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Startup Failure Rate Statistics To Take In [2020]

startup statistics

Every year, hundreds and thousands of highly-determined and ambitious entrepreneurs lay the foundations of several new businesses.

Most of these entrepreneurs have dreams in their eyes and emit rays of positive energy. But did you know that in the following four years, almost half of them would vanish as they never existed?

While plenty of small businesses fail to survive in the business world, a handful of them make it past this critical period and continue to thrive. How many of such businesses are there among the survivors?

Which industries provide the highest/lowest chances of startup success? What are the reasons why small businesses fail to grow? Keep reading to find out.

Top 10 Most Interesting Startup Statistics

Building your very own startup requires a lot of courage, determination, and skill. It takes years of constant struggle and hard work before a startup can be declared as established.

Catching on some of the most interesting startup statistics can help you take better decisions for your business. Some of these facts have been mentioned below.

  • 20% of the small businesses fail during their first year
  • 50% of the small businesses fail after five years
  • 13% of small businesses collapse because of a loss of focus.
  • 7% of the small businesses fail due to their failure to pivot.
  • 13% of small businesses fail because of disagreements between the workforce, owners, and investors leads to failure.
  • 42% of small businesses fail because they no longer have any market need.
  • 46% of the owners with failed startups are found to be incompetent for the job
  • Lack of managerial experience in the owner accounts for business failure in 30% of the cases
  • Around 55% of the small business owners believe artificial intelligence to be the most promising industry in 2019.
  • 25% of the small business owners are females

Top 10 Fastest-Growing Small-Business Industries

As far as small business industries are concerned, their rate of growth is multifactorial and dependent on several factors. Taking all these factors into consideration, the following top ten businesses have been nominated as the fastest-growing industries in the U.S. according to their growth rates (sales percentage) in the year 2018.

  • Computer system designing industry: 18% growth rate
  • Service to buildings and dwellings: 14% growth rate
  • Building finishing contractors: 13% growth rate
  • Residential building construction: 14% growth rate
  • Foundation, structure, and building exterior contractors: 13%
  • Building Equipment Contractors: 13%
  • Other speciality trade contractors: 13%
  • Non-residential building construction: 13%
  • Other heavy and civil engineering: 13%

Top 10 Industries with the Best Chances Of Startup Success

Amidst the countless industries of different types, it is difficult for one to decide which one to opt for. Statistics that measure the percentage of startup success according to the type of industry can come handy in such situations.

Here are the top ten industries with the highest chances of success on the basis of their net profit margin (NPM):

  • Accounting, tax preparation, bookkeeping, and payroll services: 18.4% NPM
  • Lessors of real estate: 17.9% NPM
  • Legal services: 17.4% NPM
  • Management of companies and enterprises: 16% NPM
  • Activities related to real estate: 14.9% NPM
  • Offices of dentists: 14.8% NPM
  • Offices of real estate agents and brokers: 14.3 %NPM
  • Nonmetallic mineral mining and quarrying: 13.2% NPM
  • Offices of other health practitioners: 13% NPM
  • Medical and diagnostic laboratories: 12.1% NPM

Industries with the Worst Startup Statistics

While it is important to know about the list of businesses with the best startup, it is equally significant to keep an eye on Industries with the least chances of succeeding. 

According to Sageworks, here is a list of top ten industries with the worst startup statistics is mentioned below on the basis of NPM:

Oil and Gas Extraction: -6.9% NPM

Software Publishers: -5.1% NPM

Beverage Manufacturing: -3.7% NPM

Semiconductor and Other Electronic Component Manufacturing: -0.3% NPM

Forging and Stamping: 0.4% NPM

Farm Product Raw Material Merchant Wholesalers: 0.9% NPM

Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesalers: 2.1% NPM

Petroleum and Petroleum Products Merchant Wholesalers: 2.8% NPM

Grocery Stores: 2.2% NPM

Bakeries and Tortilla Manufacturing: 2.3% NPM

What Are The Most Promising Industries in the Future?

It is important to determine the future of entrepreneurship with respect to different fields. This will help decide people which businesses to prefer in the upcoming future. The statistics regarding the most promising industries in 2019 are mentioned below:

Around 55% of the small business owners believe artificial intelligence to be the most promising industry in 2019.

Around 30% of the small business owners believe big data to be the most promising industry in 2019.

Around 25% of the small business owners believe cybersecurity to be the most promising industry in 2019.

Around 25% of the small business owners believe life science to be the most promising industry in 2019.

Around 25% of the small business owners believe digital health to be the most promising industry in 2019.

Financial Statistics for Startups

Money is among the key factors required to lay down the foundation of a small business. The statistical facts mentioned below provide interesting information about the financial views of small business owners in different contexts:

About 52% of the small business owners in the U.S. expect venture capital to be their next source of funding.

About one-third of the small businesses require less than $5000 to initiate.

58% of small businesses require a budget of less than $25000 to start.

65% of the small business owners admit that they lack sufficient budget to lay the foundation of a startup.

93% of the small business owners said they calculated a potential run rate of shorter than 18 months.

Most Popular Small Business Financing Methods

Financing is possibly the most important factor to take into consideration while initiating a business startup. Research has shown that the type of funding preferred by the business owner immensely affects its rate of success.

Mentioned below is the list of some popular financing methods that were adopted by most small business owners in the year 2018.

  • Personal funds: 77%
  • Bank loan: 34%
  • Borrowing (from family/friends): 16%
  • Other funding:11%
  • Donations: 9%
  • Online lender: 4%
  • Angel investor: 3%
  • Venture capital: 3%
  • Crowdfunding: 2%

Statistics for Small Business Owners

Extensive research has been performed to categorize the individuals starting their personal businesses on smaller scales. These individuals have been categorized on the basis of gender, ethnicity, age range, education, and reason for starting the business.

Gender

25% of the small business owners are females

73% of them are males

Education

On the basis of education, the statistics are as follows:

High School: 33%

Bachelor’s Degree: 29%

Master’s Degree: 16%

Doctorate: 4%

Ethnicity

On the basis of ethnicity, the statistics are as follows:

White and/or Caucasian: 71%

African American: 7%

Latino: 6%

Asian: 7%

Others: 5%

Age Group

On the basis of age group, the statistics are as follows:

50-59 years: 35%

40-49 years: 25%

60-69 years: 18%

30-39 years: 14%

18-29 years: 4%

70+ years: 4%

Reasons for Starting Business

On the basis of the reason behind a startup, the statistics are as follows:

  • To avoid retirement: 6%
  • Outsourcing: 6%
  • Dissatisfaction with corporate America: 12%
  • To pursue a passion: 23%
  • To become their own boss: 26%
  • Any recent life event such as death: 3%
  • Other: 5%

Statistics for Why Small Businesses Fail

While many new small businesses make their way into the market every year, a much larger amount of them is wiped away. For some, this occurs shortly after their establishment while for others, it takes a few years.

How Many Small Businesses Fail Over Years in Business

Following are the statistics regarding the failure of small businesses according to years

  • 20% of the small businesses fail during their first year
  • 30% of the small business fail during their second year
  • 50% of the small businesses fail after five years
  • 70% of the small businesses fail in their 10th year

Top 10 Reasons Why Small Businesses Fail

The most common reasons why small businesses fail to flourish are mentioned below.

Top 10 Small Business Owner Character Faults

The failure of a small scale business often has something to do with its owner. Mentioned below are some of the common character faults found in the owners whose business fail to flourish.

Top 10 Countries For Small Business Entrepreneurs

The concept of entrepreneurship has gained excessive popularity in the last few years. It has significantly improved the overall economy of the world by improving efficiency by lasts technologies, presenting new problems to the solutions, and exchanging ideas on a global level. In order to quantify the trend of entrepreneurship on the basis of the country, it is important to understand the concept of Global Entrepreneurship Index.

What is the Global Entrepreneurship Index?

The Global Entrepreneurship index or GEI refers to a composite indicator that describes the current health of the entrepreneurship ecosystem in a given area. The GEI does not only measure the quality of entrepreneurship but also analyzes the depth and extent of the supporting entrepreneurial ecosystem.

Top Countries by Region

According to GEI, the top countries of entrepreneurship have been mentioned below as per their region.

Asia-Pacific

  • Australia tops the list with a GEI of 75.5%
  • Hong Kong has been ranked second with a GEI of 67%
  • Taiwan has been ranked third with a GEI of 59%

Europe

  • Switzerland tops the list with a GEI of 80%
  • The United Kingdom has been ranked second with a GEI of 78%
  • Denmark has been ranked third with a GEI of 74%

Middle East and North Africa

  • Israel tops the list with a GEI of 65%
  • Qatar has been ranked second with a GEI of 55%
  • The United Arab Emirates has been ranked third with a GEI of 53%

North America

  • The United States tops the list with a GEI of 84%
  • Canada has been ranked second with a GEI of 79%
  • Mexico has been ranked third with a GEI of 26%

Central America and the Caribbean

  • Chile tops the list with a GEI of 59%
  • Puerto Rico has been ranked second with a GEI of 42%
  • Columbia has been ranked third with a GEI of 38%

Sub-Saharan Africa

  • Botswana tops the list with a GEI of 35%
  • South Africa has been ranked second with a GEI of 3%
  • Namibia has been ranked third with a GEI of 31%

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