About 1 in 5 new U.S. businesses close before their first birthday, and roughly half are gone within five years (BLS Business Employment Dynamics, data through March 2025). But that "half fail" headline hides the real story: the odds swing hard by industry. A new business in Information survives five years only 45.7% of the time; in Agriculture, it's 61.8% (BLS BED). Same economy, a 16-point gap in whether you're still open. Here are the real survival-and-failure benchmarks, by industry and by year.
"Half of businesses fail in five years" is the most repeated statistic in small business — and the least useful. It gets quoted without a source, without a year, and without the one thing a founder actually needs: which half, and why. The number that matters isn't the average. It's the average for a business like yours, held against the reasons businesses in your lane tend to close.
The gold-standard source is the Bureau of Labor Statistics Business Employment Dynamics program, which has tracked every private-sector establishment from its opening year since 1994 — not survey guesses, but actual payroll-reporting data. Everything below is anchored there, with the "why" layered on top from the post-mortem research. If you're earlier in the journey, pair this with our breakdown of how to start a business in the USA; the survival clock starts the day you open.
The Headline Benchmarks (All Industries, by Year)
Across all private-sector establishments, the survival curve is remarkably stable across decades of cohorts (BLS BED, national):
- Year 1: ~80% survive — roughly 20% close in the first year (BLS BED).
- Year 2: ~69% survive — the drop accelerates after the honeymoon (BLS BED).
- Year 5: ~50% survive — the famous "half" is real at this mark (BLS BED).
- Year 10: ~34% survive — about two-thirds are gone by the ten-year line (BLS BED, March 2025).
Read that curve carefully: the steepest losses happen early. If you clear year three, your odds improve sharply — survivors at that point fail far more slowly. The first 1,000 days are the gauntlet, which is exactly why your first 1,000 customers matter more than your next 100,000: they're what carry you across it.
Five-Year Survival Rate by Industry
This is where the average breaks apart. BLS BED tracks survival across 19 industry sectors; the spread between the safest and the riskiest is roughly 16 percentage points. Approximate five-year survival rates by sector (BLS BED, establishments):
| Industry sector | ~5-yr survival | Risk read |
|---|---|---|
| Agriculture, forestry, fishing | ~61.8% | Safest |
| Mining & extraction | ~51% | Above average |
| Health care & social assistance | ~55% | Above average |
| Manufacturing | ~51% | Around average |
| Professional & business services | ~50% | Around average |
| Retail trade | ~48% | Below average |
| Construction | ~48% | Below average |
| Transportation & warehousing | ~47% | Below average |
| Accommodation & food services | ~47% | Below average |
| Information (tech, media, telecom) | ~45.7% | Riskiest |
Two things surprise people here. First, the Information sector is the riskiest at ~45.7% five-year survival (BLS BED) — the exact industry pop culture tells you is the gold rush. Software, media, and telecom startups fail more than any other category, because the winner-take-most dynamics, fast obsolescence, and capital intensity are brutal. Second, restaurants are not uniquely doomed: accommodation and food services sits around ~47% (BLS BED), below average but a long way from the "90% fail" myth that gets repeated endlessly. The "9 out of 10 restaurants fail" claim has no basis in the BLS data.
Insight
A "risky" industry survival rate is not your personal destiny — it's the base rate for everyone who entered, including the unprepared, the undercapitalized, and the untested. Your job is to be the business that beats its own base rate. The benchmark tells you the odds of the table; it doesn't deal your hand.
Why Businesses Actually Close (the Causes Behind the Rates)
Survival rates tell you how many. The post-mortems tell you why. When CB Insights analyzed startup failure post-mortems, the top reasons were strikingly consistent (CB Insights, "Why Startups Fail"):
- No market need — ~42%. The single most common killer: building something nobody urgently wants. This is why disciplined market research and reading between the lines of what customers actually do matter more than any growth hack.
- Ran out of cash — ~38%. Usually a symptom, not a root cause, but it's what administers the final blow. JPMorgan Chase found the median small business holds just 27 cash buffer days — less than a month of runway if income stopped (JPMorgan Chase Institute). We unpack that in the one metric that predicts 5-year survival.
- Got outcompeted, pricing/cost problems, and wrong team round out the top causes (CB Insights). Pricing shows up more than founders expect — being the cheapest option is often the most expensive decision you can make.
Notice what connects them: almost every cause is a demand or cash timing problem, not a product-quality problem. Businesses rarely die because the work was bad. They die because not enough people wanted it, or the money ran out before enough people found it. That reframing changes what you measure day to day — and it's why knowing when your model actually breaks even is a survival metric, not an accounting one.
Survival is mostly about one thing: how long you can keep the lights on when income is thin.
How the Odds Change With Time, Money, and Model
The by-industry rate is a starting point, not a sentence. Several factors move your personal odds well off the base rate:
- Employer vs. non-employer. The BLS BED figures track establishments with payroll. Solo and micro-businesses with low fixed costs can outlast the curve simply because they have less to lose each month — a core reason the $0-overhead startup is so resilient.
- Capital at launch. Underfunding is a top correlate of early death. Knowing your real number first — see what it actually costs to start — buys you runway, and runway buys you survival.
- Focus. Diffuse businesses chasing everyone tend to fade; the data consistently favors the specialist. This is the quiet logic behind doing one thing and cutting your niche in half.
- Margin. A business at a 10% margin has almost no shock absorber; one at 30% can weather a bad quarter. Benchmark yours against realistic margins by industry and find the slack you may already have with the margin you can't yet see.
There's also a survivorship caveat worth stating plainly: these rates count businesses that closed, and a closure isn't always a failure. Owners retire, sell, merge, or voluntarily wind down a fine business to do something else. BLS tracks whether an establishment keeps reporting employment — not whether its owner considered it a success. The real failure rate (money lost, debts unpaid) is somewhat lower than the raw closure rate implies.
What This Means for You
Benchmarks are only useful if they change a decision. Here's how to turn these numbers into moves:
- Find your lane's base rate, then plan to beat it. If you're in Information (~45.7%) or food service (~47%), you're entering a below-average table — so overcapitalize, validate demand harder, and keep fixed costs lean. If you're in a safer lane (~55-62%), don't get complacent; base rates don't pay your bills.
- Treat the first three years as the gauntlet. The curve is steepest early. Protect cash ferociously, delay every fixed cost you can, and measure your cash trajectory — not just the balance, but whether it's accelerating or bleeding.
- Attack the real killers first. Since ~42% die from no market need and ~38% from running out of cash (CB Insights), spend your early energy on demand validation and runway, not logo and branding. Keep a written plan you revisit — a business plan that actually works is a survival document, not a formality.
- Know the number that forecasts your odds. Watch your cash buffer days. Under one month is the danger zone the median business lives in; pushing it past 60-90 days is the single highest-leverage survival move you can make.
- Build the thing people come back to. Retention compounds survival — repeat customers cost less and smooth cash. The science of retention and the trust economy are where long-term survivors are made.
The data's real lesson isn't fear — it's agency. The businesses that survive five years rarely had better ideas; they had better timing, leaner costs, clearer demand, and more cash on hand when it got hard. Every one of those is a choice, not a lottery. When you're staring at a hard call, it helps to borrow judgment from people who navigated worse — talk to the business legends who built things that lasted, and sharpen your own calls with better decision-making frameworks and an eye for the biases that quietly sink businesses.
Half of businesses close within five years. The other half decided, over and over, to be in the half that didn't. The benchmark sets the odds. You play the hand.
The survival rates tell you the odds; Horowitz tells you what it actually feels like to keep a business alive when cash is thin and every call is hard — the honest manual for the half that doesn't close.
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