Estimated reading time: 3 minutes, 18 seconds

“Most small businesses fail in the first year.”  This notion is guaranteed to instill fear in many that consider becoming entrepreneurs.  As an entrepreneur, I had to ask ‘how accurate is this statement?”  It turns out, not at all.  First, lets look at the facts.


A 2017 report from the Small Business Administration (SBA) indicated that 79.9% of small businesses survived one year after their inception, up from 78.5% in 2006.  This is, in fact, the highest rate of success we’ve had in the last decade!  Moreover, the SBA recorded nearly half of all small businesses surviving five years and longer. 

There were nearly 30 million small businesses in the United States last year.  With that, two out of three establishment exits that occurred were the result of company closures.  According to U.S. Bank, the reason these small businesses were failing was the result of poor cash flow management.  Though many entrepreneurs had countless hours of rigorous research under their belt and built solid networks and partnerships, incoming cash flow was insufficient to meet their outgoing cash flow needs. 

This data blew my mind as I can imagine it would for many fellow entrepreneurs.  That notorious belief that small businesses fail within their first year is a misconception. 

One thing I want to assert here is that the number of women-owned businesses has increased substantially over the last decade, especially among women of color.  In 2012, there were nearly 10 million women-owned small businesses, and another 2.5 that were equally owned by men and women.  This meant that 45% of all firms were at least 50% women-owned.  Ethnic and racial minorities did not fall behind in the industry either.  Not only were eight million firms owned by people of color, but the women in these communities had also driven their small business ownership up drastically.  Firms owned by Asian women increased by 44%; Black women by 68%; and Hispanic women by 88%.  As the notion goes, there couldn’t be a better time to be a woman, minority and entrepreneur. 

Small businesses have comprised 99.9% of all firms throughout the nation. They supply our economy with employment opportunities, and contribute to our communities.  Many are involved in sponsoring, donating and volunteering at charity events, for social and environment causes.  As an entrepreneur, you should feel inclined and encouraged to share your story and your brand.  Becoming a small business owner comes with countless opportunities to expand your network, gain unrivaled skills, work at your own time and make a positive change in society. 

Take, for example, Page One Consultants, an engineering and construction consulting firm.  Started in 1993, the business had moderate performance throughout its subsequent decades before picking up in the recent years, tripling its revenues and hiring several more employees.  The owners of Well+Good saw movement in the health and beauty industry only slightly in 2010, however, took the opportunity to launch their platform that later grew to over 5 million users in web traffic.  The creators of GrubHub, the online food ordering company, saw the opportunity to construct their brand after they repeatedly called restaurants for takeout one night.   Entrepreneurship is patience.  It’s risk and opportunity. 

Despite the uncertainties that come with creating a small business, over 400,000 new businesses are launched annually.  It goes without saying that you’re in good company if you’re looking to be your own boss.  With the growing rates of survival for small businesses, now is the time for you to start your company.

Check out the full New Business Survival & Failure Percentage Rates infographic.

SBA report percentage of businesses failure by first year, five years and 10 years

Marsha Kelly sold her first business for more than a million dollars. She has shared hard-won experiences as a successful serial entrepreneur on her Best4Businesses blog, where she also regularly posts business tips, ideas, and suggestions as well as product reviews for business readers. As a serial entrepreneur who has done “time” in corporate America, Marsha has learned what products and services really work well in business today. You can learn from her experiences to build your business.

Last modified on Friday, 01 June 2018
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