(1) Start-up Failure Rates Vary — Choosing the Right Industry Matters
By Scott Shane, Startup Trends, May 28, 2008
Below is Figure 7.1 (p.113) from Scott Shane’s book Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.
The data show that the four-year survival rate in the information sector is only 38 percent, but is 55 percent in the education and health services sector. That is, the average start-up in the education and health sector is 50 percent more likely than the average start-up in the information sector to live four years. That’s a huge difference.
(2) Start-up Odds of Survival Depend on Industry
By ,Startup Trends, September 27, 2010
New business survival rates differ pretty substantially across sectors of the economy.
The following is the data on the five year survival curves for the 2000 cohort (the most recent available) of start-up establishments using data from the Longitudinal Business Database of the U.S. Census.
Anew business’s odds of survival are much higher in some industry sectors than in others.
The five year survival rate of businesses:
Finance, insurance and real estate sector – 57.4 percent
Transportation, communication, and utilities – 44.4 percent
That is a 13.2 percentage points of difference.
(3) Business Failure Rates Highest in First Two Years
By Anita Campbell , July 7, 2005, Economic Trends
New research from the U.S. Bureau of Labor Statistics suggests that most failures of American startups will occur in the first two years of their existence. After that, the rate of business failure slows.
The data come from an article by Amy Knaup in Monthly Labor Review and look at the 1998 cohort of new businesses.
From the article that is referred in above studies….
Survival and longevity in the Business Employment Dynamics data
Source:Amy E. Knaup 2005. Survival and longevity in business employment dynamics data. Monthly Labor Review, May 2005: 50-56.
The report profiled business births, survival rates, and deaths during the early years of the decade, when the boom was just starting. This article follows the businesses reported on into the recession of 2001 to see how they fared once the economy took a downturn.
The data show that, across sectors, 66 percent of new establishments were still in existence 2 years after their birth, and 44 percent were still in existence 4 years after. (See chart 1.)
These survival rates do not vary much by industry. (See chart 2.)
Information industry had the lowest 4-year survival rates, 38 percent. Education and health services had the highest 4-year survival rates, 55 percent. Leisure and hospitality sector’s 4-year survival rates of 44 percent are only slightly below average, despite including restaurants.
That is, the sector with the highest survival rates is education and health services. The sector with the lowest survival rates is the information industry.