Have you ever heard this statistic?
“According to the United States Small Business administration, approximately 90% of small enterprises fail within the first two years of operation.”
I’ve heard that quoted so many times. It has to be true, right?
Nope. It’s a myth.
Here is a direct quote from the SBA Frequently Asked Questions PDF:
“What is the survival rate for new businesses?
About half of all new establishments survive five years or more and about one-third survive 10 years or more. As one would expect, the probability of survival increases with a firm’s age. Survival rates have changed little over time.”
About half of new small businesses survive five years or more.
That’s radically different from 90% of small businesses failing within 2 years.
Starting a business is risky. There is no doubt about it. Odds say only half will survive five years or more.
But it’s nowhere near the disaster that common wisdom says it is.
Another interesting stat from the SBA, “When finding work is difficult, starting a business can be just as difficult if not more so. But in March 2011, a significant number of the self-employed, 5.5 percent or about 900,000 had been unemployed in the previous year.”
This is compared to 3.6% in 2006 and 3.1% in 2001.
In today’s economy, 900,000 new people are turning to self-employment instead of finding a new job.
One-third of small businesses survive 10 years or more.
I don’t have a stat for how many people stay in the same job for 10 years or more, but check out this quote from a recent press release by the Bureau of Labor Statistics.
“Although job duration tends to be longer the older a worker is when starting the job, these baby boomers continued to have large numbers of short-duration jobs even at middle age. Among jobs started by 40 to 46 year olds, 33 percent ended in less than a year, and 69 percent ended in less than 5 years.“
While a small business is risky, it seems the common plan of getting a job and holding it for years is much more risky.
50% of small businesses are still around after 5 years.
31% of baby boomers held a job for over 5 years.
Personally, I like the odds of being in a small business better.
What about you?