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According to data from the Bureau of Labor Statistics, approximately 20% of new businesses fail during the first two years of being open.

But how many businesses fail in the first 5 years?

There are approximately 45% during the first 5 years, and 65% during the first 10 years. The failure rate gives an idea of how and when businesses tend to fail. 

How Many Businesses Fail In The First 5 Years

Why do businesses fail in the first 5 years?

Small businesses can fail for various reasons, but some common factors contribute to their failure within the first five years. 

The most common reasons include a lack of capital or funding, inadequate management team, faulty infrastructure or business model, unsuccessful marketing initiatives, bad location, internet presence and marketing, remaining rigid and not adapting to changes in the market(Investopedia).

Inadequate market research is another significant reason why small businesses fail within the first five years according to Linkedin. Entrepreneurs may have a good idea or product but fail to conduct proper market research to determine if there is a demand for it. 

Cash flow problems are also a leading cause of business failure (InvoiceTracker). When customers do not pay on time or sales are slow, it can lead to cash flow problems that can cripple a small business.

To avoid these pitfalls and increase their chances of success, small business owners should conduct thorough market research before launching their venture. 

They should also create a solid business plan that outlines their goals and strategies for achieving them. Additionally, they should ensure they have enough financing to cover expenses during the early stages of the business. 

Finally, they should remain flexible and adapt to changes in the market as needed.

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