Business failure rates
In order to study business failure rates, you have to first define what a business "failure" is. We use quotes around failure because there's no clear-cut definition. Unfortunately, there is no easy answer to the business failure rate question, nor is there one place where the data is available as easy-to-read statistics. You may need to interpret and calculate the raw data, turning it into the statistical information necessary for your research. You need to be ready to do some work if you find that no one else has already done this ahead of you.
These are things to consider.
- When does a business fail, and when does it simply close?
- If a start-up closes within the first few years because it's insufficiently funded, then it's easier to argue it has failed.
- Is it a failure if it ran for 5 years? 10 years?
- Is it also a failure if it made a profit but not as much as the owner hoped?
Where to begin the search
The Small Business Administration and Bureau of Labor Statistics keep statistics on business exits. This is the number of businesses that close in any given year. Notice that they're not tracking business failures, because the term is subjective, as discussed in the section above. Business exits is probably the number that you should seek out, but you need to think carefully about what it will provide.
Business exits include any company that closes, such as:
- a new start up that ran out of money
- a company that has been operating for a few years but is closed because the owner wants to change direction
- a company that closes after 30 years of fabulous success with a wealthy owner retiring to Hawaii
You will need to plot the survival rates by industry for firms founded in a specific year. Listed below are helpful government websites that track business exits or other related statistics or information.
United States government websites
The U.S. Government collects and presents useful data for business and industry research. Explore these sites for data and statistics.
Sample search terms for articles
You can sometimes find articles that will present figures on failure rates, but be cautious and take a close look at how the article is defining failure for that figure. Additionally, it may be useful to search for business survival rates for various time-spans (e.g. 5 years).
Here are some alternate terms:
business AND births OR deaths
business survival OR business longevity OR business mortality