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Image result for startup companyStartup Survival Rates

ECON First believes that business success centers around knowing the economic and demographic characteristics of each unique primary market area. While business experience, insights and intuition are important, they are substantially advanced by hard

data.

Using Bureau of Census data, ECON First estimates business start-up survival rates. As the example below demonstrates, the data varies considerably by both state and major industry.

AN EXAMPLE

The most recent Census data on business dynamics ends in 2014. The following tables show five year survival rates as of 2014 for firms that started up in 2009, by the employment size of the firm at start-up.

The first table shows the five year survival rates for the states of Massachusetts and Kentucky. In both states the survival rates improve the larger the firm is at time of start up. The logical explanation is that a larger start up requires more initial capital, and the more capital at risk, the more careful the strategic planning.

2009-14 Start up survival rates by initial size of start up by state

a) 1 to 4 b) 5 to 9 c) 10 to 19 d) 20 to 49
Massachusetts 41.9% 83.2% 89.6% 98.8%
Kentucky 40.2% 59.8% 74.8% 77.5%

The impact of the overall state economy on the likelihood of survival is clearly evident. Firm start ups in Massachusetts have notably better five year survival rates than firms that start up in Kentucky.  Between 2009-14 the Massachusetts economy had a stronger growth record than Kentucky, and the pool of human capital in Massachusetts is considerably deeper.

The second table shows five year survival rates for start ups over the same time period across the U.S. and by major industry. Once again, a smaller firm size at start up results in a lower survival rate. Also, across the industries the survival rates in retail trade are considerably below the other major industries. The highest survival rates are in services, the growth sector in the U.S. economy.

2009-14 Start up survival rates by initial size of start up by major industry

a) 1 to 4 b) 5 to 9 c) 10 to 19 d) 20 to 49
Construction 36.8% 63.7% 82.4% 88.7%
Manufacturing 38.7% 67.8% 80.5% 82.9%
Retail 35.2% 56.8% 63.3% 71.5%
Service 42.0% 79.2% 86.4% 100.0%

Finally, while not shown, the survival rates for year one are higher than those for year two, and year two’s rates are higher than year three.

CONCLUSION

ECON First specializes in providing the hard data that allows business owners to make more informed decisions regarding start-ups. expansion, marketing channels, strategic planning, and pricing strategies. It is inappropriate to apply summary measures taken from nation or state level data and assume they apply to specific businesses and primary market areas. A more comprehensive analysis is required for business success.

Let ECON First help you to better evaluate the likelihood of the survival of your start up.

Dr. John E. Stapleford

ECON First

www.econfirst.com