Search:
Recent Posts
Categories
Archives
What are the Real Stats on Small Business Failure?
What is the real rate of small business failure in the United States? Over the years I have heard many different numbers. Just the other night in my class a guest speaker said that nine out of ten small businesses will fail in the first five years. Of those that make it past the five year mark, only ten percent will make it to the ten year mark. Seems reasonable.
I use the number given in the book The E-Myth, which states that eighty percent of all businesses fail. Interesting to note that The E-Myth also claims that 80% of all franchises succeed.
I was reading through the book Start Up Nation By Rich and Jeff Sloan. They claim that the eighty percent number is wrong. They reference research done by Bruce Kirchoff, the former chief economist for the SBA. Bruce was perplexed by the data given on small business failure and simply did not believe the numbers. So he spent years combing through millions of pieces of data to see if he could come up with more accurate information. He concluded that forty percent of all business are still in business six years after they start. He also found that only eighteen percent of businesses from the same sample group actually filed for bankruptcy.
We shouldn’t be surprised that the data provided by the government is inaccurate. Bruce found that people who simply retired and closed their businesses, companies that changed their names or locations and companies that had been acquired or merged and had a name change were all lumped into a “failure” category at the SBA.
If you have any additional data on small business failure I would like to see it for a project I am working on.
[...] I blogged recently about the myth of small business failure. That got me thinking about other myths that are prevalent in our world. [...]
Left by ChrisKnudsen.biz » Nine (or so) Myths About Business and Entrepreneurship on 12/06/2006[...] I blogged recently about the myth of small business failure. That got me thinking about other myths that are prevalent in our world. [...]
Left by ConnectBlogs » Blog Archive » Nine (or so) Myths About Business and Entrepreneurship on 12/18/2006