The Five-Year Survival Curve
Of businesses in the cohort tracked from March 2020 to March 2024, 76.8% survived to Year 1, dropping to 63.8% by Year 2, 57.9% by Year 3, 56.3% by Year 4, and 51.2% by Year 5, according to DesignRush’s reporting on the Bureau of Labor Statistics’ Business Employment Dynamics Business Survival Rate Tables. Laid out year by year rather than as a single five-year headline, the curve shows survival risk front-loaded early rather than spread evenly across all five years.
Where the Steepest Drop Happens
The single largest year-over-year decline in the curve above is the move from Year 1 to Year 2, a 13-point drop from 76.8% to 63.8%. Every subsequent year loses ground more slowly: Year 2 to Year 3 falls 5.9 points, Year 3 to Year 4 falls 1.6 points, and Year 4 to Year 5 falls 5.1 points. A business that clears its second full year of operation has already survived the steepest single drop the curve contains, even with three more years of risk still ahead of it.
Where the “Half of Businesses Fail in Five Years” Line Comes From
The 51.2% five-year survival figure sits close enough to the popular “half of small businesses fail within five years” claim to explain where that widely repeated line likely originates, even though the real figure runs slightly above the 50% threshold the popular version implies. A cohort where just over half of businesses are still operating at Year 5 is a more precise, more defensible claim than the flat “half fail” framing usually gets credit for.
A Second Source Lands in a Similar Range
VantaInsights independently reports a comparable curve, roughly 80% surviving Year 1 and roughly 45% surviving Year 5, attributed to the same BLS Business Employment Dynamics program. VantaInsights explicitly self-describes its industry-level breakdowns as approximations derived from published cohort data rather than a direct citation of one specific BLS table, so this piece uses its figures only as directional corroboration of the DesignRush curve above, never cited on its own as an independent, precisely sourced statistic.
Why Neither Figure Is a Direct BLS Citation
Every Bureau of Labor Statistics Business Employment Dynamics page attempted for this piece returned an access error, so neither the DesignRush figures nor the VantaInsights figures come from a direct load of bls.gov itself. Both are third-party reporting on the same underlying government program rather than a first-party BLS citation, worth stating plainly given how often survival-rate figures circulate without their original source attached.
What a Survival Curve Does Not Tell You
A single national curve blends every industry into one line, restaurants, professional services, construction, retail, each of which almost certainly survives at a different rate than the blended figure shows. The curve also describes whether a business is still operating. It does not explain why the ones that closed shut down: a cash-flow problem, a strategy problem, and an owner simply moving on to something else all register identically as a Year N closure in this kind of data.
Why Year 2 Onward Is Still an Underwriting-Relevant Window
A business that has cleared Year 2, past the steepest single-year drop the curve contains, has already demonstrated more staying power than the raw Year 1 number alone would suggest, even while three more years of decline still sit ahead of it on the curve above. That distinction is exactly the kind of nuance a flat minimum time-in-business threshold tends to flatten out entirely.
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The Numbers
Business survival by year, cohort tracked March 2020 to March 2024: Year 1, 76.8%; Year 2, 63.8%; Year 3, 57.9%; Year 4, 56.3%; Year 5, 51.2%.
DesignRush, reporting on BLS Business Employment Dynamics Business Survival Rate Tables
The steepest single-year drop in the curve runs from Year 1 to Year 2, a 13-point decline, faster than any later year-over-year drop in the same curve.
DesignRush, reporting on BLS Business Employment Dynamics Business Survival Rate Tables
A second, weaker source, VantaInsights, independently reports roughly 80% Year 1 survival and roughly 45% Year 5 survival, attributed to the same BLS program but explicitly self-described as approximations, used here only as directional corroboration.
VantaInsights, Business Failure Rate 2026: US Survival by Industry
Sources
The external data in this article draws on the sources below. Figures described in the text as estimates or industry triangulations are directional and are not attributed to a single dataset.
- DesignRush, reporting on BLS Business Employment Dynamics Business Survival Rate Tables
- VantaInsights, Business Failure Rate 2026: US Survival by Industry