How often do small businesses fail?

Every small business owner starts out feeling positive and chasing what many consider the American Dream. They read stories about other companies starting in a garage and growing into an international powerhouse, and they can’t help but hope for that type of success.

Unfortunately, the real world can be more brutal for small businesses, as many of them fail — and it does not always take very long.

For instance, did you know that a full 20 percent of small businesses close their doors within the first 12 months? It often does not even take a year to go from a grand opening to shutting down operations entirely.

Even businesses that make it into their second year are not necessarily safe at that point. In reality, about 30 percent of them fail that year. It’s worse when you get out to five years, when 50 percent of small businesses close down.

Those who can make it through the critical fifth year have a little better chance of success. About 30 percent of all small business owners make it through a decade.

You need to face this reality that if you’re a small business owner. It is fine to feel optimistic and hopeful, but you also need to plan for the future.

It may be worth looking into your bankruptcy options. Even if business bankruptcy is not in the cards for your company, having a business go under when you have invested so much time, money and energy in it can push you toward personal bankruptcy. Make sure you understand all of the legal options that exist.

Source: Fundera, “What Percentage of Small Businesses Fail? (And Other Need-to-Know Stats),” Georgia McIntyre, accessed May 24, 2018