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What Matters More: Business Exit Rates or Business Survival Rates?
What Matters More: Business Exit Rates or Business Survival Rates?
Abstract
One of the most frequent questions asked of a small business researcher is: “What percent of businesses fail?” This most often comes from policymakers, the press, or others interested in the overall health or weakness of the economy. The response starts with, “Do you mean how many businesses fail every year, or do you mean what percent of new businesses fail after a certain period of time?”
Good answers to both questions used to be much harder to come by. The U.S. Census Bureau Center for Economic Studies’ recently released Business Dynamics Statistics (BDS) has made answering both of these questions easier, and it has made interesting conclusions apparent as well. The technical answer to the first question is given by the business exit rate, which shows the rate of exit of all existing businesses. The second question is addressed by the business survival rate, or the percentage of a cohort of businesses that started at the same time that remain in business for a set length of time.
Page Last Revised - October 8, 2021
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