The Bureau of Labor Statistics reports that 37.9% of businesses fail within the first three years.
This means nearly four out of ten businesses are unable to make it past those crucial initial years. Even more troubling is the fact that it can take years and significant investment to get a business off the ground, so seeing such a high percentage fail so quickly can be extremely disheartening for entrepreneurs everywhere.
We should keep in mind, however, that starting a business entails calculated risk, and being aware of this statistic is useful for developing strategies to help new businesses succeed.
What Are The Top Reasons Why Businesses Fail In The First 3 Years
There are a variety of reasons why businesses fail in their first three years.
According to 1st formations, some of the most common reasons include a lack of market research, insufficient capital, poor management, and starting a business for the wrong reasons. Investopedia.com states that a primary reason why small businesses fail is a lack of funding or working capital.
LinkedIn.com lists 11 reasons for businesses failing within their first three years, including money, lack of vision, poor delegation, and not having a leader.
Zenbusiness.com also lists insufficient capital as one of the top eight reasons for startup failure.
Forbes.com provides additional reasons such as complacency, not prioritizing sustainability, and not putting customers first.