It’s a statistic I’ve heard time and again, and one that is often brought up when I mention I work at a startup: 90% of new businesses fail within a year of operation. Mark Henricks, reporting for BNet, recently reported that the factoid is completely incorrect…in fact, no one quite knows where it comes from. Here are some better statistics that are actually true:
- The SBA (in addition to other reputable studies) reports that 70% of new firms with at least one employee survive for at least 2 years. About 50% go on for 5 years.
- Most new businesses that shut their doors, do so not because they are going broke. In fact, they are profitable but instead shut up shop for perhaps personal reasons, such as poor health.
The next step is to look at the statistics regarding the success of alternative options: a regular job. You may be surprised.
- According to the Bureau of Labor and Statistics, 31% of new jobs ended in less than a year. This number takes into account older, supposedly more stable workers.
- Of those new jobs, 65% ended in less than 5 years.
So much for traditional jobs being more “safe” than starting a business. I’m certainly not suggesting that everyone should go out and start their own company because it’s obviously a ton of work which requires passion, capital, and ability. However, I’m suggesting not to let random stats get you down…especially when they turn out to be a complete myth.