The journey of a business from inception to longevity is a brutal test of endurance. In the U.S.A., nearly 20% of new ventures don’t make it past their first year, and over two decades, only one in five (20%) survive.
What determines which companies thrive while others fade? From the resilient farms of rural America to the volatile tech startups of Silicon Valley, survival rates reveal a story of grit, adaptation, and sometimes, sheer luck.
This article covers the numbers behind business lifespans and why half vanish within five years, why some industries outlast others, and what separates the casualties from the champions.
Business Survival Rate Statistics
There are over 30 million businesses in the USA. Data from the U.S. Bureau of Labor Statistics and other research sources indicate the following survival rates:
20% of businesses close within the first year
50% fail within five years
65% do not last beyond ten years
Only 25% survive for 15 years or more
50% of small businesses are home-based
42% of founders cite “no market need” as the top reason for failure.
While these figures provide a general overview, survival rates vary significantly based on industry and company size.
Myth That Most Businesses Fail Within aYear
The idea that most businesses fail within one year is a misconception—actual data shows that about 80% of new businesses survive their first year in the U.S. However, this myth persists for several reasons:
Why People Think Most Businesses Fail in One Year
Confusion Between “Closing” and “Failing” – Not all businesses that close in the first year fail due to financial struggles. Some owners voluntarily shut down due to personal reasons, better job opportunities, or market changes.
High Failure Rates in Certain Industries – While most businesses survive their first year, some industries—such as restaurants, retail, and tech startups—do have higher early failure rates, which may contribute to the perception that most fail quickly.
Misinterpretation of Business Statistics – People often misquote failure rates. While 20% of businesses close in the first year, this does not mean 80% fail immediately—many continue for years before closing.
Survivorship Bias – Successful businesses get more attention, while failed ones disappear quietly. This can lead people to believe that the majority of businesses fail quickly, even if they actually last longer.
Media Exaggeration – Sensational stories about dramatic business failures spread quickly, reinforcing the idea that failure is the norm. In reality, most businesses last multiple years, even if they eventually close.
Survival of Startups vs. Established Businesses
Startups face steep odds—20% fail within their first year, 50% by year five, and only 30% reach a decade, per U.S. Bureau of Labor Statistics. Cash flow woes (38%) and lack of market need (35%) are top killers. Experience helps—serial entrepreneurs succeed 30% of the time versus 18% for first-timers.
Established businesses fare better—post-five years, their annual failure rate drops to 5-7%, with 65% surviving a decade. Brand power (Coca-Cola: $98 billion market cap, 2024) and cash reserves ($2.1 trillion for S&P 500, 2023) give them an edge.
But stagnation kills—Kodak and Blockbuster tanked missing digital shifts, while Netflix soared to $240 billion by 2024. Adaptation trumps longevity.
Number of New Businesses Per Year & Survival
In 2023, the United States experienced a record-breaking 5,481,437 new business applications, representing an 8.7% increase from the previous year. In 2024, the number of new business applications decreased by 4.77% to 5.21 million.
Over the past five years, an average of approximately 4.7 million new business applications have been filed annually, reflecting strong and sustained entrepreneurial activity.
Survival Rates of New Businesses
The longevity of new businesses varies, with survival rates declining over time:
70% of new businesses survive beyond their first two years.
50% of new businesses remain operational after five years.
30% of businesses survive beyond ten years.
Only 25% of businesses are still active after 15 years.
Here is a table showing the average lifespan of new businesses by industry, based on available survival rate data:
| Industry | Average Business Lifespan | Five-Year Survival Rate | Ten-Year Survival Rate |
|---|---|---|---|
| Health Care & Social Assistance | 10+ years | 60% | 40% |
| Real Estate & Rental Leasing | 8–10 years | 55% | 35% |
| Finance & Insurance | 8–10 years | 55% | 35% |
| Educational Services | 8–10 years | 55% | 35% |
| Professional & Technical Services | 7–9 years | 50% | 30% |
| Manufacturing | 7–9 years | 50% | 30% |
| Construction | 6–8 years | 45% | 25% |
| Retail Trade | 5–7 years | 40% | 20% |
| Hospitality & Restaurants | 4–6 years | 35% | 15% |
| Transportation & Warehousing | 4–6 years | 35% | 15% |
Larger Companies and the S&P 500
The S&P 500 Index comprises 500 leading publicly traded companies in the United States, serving as a benchmark for the overall performance of large-cap U.S. equities. Over time, the composition of this index changes due to various factors, reflecting the dynamic nature of the business environment.
Average Tenure of S&P 500 Companies
Historical Decline in Tenure: In 1965, the average tenure of a company in the S&P 500 was 33 years. This duration decreased to 20 years by 1990 and is projected to shrink to 14 years by 2026.
Current Average Lifespan: As of recent analyses, the average lifespan of a company on the S&P 500 is approximately 18 years.
Turnover Rates
10-Year Turnover: Over a typical 10-year period, approximately 36% of S&P 500 constituents are replaced.
Future Projections: If current trends persist, it is estimated that about 75% of the companies currently in the S&P 500 will be replaced by 2027.
Factors Influencing Turnover
Several factors contribute to the turnover of companies within the S&P 500:
Mergers and Acquisitions: Companies may be acquired or merge with others, leading to their removal from the index.
Financial Performance: Companies that underperform financially may be delisted from the S&P 500.
Technological Disruption: Advancements in technology can render existing business models obsolete, affecting a company’s position in the index.
Market Dynamics: Shifts in consumer preferences and global economic conditions can impact a company’s relevance and profitability.
Industry-Specific Survival Rates
Certain industries have higher survival rates due to stable demand, while others face increased risk due to competitive pressures and market volatility.
Industries with Higher Survival Rates: Health care, education, and real estate tend to have more stable business models and longer lifespans.
Industries with Lower Survival Rates: Restaurants, retail, and technology startups often struggle due to high competition, evolving consumer preferences, and significant operational costs.
Most Common Causes of Business Failure
Businesses don’t just die—they’re often killed by avoidable mistakes. Here’s a quick rundown of the top reasons companies fail, backed by the latest stats.
1. No Market Need
The top reason startups collapse? No one wants what they’re selling. 42% of failed startups cite “no market need”. Fundera’s 2024 data shows 38% of small businesses flop for the same reason—building without demand.
2. Running Out of Cash
Cash is king, and when it’s gone, so is the business. 29% of startups run dry , while the SBA says 82% of small business failures involve cash flow woes (2024). 40% of first-year closures tie to this.
3. Wrong Team, Bad Execution
A weak team sinks even strong ideas. 19% of startups fail due to poor leadership or skills. The SBA notes 23% of closures stem from management missteps (2024). Newbies fare worse—30% higher failure rate without experience.
4. Outpaced by Competition
Rivals can crush you. 18% of startups get outmaneuvered, and 19% of small businesses can’t keep up. In tech, 25% lose to faster giants.
5. Pricing and Cost Issues
Bad pricing or high costs doom profits. 15% of startups struggle here. 28% of small businesses misjudge expenses within five years, with 20% of restaurants hit by thin margins.
Factors That Support a Lasting Business
Despite the risks, many businesses achieve long-term success by focusing on key factors:
Effective Leadership – Strong management and strategic decision-making contribute to business sustainability.
Financial Planning – Proper budgeting and cash flow management help businesses navigate economic challenges.
Product-Market Fit – Companies that address real customer needs have a higher chance of long-term survival.
Innovation and Adaptability – Businesses that embrace new technologies and trends remain competitive.
Customer Retention – A loyal customer base helps stabilize revenue and ensures continued growth.
