Industry Statistics
The industries with the highest failure rates are construction, transportation, and warehousing, with 30%-40% of these businesses failing within their fifth year. Over a quarter of new companies started in this tropical state fail in less than 12 months.
The professions with the highest failure rates are Retail – 53%, Transportation & Utilities – 55%, and Information – 63%. The healthcare and social assistance industries have the highest survival rate.
Businesses established in the information industry have a failure rate at every benchmark, with a 1-year failure rate of 27.6% and a 5-year failure rate of 60.9%.
Independent restaurants have a failure rate of over 60% at the 10-year mark. Retail stores face intense competition from both other brick-and-mortar and online stores.
Factors of Failure and Success
A leading cause of failure for start-ups is entrepreneurs failing to account for costs of running a business. Business models with high overhead, long hours, and small profit margins pose challenges.
According to Harvard Business Review, ineffective management caused 65% of startup failures. Other factors include a lack of market understanding and insufficient capital leading to cash flow problems.
The type of business is crucial, with some tapping into growing markets or offering unique products/services being more likely to succeed. In contrast, businesses that are highly leveraged or with considerable debt are riskier and more prone to fail. Successful businesses are characterized by a clear mission/vision and well-organized, passionate teams.
Entrepreneurship Challenges
Before examining the businesses failing the most, note that 39% of small businesses are profitable, and 30% break even. An owner’s ability to raise capital is a significant factor in success, and for restaurants, a lack of marketing strategies or high traffic locations contributes to failure.