor Statistics Business Employment Dynamics data.
What percentage of businesses fail within 5 years? 54.6% of new U.S. businesses have closed by the five-year mark, leaving 45.4% still operating, per the same BLS establishment survival series.
What percentage of businesses survive 10 years? Around 34.6% of new businesses are still operating after 10 years, so roughly 65.4% have closed by that point, based on BLS long-run cohort tracking.
What is the most common reason startups fail? Running out of cash or failing to raise new funding is the single most cited reason, named by 38% of failed startups in CB Insights’ postmortem analysis of founder-submitted failure reports.
Sources and References
- US Bureau of Labor Statistics. Business Employment Dynamics, “Entrepreneurship and the U.S. Economy.” Establishment survival rates by years since opening, cohort-tracked data.
- US Census Bureau. (2023). Business Formation Statistics. 5.5 million new business applications filed in 2023.
- CB Insights. “The Top 12 Reasons Startups Fail.” Analysis of founder-submitted postmortem reports.
- US Small Business Administration, Office of Advocacy. Small Business Profile. 33.2 million small businesses operating in the US.
Note: All figures verified as of September 2026. Establishment survival data lags by design since it requires years of cohort tracking, and formation figures update annually, so headline numbers are refreshed at least twice a year.
