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Business Startups Stats

I have read an article in Fortune Magazine that stated that 9 out of 10 startups fail,

The U.S. Census Bureau reports that 400,000 new businesses are started every year in the USA, but 470,000 are dying.

“More than one-third of businesses today will not survive the next 10 years”.

John Chambers Cisco’s CEO of 20 years

According to the Small Business Administration – The SBA – close to 66% of small businesses will survive their first 2 years. What that means is that only about one-third of total businesses will fail during the first 2 years. The SBA also tells you that about 50% of businesses fail during the first year in business.

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Diverse People Working and Startup Business Concept

GENERAL STARTUP STATISTICS

  • 51 percent of owners of small businesses are 50-88 years old, 33 percent are 35-49 and only 16 percent are 35 years old and under.
  • 69 percent of U.S. entrepreneurs start their businesses at home.
  • According to the National Association of Small Business’s 2015 Economic Report, the majority of small businesses surveyed are S-corporations (42 percent), followed by LLCs (23 percent).
  • While around 9 percent of all American businesses close each year, only 8 percent are opened.
  • 51 percent of people asked, “What’s the best way to learn more about entrepreneurship?” responded with “Start a company”.

STARTUP FAILURE RATE STATISTICS

  • A bit more than 50 percent of small businesses failin the first four years.
  • In fact, of all small businesses startedin 2011:
    • 4 percent made it to the second year
    • 3 percent made it to the third year
    • 9 percent made it to the fourth year
    • 3 percent made it to the fifth year
  • Leading causesof small business failure:
    • Incompetence: 46 percent;
    • Unbalanced experience or lack of managerial experience: 30 percent;
    • Catchall category (includes neglect, fraud, and disaster): 13 percent; and
    • Lack of experiences in line of goods or services: 11 percent.

STARTUP FINANCE STATISTICS

  • The vast majority of startup funds (82 percent)came from the entrepreneur himself or herself, or family and friends.
  • 77 percent of small businesses relyon personal savings for their initial funds.
  • 40 percent of small businesses are profitable, 30 percent break even and 30 percent are continually losing money.
  • Having two founders, rather than one, significantly increases your odds of success as you’ll:
    • Raise 30 percent more money,
    • Have almost 3X the user growth, and
    • Are 19 percent less likely to scale prematurely.
  • 82 percent of businesses that fail do so because of cash flow problems
  • 27 percent of businesses surveyed by the NSBA claimed that they weren’t able to receive the funding they needed.

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Startup Funds

INDUSTRIES WITH THE BEST STARTUP STATISTICS

  • The industries with the highest success rates were finance, insurance, and real estate — 58 percent of these businesses were still operating after 4 years.
  • 15 most profitable small business industries by net profit margin (NPM) are:
    • Accounting, tax preparation, bookkeeping and payroll services: 18.4 percent NPM
    • Management of companies and enterprises: 15.5 percent NPM
    • Offices of real estate agents and brokers: 15.19 percent NPM
    • Automotive equipment rental and leasing: 14.55 percent NPM
    • Legal services: 14.48 percent NPM
    • Offices of dentists: 14.41 percent NPM
    • Electric power generation, transmission and distribution: 14.02 percent NPM
    • Lessors of real estate: 14.01 percent NPM
    • Offices of other health practitioners: 13.30 percent NPM
    • Offices of physicians: 13.01 percent NPM
    • Commercial and industrial machinery and equipment rental and leasing: 12.58 percent NPM
    • Religious organizations: 12.41 percent NPM
    • Management, scientific and technical consulting services: 12.05 percent NPM
    • Specialized design services: 11.4 percent NPM
    • Office administrative services: 11.3 percent NPM

INDUSTRIES WITH THE WORST STARTUP STATISTICS

  • Of all startups, information companies aremost likely to fail, with only a 37 percent success rate after four years.
  • 15 least profitable industries in the US by net profit margin (NPM) are:
    • Oil and gas extraction: -7.6 percent NPM
    • Support activities for mining: 0.6 percent NPM
    • Beverage manufacturing: 0.8 percent NPM
    • Grocery and related product merchant wholesalers: 1.9 percent NPM
    • Lawn and garden equipment and supply stores: 2.0 percent NPM
    • Miscellaneous durable goods merchant wholesalers: 2.3 percent NPM
    • Petroleum and petroleum products merchant wholesalers: 2.4 percent NPM
    • Grocery stores: 2.5 percent NPM
    • Automobile dealers: 3.2 percent NPM
    • Building material and supplies dealers: 3.2 percent NPM
    • Continuing care retirement communities and assisted living facilities for the elderly: 3.3 percent NPM
    • Other motor vehicle dealers: 3.3 percent NPM
    • Home furnishings stores: 3.3 percent NPM
    • Furniture stores: 3.3 percent NPM
    • Beer, wine, and Liquor stores: 3.4 percent NPM

Bottom Line

If you want to start your own business, don’t let the startup statistics above put you off. After all, you’re more likely to succeed if you’ve failed than if you’ve never tried:

  • Founders of a previously successful business have a 30 percent chance of success with their next venture, founders who have failed at a prior business have a 20 percent chance of succeeding versus an 18 percent chance of success for first time entrepreneurs.

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Planning a Start Up

Bankruptcy filings are continuing to decline, with fewer than 800,000 people filing in federal courts last year.

All bankruptcy cases are handled in federal courts, per the U.S. Bankruptcy Code.

While it’s also the sixth consecutive year that bankruptcy filings have fallen, 2016 saw the decline at its slowest — 5.9 percent for the year. It was the first calendar year that the rate of annual decline was less than 10 percent.

By the numbers, here’s how bankruptcy filings broke down in 2016:

  • 794,960total bankruptcy filings for the 12-month period ending Dec. 31, 2016;
  • 490,365 of those were Chapter 7;
  • 296,655were Chapter 13;
  • 7,292 were Chapter 11;
  • and 461 were Chapter 12.

Total Bankruptcy Filings by Bankruptcy Chapter Years Ending June 30, 2012-2016

Year          Chapter

                     7                  11       12          13

2016         490,365          7,292    461     300,858

2015         568,679          6,672   357      303,945

2014         669,976          8,347   394      321,278

2013         778,845          9,633   426      348,994

2012         914,015          10,921 582      385,949

Comparing 2016 to 2015 filings through Dec. 31, overall filings decreased 5.9 percent, while terminated cases decreased 7.1 percent and pending cases decreased 8.1 percent.

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