How many small businesses fail: survival rates by year, industry and state, and how many open and close

This page is for founders checking their odds, analysts who need a sourced failure rate, and B2B sellers whose customers are small businesses. It gives the current federal survival rates by age, cohort, industry and state, the yearly openings and closures, and what the churn means for a prospect list.

What percentage of small businesses fail

BLS follows every private-sector establishment that opens with employees covered by state unemployment insurance and counts how many still have employees each March. These are the latest figures, released with data through March 2026:

Survival rates from BLS Business Employment Dynamics, table 7 (total private). The averages are the SBA Office of Advocacy's, from the same BLS data, published February 2026.

The odds improve with age. The SBA's analysis of the same data found that 69.5% of establishments that reach five years reach ten, and 76.1% of those that reach ten reach fifteen. Of the 569,387 establishments that opened in the year to March 1994, 12.0% were still open 32 years later.

These are establishments, not companies, and nearly all are small: those opened in the year to March 2025 averaged 3.6 employees at birth. Businesses with no employees aren't in the data.

Survival rates by year opened

The rule of thumb is stable because the rates are. These are BLS survival rates for selected cohorts:

Businesses opened in the 2021 to 2022 boom have done slightly worse: the 2021 cohort's five-year survival (47.2%) is the lowest since 2007's (46.4%), and the 2022 cohort had the weakest first year (76.3%) since 2008's. The boom was large: about a million establishments a year opened in 2022 to 2025, against 650,000 to 770,000 a year in 2014 to 2019.

Failure rates by industry

Cohorts are establishments opened in the year to March of the year shown, measured in March 2026. BLS publishes a table for each sector.

Restaurants are often said to fail fastest. In the BLS data, accommodation and food services had the best first-year survival of these 12 sectors and beat the average at five and ten years. Information, professional services and administrative services did worst.

Failure rates by state

BLS publishes the same table for every state and Puerto Rico on its establishment age and survival page.

How many businesses close each year

The BLS figures are our sums of four seasonally adjusted quarters. BLS counts a closing as a death only after a location has had no employees for four consecutive quarters, so 2025 deaths aren't complete yet.

The counts differ because BLS counts locations quarter by quarter, while the Census Bureau's Business Dynamics Statistics (BDS) compares March to March, so a business that opens and closes within the year never appears. A BDS firm death means every location of a company closed.

Small firms account for nearly all closures. Of the 523,958 firm deaths in 2023, 469,672 (89.6%) were firms with one to four employees, and only about 600 had 100 or more employees. Young firms account for half: 258,117 (49.3%) were firms one to five years old. The 2023 total is the highest in the BDS series, which starts in 1978, ahead of 2009 (511,115).

Bankruptcy is a small part of the story: 26,941 business filings a year against more than a million closures. Most businesses that close simply stop trading or are wound up.

How many new businesses start each year

Applications are running higher in 2026: 4,927,840 from January to September, 15.3% more than the same months of 2025. Florida (647,734), California (553,931), Texas (544,146) and New York (301,047) had the most applications in 2025.

Most applications never hire: of the 5,390,816 filed in 2021, 403,072 (7.5%) became employer businesses within eight quarters.

What counts as failure

The federal data count closures, not why they happen, so an owner who retires from a profitable business counts the same as one who runs out of cash. A sale isn't a closure: BLS tracks each establishment through changes of name and owner. And establishment counts can include new branches of existing companies; for new companies only, use the BDS firm counts.

What the churn means for a prospect list

If you sell to small businesses, closures are a data problem. BDS counted 9.4% of employer establishments exiting in 2023, so nearly one in ten records on a list of employers goes dead each year, and more among the youngest.

1. Date your list. Record when each account was last verified. A list bought two years ago may have lost one record in six to closures alone.
2. Measure your own decay. Take 200 random accounts last verified a year ago and check each against the state business register, its website and its phone line. The share that fails all three is your annual closure rate.
3. Weight by age. A business in its first two years is three to four times as likely to close in a given year as one more than ten years old. If your contract is annual and prepaid, the risk is yours only at renewal; if you extend credit or bill in arrears, check age first.
4. Treat new businesses as a segment. A business in its first year buys banking, insurance, payroll and software at once. State registers publish new filings, and the Census application counts show where formation is rising.

Worked example: pricing a first-year customer

Illustrative example. The company and its prices are invented; the survival rates are BLS figures for all private industries through March 2026.

Northfield Payroll (northfield.example) sells payroll software to new employers at an illustrative $1,200 a year and pays $1,500 to win each customer. It wants to know whether new businesses are worth the acquisition cost.

1. Apply the survival curve. Of 100 customers signed in their first year of trading, about 79 are still trading a year later, 67 after two years and 58 after three, if Northfield's customers follow the national rates.
2. Count the revenue. Each survivor renews once a year, so over the first four years each customer signed pays for about 3.0 years (1 + 0.79 + 0.67 + 0.58), or about $3,640.
3. Compare. At $1,500 to acquire, Northfield recovers its cost early in the second year even after closures. A business more than ten years old survives 95% to 96% of years in the BLS data, so it pays for about 3.7 years over the same period and is worth about a fifth more to win.
4. Find them early. A new employer has to choose a payroll provider before its first pay run. Finding the owner of each newly registered company is the slow part; Bebop finds the contacts at matching companies and researches each one in the list.

Next step: see how many businesses there are in the US for the size split behind these rates, then plan the approach with our guide to selling to small businesses.