Fact or myth? Will 9 in 10 new businesses close in the first year?

Balanko-Dickson reports:

There is a myth from the 1990’s that stated 9 out of 10 businesses close in their first year. The US Small Business Administration still gets calls every year from people looking for the unknown source of the 9 out of 10 sound bite. The myth persists partly due to a widely held belief that business closure is always considered a negative event.

Dun & Bradstreet (D & B) data from the same period shows a much different picture:

• 76 percent of new businesses were open after two years.

• 47 percent after four years.

• 38 percent after six years.

So why does the myth flourish?

Because it is generally believed that new businesses have high failure rates based upon a widely held but unsubstantiated belief that new firm closure rates are high and that a closure is a “negative” outcome.