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Fact Or Fiction: 9 in 10 New Business Will Close In The First Year?
There is a myth from the 1990’s that stated 9 out of 10 businesses close in their first year. The US Small Business Administration still gets calls every year from people looking for the unknown source of the 9 out of 10 sound bite. The myth persists partly due to a widely held belief that business closure is always considered a negative event.Dun & Bradstreet (D & B) data from the same period shows a much different picture:
- 76 percent of new businesses were open after two years.
- 47 percent after four years.
- 38 percent after six years.
Photo by Jasoon.
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Greg Balanko-Dickson on December 22nd, 2005 1:39 pm
Hi Dane: Thanks for posting this on your blog. That totally bogus statistic is one of my pet peeves about how business websites use it to scare people to buy their products. The failure rate according to D&B is still high – but not nearly as severe as that 9 out of 10 falsehood.
Acland on December 24th, 2005 1:18 pm
The person who really made this statistic popular was Michael Gerber in his book ‘The Emyth’.
He used the statistic to support his theory that the reason most businesses fail is because knowing how to do the work is very different to knowing how to run a business that does the work.
Can on December 26th, 2005 11:16 pm
Maybe (possibly) I’m wrong but I think that saying was specifically for HiTech companies.
Still, I think it’s impossible to make such a general statement. The ratio would change depending on country and time.
Business Opportunities Weblog Brasil | Fato ou Ficção: 9 Entre 10 Novos Negócios Irão Fechar no Primeiro Ano? on December 28th, 2005 4:13 am
[...] Dane – Business Opportunities Weblog – em Fact or Fiction: 9 in 10 New Business Will Close in The First Year [...]
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