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What Percentage of Small Businesses Fail Within the First Year?

By: Jack Nicholaisen author image
Business Initiative

Starting a small business is a dream for many people, but the harsh reality is that it’s not an easy feat.

According to the Small Business Administration (SBA), about 20% of small businesses fail within the first year. That number increases to 50% by the fifth year, and 70% by the tenth year.

These statistics can be discouraging, but understanding why businesses fail can help entrepreneurs take preventative measures.

The 6 Most Common Reasons Small Business Fail

1. Lack of planning:

Many entrepreneurs jump into starting a business without a solid plan. This can lead to overspending, poor financial management, and lack of direction.

To prevent this, entrepreneurs should create a detailed business plan that outlines their goals, finances, and marketing strategies.

2. Insufficient funding:

Starting a business requires a significant amount of capital.

Without enough funds, entrepreneurs may struggle to cover expenses and make necessary investments.

To avoid this, entrepreneurs should create a budget and secure enough funding before starting their business.

3. Poor management strategy:

A lack of experience or knowledge in managing a business can lead to poor decision-making, disorganization, and miscommunication.

To prevent this, entrepreneurs should invest in their own education or hire experienced managers.

4. Competition:

Entrepreneurs may underestimate the level of competition in their industry.

To avoid this, entrepreneurs should research their industry thoroughly, identify their unique selling points, and create a marketing strategy that sets them apart.

5. No Demand:

Sometimes entrepreneurs create a product or service that has no market need.

This can lead to low sales and eventually, business failure.

To prevent this, entrepreneurs should conduct market research to ensure there is a demand for their product or service.

Ignoring legal requirements can lead to costly fines and legal battles.

To avoid this, entrepreneurs should research and comply with all legal requirements for their industry.

➤ LEARN: Avoid these common pitfalls - and MORE!

To increase the likelihood of small business success, entrepreneurs should take the following measures:

1. Create a solid plan that outlines your business goals, finances, and marketing strategies.

2. Secure enough funding before starting the business.

3. Invest in your own education or hire experienced managers.

4. Conduct thorough market research to ensure there is a demand for your product or service.

5. Comply with all legal requirements and standards of your industry.

Are you ready to finally start your own small business?

➤ Need personalized assistance? Book a FREE Consultation Today!

Don’t let the statistics scare you away.

With a solid plan, thorough research, and the right support, you can significantly increase your chances of success.

Take the initiative and join the ranks of successful entrepreneurs who have turned their dreams into reality.


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About the Author

jack nicholaisen
Jack Nicholaisen

Jack Nicholaisen is the founder of After acheiving the rank of Eagle Scout and studying Civil Engineering at Milwaukee School of Engineering (MSOE), he has spent the last 4 years disecting the mess of informaiton online about LLCs in order to help aspiring entrepreneurs and established business owners better understand everything there is to know about starting, running, and growing Limited Liability Companies and other business entities.