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Urban Legend

Do 90 percent of start-ups really fail to make it past their first year?

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This story appears in the August 2003 issue of Entrepreneur. Subscribe »

It's a grim little statistic-and persistent, too. You know, the one about nine out of 10 start-ups failing in their first year. You've heard it, or some variation of it, from experts, research firms and databases since day one of your business's inception. Trouble is, those statistics are more than a bit off the mark. Not that starting a business is easy. But it's not quite the suicide mission it's been made out to be.

According to Brian Headd, an economist in the SBA's Office of Advocacy who spearheaded a study on business closures while working as a Census Bureau researcher, a business closure does not a failure make. That's an important distinction, says Headd, whose findings will be published in a forthcoming article in the journal Small Business Economics. "We're focusing so much on survival rates, but it's very possible these businesses had an exit strategy," explains Headd. "If someone completes that goal, that would be a very positive outcome."

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