small businesses

By Marsha Kelly

Opening the doors of a new business can be a big challenge for an entrepreneur, but an even more significant hurdle is ensuring that you survive that first year in business.  There is good news on that front with new data from the Small Business Administration’s Office of Advocacy which found that 79.9% of establishments started in 2015 were still in business at the end of their first year, the highest share since 2006.  Better yet, 51% survived five years or longer in business with 33% of small businesses making it to their 10-year anniversary.

Small business startups play an essential role in our economy, however not every business makes it the first three years are critical to long-term success. Business survival rates differ by industry and can vary over a period.  According to the Bureau of Labor Statistics, the healthcare industry ranks among those with the highest survival rates over time, while construction ranks among the lowest.

Why is it so important to monitor the startup and closures of businesses?  Firstly, one of the key engines of economic growth in the U.S. is the jobs and wages generated by new businesses.  Small businesses makeup 99.9% of all firms and employ 58 million private sector employees (47.8%). In fact, they account for two-thirds of all net new jobs. The relationship between business startups and deaths can help us better forecast the direction of our economy and monitor growth as well as decline.

Secondly, small businesses continue to be hubs of innovation – improving services, creating new products, and developing new technologies.  Small businesses represent about 95.9% of employer firms in high-patenting manufacturing industries and 98.5% of firms in high-tech industries.  Due to their size, small companies can be nimble and execute ideas more rapidly than large firms, helping them drive innovation. A decline in startups or decrease in business survival rates can impede economic development.

With small business so vital to the advancement the U.S. economy, keeping a watchful eye on business survival rates is the bellwether we need to determine if we are fostering an economic and policy climate that allows small businesses to thrive.  

Marsha Kelly sold her first business for more than a million dollars. She has shared hard-won experiences as a successful serial entrepreneur on her Best4Businesses blog, where she also regularly posts business tips, ideas, and suggestions as well as product reviews for business readers. As a serial entrepreneur who has done “time” in corporate America, Marsha has learned what products and services really work well in business today. You can learn from her experiences to build your business.