One fifth of businesses in the United States fail in their first year. Only 33 percent of new establishments survive at least five years. Lack of market need leads the reported reasons for small business closures.
Key Takeaways
- 33% of new establishments survive to at least 5 years in the United States (worker-firm establishment survival)
- About 1 in 5 businesses fail in the first year in the United States
- 23% of small businesses fail due to lack of market need (survey-reported reason for failure)
- 10% of small businesses fail due to a lack of funding (survey-reported reason for failure)
- 15% of U.S. small businesses fail due to not planning well (survey-reported reason for failure)
- In 2023, U.S. Chapter 11 filings were 1,014 for healthcare industry (industry segment statistic)
- S&P Global Market Intelligence reported 2024 U.S. bankruptcies of 457 in Q1 2024 (quarterly update)
- S&P Global Market Intelligence reported 2024 U.S. bankruptcies of 1,977 for the full year 2023 (baseline annual figure in report)
- Federal Reserve data show small business credit card balances fell 6% year-over-year in Q1 2023 (credit utilization indicator)
- NFIB: 14% of small businesses reported labor costs as a business problem in 2023 (survey statistic)
- OECD reported that start-up rates decreased from 2008 to 2019 in member countries (panel statistic summary)
- CB Insights reported 18% of startups fail due to not having enough capital (failure reason share)
- KPMG reported 51% of deals failed post-merger due to integration challenges (relevant to new venture failure drivers)
- PitchBook reported median time to exit (M&A or IPO) for venture-backed startups was 6.5 years for 2019 cohorts (exit timing metric)
- Bureau of Labor Statistics: business sector labor productivity increased 2.4% in 2022 (macro productivity metric associated with business competitiveness)
Most new US businesses fail early due to market, funding, or planning gaps, and insolvency risk raises exit odds.
Related reading
01 · Category
Survival Rates2 stats
Interpretation
Survival Rates Interpretation
In the survival rates category, the data show that only 33% of U.S. new establishments make it to at least 5 years, and about 1 in 5 fail within their first year, underscoring how quickly new businesses face steep odds.
02 · Category
Failure Causes4 stats
01
23% of small businesses fail due to lack of market need (survey-reported reason for failure)[3]
02
10% of small businesses fail due to a lack of funding (survey-reported reason for failure)[4]
03
15% of U.S. small businesses fail due to not planning well (survey-reported reason for failure)[5]
04
A 1 percentage point increase in insolvency risk is associated with a higher probability of business exit in firm-level studies (study reports elasticity-style estimate)[6]
Interpretation
Failure Causes Interpretation
From the Failure Causes perspective, the data suggests that market need and planning gaps are among the biggest drivers, with 23% failing for lack of market need and 15% in the US failing due to not planning well, while lack of funding accounts for 10% and rising insolvency risk further increases the likelihood of business exit.
03 · Category
Financial Distress4 stats
01
In 2023, U.S. Chapter 11 filings were 1,014 for healthcare industry (industry segment statistic)[7]
02
S&P Global Market Intelligence reported 2024 U.S. bankruptcies of 457 in Q1 2024 (quarterly update)[8]
03
S&P Global Market Intelligence reported 2024 U.S. bankruptcies of 1,977 for the full year 2023 (baseline annual figure in report)[8]
04
Moody’s reported that 2023 U.S. speculative-grade default rate peaked at 5.8% (annual peak in report)[9]
Interpretation
Financial Distress Interpretation
Financial distress appears to be intensifying as U.S. bankruptcies climbed from 1,977 in full-year 2023 to 457 in just Q1 2024, while speculative-grade defaults also hit a 5.8% peak in 2023, underscoring rising stress in vulnerable businesses.
More related reading
04 · Category
Market & Macro4 stats
01
Federal Reserve data show small business credit card balances fell 6% year-over-year in Q1 2023 (credit utilization indicator)[10]
02
NFIB: 14% of small businesses reported labor costs as a business problem in 2023 (survey statistic)[11]
03
OECD reported that start-up rates decreased from 2008 to 2019 in member countries (panel statistic summary)[12]
04
OECD: 10% increase in product market regulation is associated with lower entrepreneurship (cross-country regression estimate)[12]
Interpretation
Market & Macro Interpretation
For the Market & Macro side of new business failure, weaker demand and a tougher operating environment show up clearly as small credit card balances fell 6% year over year in Q1 2023 and OECD evidence links higher product market regulation with lower entrepreneurship, while both startup rates declined from 2008 to 2019 and 14% of small businesses in 2023 cited labor costs as a key problem.
05 · Category
Predictive Metrics6 stats
01
CB Insights reported 18% of startups fail due to not having enough capital (failure reason share)[13]
02
KPMG reported 51% of deals failed post-merger due to integration challenges (relevant to new venture failure drivers)[14]
03
PitchBook reported median time to exit (M&A or IPO) for venture-backed startups was 6.5 years for 2019 cohorts (exit timing metric)[15]
04
Experian reported that 30% of small business failures in 2023 had prior late payments (late-payment history share)[16]
05
Moody’s Analytics model: firms with deteriorating liquidity metrics experience higher default probability within 12 months (12-month horizon statistic)[17]
06
U.S. Census Business Dynamics Statistics: 50% of employer firms exit within 5 years (firm dynamics survival statistic)[18]
Interpretation
Predictive Metrics Interpretation
Across predictive metrics, the data point to early warning signals rather than surprises, with 50% of employer firms exiting within 5 years and 18% of startups failing for lack of capital, while 30% of 2023 small business failures involved prior late payments.
06 · Category
Industry Trends3 stats
01
Bureau of Labor Statistics: business sector labor productivity increased 2.4% in 2022 (macro productivity metric associated with business competitiveness)[1]
02
US Census Bureau: business exit rate was 7.1% in 2022 (business exit rate metric)[18]
03
BLS Job Openings and Labor Turnover Survey (JOLTS): total separations were 5.5 million per month in 2023 (labor churn indicator)[1]
Interpretation
Industry Trends Interpretation
From an Industry Trends perspective, even as labor productivity rose 2.4% in 2022, the business exit rate still reached 7.1% and total separations averaged 5.5 million per month in 2023, signaling that gains in efficiency have not translated into fewer failures or churn.
report visual · Comparison
New business survival and early failure: key snapshots
Early failure is common, while long-run survival is much lower—survey reasons also highlight recurring drivers like market demand and funding.
33% of new establishments survive to at least 5 years in the United States (worker-firm establishment survival)33%
23% of small businesses fail due to lack of market need (survey-reported reason for failure)
23%
10% of small businesses fail due to a lack of funding (survey-reported reason for failure)
10%
About 1 in 5 businesses fail in the first year in the United States
5
source-verifiedirs.gov · bls.gov · fundingcircle.com · marketscreener.com
Reference
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APA
Marcus Afolabi. (2026, February 13). New Business Failure Statistics. Gitnux. https://gitnux.org/new-business-failure-statistics
MLA
Marcus Afolabi. "New Business Failure Statistics." Gitnux, 13 Feb 2026, https://gitnux.org/new-business-failure-statistics.
Chicago
Marcus Afolabi. 2026. "New Business Failure Statistics." Gitnux. https://gitnux.org/new-business-failure-statistics.
Sources & references
18 sources cited across this report