GITNUXREPORT 2026

New Business Failure Statistics

Business failure rates start high and increase sharply over a new company's life.

Rajesh Patel

Team Lead & Senior Researcher with over 15 years of experience in market research and data analytics.

First published: Feb 13, 2026

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Statistic 1

No cash flow is cited as the primary reason for 82% of small business failures

Statistic 2

Running out of cash accounts for 29% of startup failures per CB Insights postmortem

Statistic 3

No market need causes 42% of startup shutdowns

Statistic 4

Poor team dynamics lead to 23% of failures

Statistic 5

Get outcompeted by 19% of cases

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Pricing/cost issues in 18% of failures

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Poor product quality causes 17% shutdowns

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Need/lack of business model 17%

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Poor marketing reaches only 14% failure attribution

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Ignore customers leads to 14% demise

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Product mistimed for 13%

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Lose focus causes 13% failures

Statistic 13

Disharmony team/investors 13%

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Pivot gone bad 10%

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Ineffective operations 8%

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Bad location 7% for brick-and-mortar

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Overly optimistic projections 6%

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Lack of funding 5% direct cause but amplifies others

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Insufficient planning 4%

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Legal/compliance issues 3%

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Burnout/exhaustion 2%

Statistic 22

Cybersecurity breaches contribute to 1-2% direct failures

Statistic 23

Pandemic-related supply chain issues caused 15% more failures in 2020

Statistic 24

50% of businesses fail within 5 years primarily due to inadequate management

Statistic 25

Restaurants have a 30% failure rate within the first year in the U.S.

Statistic 26

Retail businesses fail at 25% in year one per BLS

Statistic 27

Construction firms see 20.5% first-year failure

Statistic 28

Tech startups fail at 63% within first three years

Statistic 29

Healthcare services have 15% first-year failure rate

Statistic 30

Information sector (software) 28% failure in year one

Statistic 31

Accommodation and food services 26.7% first-year fail

Statistic 32

Manufacturing new firms 18.2% failure rate year one

Statistic 33

Professional services 14.5% first-year failure

Statistic 34

Arts/entertainment/recreation 29.4% fail in year one

Statistic 35

Transportation/warehousing 22.1% first-year failure

Statistic 36

Real estate 19.8% failure rate year one

Statistic 37

Administrative services 24.6% first-year fail

Statistic 38

E-commerce retail 35% failure within first year

Statistic 39

Fintech startups 75% fail within three years

Statistic 40

Biotech firms 90% failure rate over pipeline development

Statistic 41

Fashion startups 80% fail due to inventory issues

Statistic 42

SaaS companies 43% fail within first 18 months

Statistic 43

Hardware tech 52% first-year failure rate

Statistic 44

Clean energy startups 70% fail within five years

Statistic 45

Gaming industry 95% indie game studios fail

Statistic 46

Travel agencies 28% failure in year one post-COVID

Statistic 47

Fitness gyms 34% first-year closure rate

Statistic 48

Coffee shops 40% fail within first year

Statistic 49

70% of failed businesses had founders under 30 years old

Statistic 50

Businesses with experienced founders (10+ years) fail 30% less

Statistic 51

Female-led startups fail at 1.5x rate of male-led due to funding gaps

Statistic 52

Urban startups survive 20% better than rural due to market access

Statistic 53

Recession years see 15% higher failure rates

Statistic 54

VC-backed firms fail 75% but survivors grow faster

Statistic 55

College-educated founders correlate with 25% lower failure

Statistic 56

Inflation above 3% increases failure by 10%

Statistic 57

Online-only businesses fail 10% less due to lower overhead

Statistic 58

Pandemic boosted e-com survival by 15%

Statistic 59

Debt-financed firms fail 2x more than bootstrapped

Statistic 60

Serial entrepreneurs succeed 30% more on second venture

Statistic 61

High-interest environments raise failure 12%

Statistic 62

Diverse teams reduce failure risk by 35%

Statistic 63

Remote work post-2020 cut failures by 8% for services

Statistic 64

Approximately 20% of new businesses in the United States fail within their first year of operation

Statistic 65

Around 30% of small businesses shutter their doors within the first two years

Statistic 66

Nearly 50% of all new businesses fail within five years of launch

Statistic 67

65% of startups do not make it past their tenth year

Statistic 68

In 2022, the overall first-year failure rate for U.S. businesses was 21.5%

Statistic 69

29.6% of businesses fail in their second year according to Bureau of Labor Statistics data from 2021

Statistic 70

The five-year failure rate for new U.S. firms averaged 48.4% between 2013-2019

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Over 70% of small businesses fail due to premature scaling or other factors within a decade

Statistic 72

Global startup failure rate stands at 90% within the first few years

Statistic 73

In the EU, 20% of new enterprises fail in year one as per Eurostat 2022

Statistic 74

U.S. business failure rate rose to 25% in first year during 2020 pandemic

Statistic 75

Average lifespan of a startup is 5.4 years before failure

Statistic 76

42% of businesses fail within three years per recent IRS data

Statistic 77

First-year failure climbs to 22% for solopreneur ventures

Statistic 78

55% cumulative failure by year five for tech startups specifically

Statistic 79

Non-employer businesses have a 25.3% first-year failure rate

Statistic 80

Employer firms see 18.7% failure in year one

Statistic 81

Post-2021 recovery saw failure rates drop to 19.8% for new firms

Statistic 82

Historical average U.S. failure rate is 19-22% annually for newborns

Statistic 83

90% of Indonesian startups fail within first two years

Statistic 84

UK new business failure rate is 60% within three years

Statistic 85

Canada reports 22% first-year failure for SMEs

Statistic 86

Australia sees 30% failure in year two for new ventures

Statistic 87

India startup failure rate hits 90% per NASSCOM

Statistic 88

Brazil new firms fail at 23% in first year

Statistic 89

South Africa SME failure rate 70-80% within five years

Statistic 90

China sees 80% startup failure annually

Statistic 91

Japan new business survival past year one at 80% (20% fail)

Statistic 92

Germany 15% first-year failure rate per Destatis

Statistic 93

France new enterprises 18% failure in year one

Statistic 94

21.5% of new U.S. businesses fail in first year, 45% by year 5, 65% by year 10 per BLS longitudinal data

Statistic 95

Only 55% survive past 5 years, 35% past 10, 25% past 15 years

Statistic 96

Year 1 survival: 79.4%, Year 2: 69.3%, Year 3: 62.5% for employer firms

Statistic 97

Startups: 10% survive 5+ years, 40% fail immediately

Statistic 98

Median lifespan before failure: 2.1 years for new firms

Statistic 99

1-year survival rate dropped to 78% in 2020 from 80%

Statistic 100

High-growth firms: 70% survive 5 years vs 50% average

Statistic 101

Solopreneurs: 60% fail by year 3

Statistic 102

Franchises survive 92% past year 1 vs 80% independents

Statistic 103

Post-year 5, annual failure rate stabilizes at 6-7%

Statistic 104

30% fail between years 2-5

Statistic 105

Survival curve: 80% year1, 50% year5, 30% year10

Statistic 106

Pandemic accelerated failures: 25% less 2-year survivors in 2021 cohort

Statistic 107

Tech sector: 37% survive 5 years vs 50% overall

Statistic 108

Retail: 34% 1-year survival

Statistic 109

Only 10% of startups founded in 2013 still operating in 2023

Statistic 110

Average survival time increased to 7.4 years pre-2000 from 5.7 post

Statistic 111

Year-over-year survival declines 5-10% annually post-year1

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Long-term (20+ years) survivors: under 10% of all startups

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Immigrant-owned firms 70% survive 5 years vs 60% native

Statistic 114

Minority-owned: 65% 5-year survival

1/114

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While the dream of launching a successful business burns bright, the harsh reality is that nearly half will shutter within five years, a sobering statistic that reveals a critical need for founders to understand and navigate the common pitfalls that lead to failure.

Key Takeaways

Approximately 20% of new businesses in the United States fail within their first year of operation
Around 30% of small businesses shutter their doors within the first two years
Nearly 50% of all new businesses fail within five years of launch
Restaurants have a 30% failure rate within the first year in the U.S.
Retail businesses fail at 25% in year one per BLS
Construction firms see 20.5% first-year failure
No cash flow is cited as the primary reason for 82% of small business failures
Running out of cash accounts for 29% of startup failures per CB Insights postmortem
No market need causes 42% of startup shutdowns
21.5% of new U.S. businesses fail in first year, 45% by year 5, 65% by year 10 per BLS longitudinal data
Only 55% survive past 5 years, 35% past 10, 25% past 15 years
Year 1 survival: 79.4%, Year 2: 69.3%, Year 3: 62.5% for employer firms
70% of failed businesses had founders under 30 years old
Businesses with experienced founders (10+ years) fail 30% less
Female-led startups fail at 1.5x rate of male-led due to funding gaps

Business failure rates start high and increase sharply over a new company's life.

Common Reasons for Failure

No cash flow is cited as the primary reason for 82% of small business failures
Running out of cash accounts for 29% of startup failures per CB Insights postmortem
No market need causes 42% of startup shutdowns
Poor team dynamics lead to 23% of failures
Get outcompeted by 19% of cases
Pricing/cost issues in 18% of failures
Poor product quality causes 17% shutdowns
Need/lack of business model 17%
Poor marketing reaches only 14% failure attribution
Ignore customers leads to 14% demise
Product mistimed for 13%
Lose focus causes 13% failures
Disharmony team/investors 13%
Pivot gone bad 10%
Ineffective operations 8%
Bad location 7% for brick-and-mortar
Overly optimistic projections 6%
Lack of funding 5% direct cause but amplifies others
Insufficient planning 4%
Legal/compliance issues 3%
Burnout/exhaustion 2%
Cybersecurity breaches contribute to 1-2% direct failures
Pandemic-related supply chain issues caused 15% more failures in 2020
50% of businesses fail within 5 years primarily due to inadequate management

Common Reasons for Failure Interpretation

The grim, often amusing, truth is that small businesses are a masterclass in self-sabotage, where a stunning 82% forget that blood needs blood money, while others expertly build dazzling products for no one, hire teams that would rather fight than work, and then watch it all crumble because, at its heart, 50% of them were just poorly run fantasies from the start.

Industry-Specific Failure Rates

Restaurants have a 30% failure rate within the first year in the U.S.
Retail businesses fail at 25% in year one per BLS
Construction firms see 20.5% first-year failure
Tech startups fail at 63% within first three years
Healthcare services have 15% first-year failure rate
Information sector (software) 28% failure in year one
Accommodation and food services 26.7% first-year fail
Manufacturing new firms 18.2% failure rate year one
Professional services 14.5% first-year failure
Arts/entertainment/recreation 29.4% fail in year one
Transportation/warehousing 22.1% first-year failure
Real estate 19.8% failure rate year one
Administrative services 24.6% first-year fail
E-commerce retail 35% failure within first year
Fintech startups 75% fail within three years
Biotech firms 90% failure rate over pipeline development
Fashion startups 80% fail due to inventory issues
SaaS companies 43% fail within first 18 months
Hardware tech 52% first-year failure rate
Clean energy startups 70% fail within five years
Gaming industry 95% indie game studios fail
Travel agencies 28% failure in year one post-COVID
Fitness gyms 34% first-year closure rate
Coffee shops 40% fail within first year

Industry-Specific Failure Rates Interpretation

While tech startups flaunt a three-year failure rate high enough to feel like a dare, and a coffee shop's first year is statistically more perilous than navigating a minefield in heels, the universal truth across all industries is that a new business is a high-stakes wager where the house—reality—almost always wins.

Influencing Factors

70% of failed businesses had founders under 30 years old
Businesses with experienced founders (10+ years) fail 30% less
Female-led startups fail at 1.5x rate of male-led due to funding gaps
Urban startups survive 20% better than rural due to market access
Recession years see 15% higher failure rates
VC-backed firms fail 75% but survivors grow faster
College-educated founders correlate with 25% lower failure
Inflation above 3% increases failure by 10%
Online-only businesses fail 10% less due to lower overhead
Pandemic boosted e-com survival by 15%
Debt-financed firms fail 2x more than bootstrapped
Serial entrepreneurs succeed 30% more on second venture
High-interest environments raise failure 12%
Diverse teams reduce failure risk by 35%
Remote work post-2020 cut failures by 8% for services

Influencing Factors Interpretation

While youth brings daring ideas, the old hand knows that true resilience is found in diverse teams, lean operations, and the hard-earned wisdom to not repeat the same expensive mistake twice.

Overall Failure Rates

Approximately 20% of new businesses in the United States fail within their first year of operation
Around 30% of small businesses shutter their doors within the first two years
Nearly 50% of all new businesses fail within five years of launch
65% of startups do not make it past their tenth year
In 2022, the overall first-year failure rate for U.S. businesses was 21.5%
29.6% of businesses fail in their second year according to Bureau of Labor Statistics data from 2021
The five-year failure rate for new U.S. firms averaged 48.4% between 2013-2019
Over 70% of small businesses fail due to premature scaling or other factors within a decade
Global startup failure rate stands at 90% within the first few years
In the EU, 20% of new enterprises fail in year one as per Eurostat 2022
U.S. business failure rate rose to 25% in first year during 2020 pandemic
Average lifespan of a startup is 5.4 years before failure
42% of businesses fail within three years per recent IRS data
First-year failure climbs to 22% for solopreneur ventures
55% cumulative failure by year five for tech startups specifically
Non-employer businesses have a 25.3% first-year failure rate
Employer firms see 18.7% failure in year one
Post-2021 recovery saw failure rates drop to 19.8% for new firms
Historical average U.S. failure rate is 19-22% annually for newborns
90% of Indonesian startups fail within first two years
UK new business failure rate is 60% within three years
Canada reports 22% first-year failure for SMEs
Australia sees 30% failure in year two for new ventures
India startup failure rate hits 90% per NASSCOM
Brazil new firms fail at 23% in first year
South Africa SME failure rate 70-80% within five years
China sees 80% startup failure annually
Japan new business survival past year one at 80% (20% fail)
Germany 15% first-year failure rate per Destatis
France new enterprises 18% failure in year one

Overall Failure Rates Interpretation

The statistics paint a grim but clear portrait: launching a business is less a sprint to success and more a grueling decade-long obstacle course where the hurdles get progressively higher, and the vast majority of runners don’t make it to the finish line.

Time-Based Survival Rates

21.5% of new U.S. businesses fail in first year, 45% by year 5, 65% by year 10 per BLS longitudinal data
Only 55% survive past 5 years, 35% past 10, 25% past 15 years
Year 1 survival: 79.4%, Year 2: 69.3%, Year 3: 62.5% for employer firms
Startups: 10% survive 5+ years, 40% fail immediately
Median lifespan before failure: 2.1 years for new firms
1-year survival rate dropped to 78% in 2020 from 80%
High-growth firms: 70% survive 5 years vs 50% average
Solopreneurs: 60% fail by year 3
Franchises survive 92% past year 1 vs 80% independents
Post-year 5, annual failure rate stabilizes at 6-7%
30% fail between years 2-5
Survival curve: 80% year1, 50% year5, 30% year10
Pandemic accelerated failures: 25% less 2-year survivors in 2021 cohort
Tech sector: 37% survive 5 years vs 50% overall
Retail: 34% 1-year survival
Only 10% of startups founded in 2013 still operating in 2023
Average survival time increased to 7.4 years pre-2000 from 5.7 post
Year-over-year survival declines 5-10% annually post-year1
Long-term (20+ years) survivors: under 10% of all startups
Immigrant-owned firms 70% survive 5 years vs 60% native
Minority-owned: 65% 5-year survival

Time-Based Survival Rates Interpretation

The entrepreneurial journey is a brutal marathon where most runners trip in the opening mile, yet those who make it past the first treacherous five years find the path ahead merely perilous instead of outright fatal.

Sources & References

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