The reality of small business survival paints a stark picture. About 18% of small businesses don't survive their first year. Half of them close within five years, and nearly 65% shut down by year ten. These odds might seem tough, but small businesses remain the heart of the American economy. They make up 99.9% of all U.S. companies.
The numbers tell an amazing story about small businesses in the United States. They employ almost half (45.9%) of American workers – roughly 59 million people. Small businesses also make up 43.5% of the nation's GDP.
The failure rate of new businesses is still a big concern, with some reports showing that up to 90% might not make it. Money problems affect about 66% of small businesses, which limits how much they can grow.
This piece will show you the real success rates of small businesses in 2025. You'll learn about the current business world across the country and the hidden factors that decide if a business succeeds or fails. We'll also help you find the industries with the best odds of success and the funding approaches that lead to lasting growth.
What is the real success rate of small businesses in 2025?
Small business success rates in 2025 paint a different picture than what most entrepreneurs might expect. The latest data shows 21.5% of businesses don't make it through their first year. This means 80% of small businesses successfully guide themselves through their first 12 months—much better odds than the popular belief that most fail right away.
1. First-year survival rate
Small businesses in 2025 show a survival rate of 78.5% in their first year, though this number shifts based on industry type. Healthcare and social assistance businesses lead the pack with 85% making it through year one. IT businesses face the toughest challenge with only 74.9% surviving their first year.
Geographic patterns tell an interesting story too. The Pacific division has recorded the highest first-year survival rate at 84.6%. Minnesota businesses face a tougher road with a 27.7% failure rate in their first year.
2. Five-year and ten-year failure rates
The numbers get tougher as time goes on. About 48.4% of businesses close by their fifth year, leaving just over half still running. This 51.6% survival rate keeps dropping as businesses age.
A decade brings even harder truths—about 65.1% of businesses don't make it. Only a third of ventures keep their doors open after ten years. The fifteen-year mark sees just 25.6% still operating, which means only one in four businesses reaches this milestone.
3. Industry-specific success rates
Different industries show wildly different success rates. Agriculture, forestry, fishing, and hunting businesses lead with 66.2% surviving five years and 50.5% making it to ten years—better than any other sector.
Mining, quarrying, and oil and gas extraction businesses have it rough. Only 40.2% last five years and 24.5% reach the ten-year mark. The IT sector struggles too, with just 44.3% making it to five years.
Retail does better than you might think. 84.2% survive their first year and 58.3% make it to five years. Restaurants also beat expectations—only 20.1% close in their first year. This breaks the myth that 90% shut down within 12 months.
4. How these numbers compare to previous years
The stats show interesting shifts over time. First-year failure rates have bounced around—from 20.8% in 2021-2022 to 23.2% in 2022-2023, settling at 21.5% now.
Economic downturns leave their mark on survival rates. Businesses that started during recession years like 2001 and 2008 had a harder time staying afloat. The South Atlantic division saw the lowest one-year survival rate ever at 71.4% for businesses born in 2008.
Starting a business remains challenging, but the odds look better than most people think. First-time owners have an 18% chance of success. Those who've already run a successful startup see their chances jump to 30% with new ventures—proof that experience makes a big difference.
How many small businesses are in the United States today?
The United States has a remarkable 36.2 million small businesses as of 2025, which make up 99.9% of all businesses in the country. This massive network serves as the foundation of the American economy.
Small businesses employ 62.3 million people and make up 45.9% of the total U.S. workforce. These numbers show how small businesses shape the national economic world, even with the failure rates we discussed earlier.
1. Total number of small businesses in 2025
The figure of 36.2 million small businesses shows substantial growth from previous years. About 82% run without employees, which means roughly 28.4 million are solo ventures with just one person at the helm. The other businesses provide jobs to tens of millions of Americans in a variety of sectors and regions.
From March 2023 to March 2024, entrepreneurs created 1.1 million new small businesses and added 1.2 million jobs to the economy. These new ventures were behind 88.9% of all new jobs during this time, which shows their outsized effect on job creation.
2. Growth trends in the last decade
Small business growth has steadily risen in the last decade. The number of U.S. small businesses has grown by about 9.7% since 2019. Here's how the numbers have grown year by year:
- 2019: 30.7 million
- 2020: 31.7 million
- 2021: 32.5 million
- 2022: 33.2 million
- 2023: 33.2 million
- 2024: 34.7 million
- 2025: 36.2 million
The surge in new business applications since 2020 stands out, with entrepreneurs filing more than 19 million new applications since that year's end. Americans now submit around 440,000 new business applications each month, 46% more than the 2017-2020 average.
3. State-by-state breakdown
California tops the list with about 4.1 million small businesses. Texas follows with 3.2 million, and Florida comes in third with 3.1 million. New York holds fourth place with 2.2 million small enterprises, while Illinois completes the top five with 1.3 million.
Wyoming has the smallest number at just over 72,000. Alaska (74,587), North Dakota (75,265), and Vermont (78,883) follow close behind. These numbers largely associate with state population sizes, though entrepreneurial activity varies by region.
4. What qualifies as a small business
The U.S. Small Business Administration (SBA) typically defines small businesses as independent firms with fewer than 500 employees. All the same, this definition changes by industry, as the SBA uses different size standards based on employee count or yearly revenue.
To cite an instance, roofing contractors qualify as small businesses when their yearly revenue is $16.5 million or less. Asphalt shingle manufacturers can have up to 750 employees and still be considered small businesses. Revenue limits range from $1 million to over $40 million depending on the industry.
Beyond the numbers, qualifying small businesses must be for-profit enterprises of any legal structure. They need to operate independently, avoid national industry dominance, and maintain physical locations in the United States or its territories. So these varied definitions help cover many types of enterprises in the American economic world.
Top reasons small businesses fail
Small business owners need to understand why businesses fail to beat the odds. The numbers show that cash flow problems cause 82% of business closures due to poor management or understanding. Let's get into the top five reasons businesses close before reaching their full potential.
1. Lack of capital and cash flow
Cash flow problems top the list of reasons why small businesses collapse. The U.S. Chamber of Commerce confirms that poor cash flow kills businesses—even those with strong incoming revenue. These problems show up in several ways:
- Not enough starting capital
- Too much spending in early growth phases
- No preparation for cash needs during rapid growth
- Poor tracking of expenses
The numbers paint a clear picture: 38% of startups fail because they run out of money. Growth can be risky too. One business owner almost went bankrupt after doubling sales. They had to build products two months ahead while waiting six months to get paid.
2. Poor market fit or demand
About 42% of startups fail because their products don't match what the market wants. You can't save a business with marketing if there's no real demand. Here's what poor market fit looks like:
- High marketing costs but few new customers
- Bad customer reviews that suggest dissatisfaction
- Customers who don't stick around
A business expert puts it this way: "If you take the product away from the customer, they should scream". Without this kind of customer loyalty, businesses can't keep up with their expenses.
3. Weak business planning
Many small businesses run without a detailed business plan or don't update it as things change. The U.S. Chamber of Commerce reports that 35% of small businesses fail because no one wants their product or service—often because they didn't research the market before launch.
A solid business plan should have:
- Clear company description and executive summary
- Detailed organization and management structure
- Marketing and sales strategies
- Realistic financial projections
4. Inadequate management
Small business owners often lack key management skills while trying to do everything themselves. Think of a restaurant owner who makes great food but struggles with finances. This skill gap creates inefficient processes that hold back growth.
The numbers tell the story: first-time business owners have an 18% success rate. Those with previous successful startup experience see a 30% success rate in new ventures. Experience makes a big difference in survival rates.
5. Marketing and visibility issues
Marketing problems cause 22% of business failures. Small businesses face these common marketing challenges:
- Small budgets competing against big company spending
- No expertise in digital marketing
- Hard time measuring if marketing works
- Not enough time for consistent marketing
The stats back this up: 73% of small business owners don't trust their current marketing strategy to help reach their goals. What's more, 56% spend just an hour or less each day on marketing.
What industries are most and least likely to succeed?
Small businesses have wildly different chances of success based on their industry. Some sectors are twice as likely to survive as others. Agriculture, forestry, fishing, and hunting businesses lead the pack with an impressive 50.5% ten-year survival rate. Mining, oil and gas extraction businesses are nowhere near as successful, with only 24.5% making it to the decade mark.
1. High-survival industries (e.g., healthcare)
Agriculture shows the strongest staying power among all industries. Utilities come in strong with a 45.7% ten-year survival rate, and manufacturing follows at 43.6%. Healthcare and social assistance businesses thrive even more, with 85% surviving their first year. This makes healthcare the industry where small businesses succeed most often.
Real estate rental businesses do well too, with an 83.9% first-year survival rate. These companies typically see profit margins around 12%, which helps them stay financially stable over time. Self-storage facilities are particularly successful – studies show they have up to 95% five-year survival rates.
2. High-failure industries (e.g., tech startups)
The information industry faces tough challenges. It has a 25.8% first-year failure rate and only 29.1% of businesses make it to ten years. This sector has publishing, motion picture, sound recording, broadcasting, telecommunications, and data processing businesses.
Tech startups paint a concerning picture with a 63% five-year failure rate, yet they create the most unicorns. Blockchain and cryptocurrency ventures face even tougher odds with a staggering 95% failure rate and short lifespans.
Transportation and warehousing businesses struggle early with a 24.8% first-year failure rate. Construction follows close behind at 24%. Mining businesses don't fare well long-term – 76.4% don't make it past ten years.
3. Why some industries perform better than others
Several factors determine how well an industry performs. People just need food, power, and manufactured goods consistently. Industries that are harder to enter tend to survive longer because they face less competition.
Profit margins tell an interesting story. Healthcare facilities run on thin margins, but high demand keeps them going. First-time founders have an 18% success rate, while experienced entrepreneurs with past successes see their chances rise to 30%. This shows how experience substantially improves success rates in any discipline.
Economic conditions affect each industry differently. Agriculture's stability comes in part from 97% of farms being family-owned. These farms need less capital investment than oil and gas operations. Regulatory environments play their part too – healthcare businesses benefit from a projected 21% industry growth through 2024, which helps drive their success.
What most owners overlook about funding and growth
Funding choices can make or break a small business. Many entrepreneurs don't pay attention to crucial financing aspects that affect their chances of survival. Most people think differently, but 80% of employer businesses use their personal savings as startup capital. This makes funding decisions crucial to staying in business.
1. Average startup costs in 2025
First-year businesses spend about $40,000 on average. The costs change a lot based on the industry type. Restaurant owners need around $375,000 to open their doors. Arts businesses can start with as little as $1,500.
Retail shops need about $38,754, and construction companies require $37,315. Staff costs add up quickly – each employee costs between $92,000-$97,000 yearly when you add everything up.
2. Self-funding vs. external funding
Business owners who bootstrap keep full control of their vision. Getting outside money means giving up some ownership. Venture capitalists offer big money but want a piece of the company. Angel investors are more flexible but still need equity.
Bank loans let you keep ownership but need collateral and interest payments. New businesses find it hard to get approved. The good news? About 78% of small businesses feel confident about getting money when they need it.
3. SBA loan approval rates
SBA loans help businesses when credit gets tight. By late 2023, about 51% of applications got approved, down from 55% in December 2019. The average SBA microloan in 2025 is $16,208. Businesses under two years old get 27% of these microloans. In 2025, about 15% of 7(a) loans went to businesses less than two years old.
4. How funding impacts long-term survival
The right funding helps businesses survive better. Young companies that got early Paycheck Protection Program loans stayed open 46% more often than those without. Companies with COVID Economic Injury Disaster Loans had 11% fewer closures than similar businesses. About 38% of small businesses fail because they run out of money or can't get more capital. This shows why proper funding matters so much.
5. Small businesses growth trends
Money access drives growth for 68% of small business owners. About 46% of owners think they could grow revenue by 30-100% with better financing. The Small Business Credit Survey looks at revenue growth, employment, profits, money problems, and financing approvals. This helps us learn about how money access shapes business growth in different sectors.
Conclusion
Small businesses succeed more often than most entrepreneurs think. Data shows that 80% of them survive their first year. This number contradicts the common belief that most fail right away. All the same, staying in business gets harder over time. Only a third make it past the 10-year mark.
The numbers tell an impressive story. Small businesses make up 99.9% of all U.S. businesses – that's 36.2 million companies. They employ more than 62 million people and keep growing each year. California, Texas, and Florida lead the pack in small business numbers. Entrepreneurs thrive in every state.
Poor cash management causes 82% of business closures. This is a big deal as it means that cash flow problems are the biggest threat to survival. Market mismatches, poor planning, weak management, and bad marketing also lead to failures.
Your choice of industry can make or break your success. Agriculture, healthcare, and utilities businesses show the best survival rates over ten years. Tech companies, transportation, and mining ventures face tougher odds. Some sectors see failure rates of 75% within a decade.
Smart funding choices help businesses last longer. Most owners use their savings, but external financing often leads to better survival rates. A typical startup needs about $40,000 for its first year. This amount varies by industry.
Small businesses remain the foundation of America's economy despite these hurdles. First-time business owners have an 18% chance of success. Those with past wins do better, with a 30% success rate. Experience clearly improves the odds. New entrepreneurs should focus on industry success rates, funding needs, and common mistakes to avoid.
These stats won't guarantee success, but they'll help you make better choices. Starting a business is tough but rewarding if you prepare well, pick the right industry, and handle your money wisely.
FAQs
Q1. What is the survival rate for small businesses in their first year?
Approximately 78.5% of small businesses survive their first year of operation. This rate is significantly higher than many people believe, debunking the myth that most businesses fail immediately.
Q2. Which industries have the highest success rates for small businesses?
Agriculture, forestry, fishing, and hunting businesses have the highest success rates, with a 50.5% ten-year survival rate. Healthcare and social assistance businesses also perform well, with 85% surviving their first year.
Q3. How much capital do most small businesses need to start?
The average startup costs for a small business in its first year are around $40,000. However, this figure varies significantly across industries, with some requiring as little as $1,500 and others needing up to $375,000.
Q4. What is the primary reason small businesses fail?
The number one reason for small business failure is cash flow problems. About 82% of business closures are attributed to poor cash flow management or understanding, even for ventures with strong incoming revenue.
Q5. How does previous entrepreneurial experience affect business success rates?
First-time business owners have approximately an 18% success rate, while entrepreneurs who have previously run a successful startup enjoy a 30% success rate in their new ventures. This demonstrates that experience substantially improves the odds of success in business.
