Startups' Risk of Failure is Exaggerated, Study Says Conventional wisdom holds that the vast majority of startup businesses – as many as nine out of 10, by some accounts – fail within a few years. Not so, says Brian Headd, an economist with SBA’s Office of Advocacy. His analysis of census data “shows that 66% of new employers survive two years or more, 50% survive four years or more, and 40% survive six years or more.” He looked only at companies that had employees when they opened. Furthermore, Headd concludes that closing a business is not synonymous with failure; about one-third of the startups that shut down between 1992 and 1996 were considered successful by their owners. He suggests “certain kinds of closings are the final step in a preplanned strategy – growing to a certain size and selling out, closing after the ending of a contract, closing for retirement, and so forth.” Headd found that “success rates generally increased with owner age, number of owners, and previous experience as the owner of another business…This picture of entrepreneurship shows that starting small, planning for success, learning from previous mistakes, and being persistent yields successful results.” He added, “These results suggest that potential entrepreneurs, particularly those planning very small ventures, have less to fear than what is commonly believed. “Their prospects of survival are reasonable, and if they close, their prospects for being successful at closure are reasonable.” His study, “Redefining Business Success: Distinguishing Between Closure and Failure,” is available at the Advocacy website, www.sba.gov/advo.