Key Findings:
- Half of businesses close within five years — only 51 out of 100 make it.
- The steepest drop happens early, with nearly 1 in 3 failing in the first year.
- Businesses in only five states beat the odds, with over 55% surviving five years — led by West Virginia, Connecticut, and Alaska.
Most businesses survive their first year. But staying in business? That’s where things get tough.
Nearly half of all businesses don’t make it past their fifth year, according to a new analysis by DesignRush using data from the U.S. Bureau of Labor Statistics.
From a strong 76.8% survival rate in Year 1, the number falls steadily to 51.2% by Year 5 — a drop of over 25%. That’s a big drop — and it happens across every state.
Our report looks at how business survival changes year by year, and which states give businesses the best chance to succeed.
The Big Picture: Survival Rates by Year
Year 1: A third of businesses fail in their first year
This means about 23 out of every 100 businesses shut down in the first year.
While some states like Washington and California show strong early support for new ventures, others — like Minnesota and Missouri — see a higher rate of early exits.
- National average: 76.8% survival
- Top states: Washington (86.4%), California (86%), and Iowa (80.2%)
- Bottom states: Minnesota (72.3%), Missouri (72.9%), and Alaska (73.7%)
Year 2: Roughly 1 in 4 businesses shut down in their second year
By the end of Year 2, only 64 out of 100 firms are still around. That means an additional 13 companies closed their doors after their first year.
California and Kentucky still lead, but Washington takes a steep fall, from best to bottom three, highlighting volatility in long-term business conditions.
- National average: 63.8% survival
- Top states: California (71.7%), Kentucky (69.6%), Georgia (69.3%)
- Bottom states: Washington (54.2%), North Dakota (55.2%), Missouri (56.7%)
Year 3: Just 6 in 10 make it to the third year
At year three, 57.9% of businesses remain. States like West Virginia (64.3%) and Massachusetts (63.6%) climb into the top 3, while Missouri and Washington continue their downward slide, indicating long-term sustainability issues.
- National average: 57.9% survival
- Top states: California (66.3%), West Virginia (64.3%), Massachusetts (63.6%)
- Bottom states: Missouri (51%), Washington (51.1%), Idaho (52.4%)
Year 4: Over 4 in 10 businesses are gone
With just 56 out of 100 businesses still operating, this year marks the point where short-term momentum must turn into long-term strategy.
States like Pennsylvania and North Carolina have improved, while companies in other states have started to go out of business.
- National average: 56.3% survival
- Top states: Pennsylvania (64.3%), North Carolina (63.3%), New York (62.9%)
- Bottom states: Missouri (48.4%), Washington (49.4%), Idaho (50.6%)
Year 5: By now, 1 in 2 businesses shut down
By year five, just 51.2% survive — nearly half have shut down.
But some states far exceed that: West Virginia (57.6%), Connecticut (57.5%), and Alaska (56%) all outperform the national average by nearly 6 points.
- National average: 51.2% survival
- Top states: West Virginia (57.6%), Connecticut (57.5%), Alaska (56%)
- Bottom states: Washington (41.1%), Missouri (43.2%), Kansas (46.8%)
Which States Are Best for Business Survival?
Some states consistently offer a better environment for long-term business success.
West Virginia, Connecticut, Alaska, Pennsylvania, and Illinois rank highest for five-year survival, each with over 55% of businesses still operating after five years.
Wisconsin also stands out for its steady performance year over year, with above-average survival rates from year one through year five.
These states seem to offer a mix of economic stability, manageable costs, and supportive local ecosystems.
This suggests that early success doesn’t always translate to long-term sustainability, and points to possible challenges in cost of living, competition, or business regulation in certain regions.
6 Tips to Survive the First 5 Years
- Pick the right state to maximize your chances: Some states help businesses last longer. West Virginia and Pennsylvania both have five-year survival rates above 56%, while Missouri drops to just 43.2%. If you’re expanding, compare state trends to adjust your growth strategy.
- Don’t make outlooks based on year one: Washington has the highest Year 1 survival rate at 86.4%, but by Year 5, it falls to 41.1% — the lowest in the country.
- Look for consistency and averages, not peaks: Wisconsin stays above the national average every year, ending at 52.1% in Year 5. Stability matters more than a good start.
- Expect a drop after Year 1: Nationwide, survival falls from 76.8% in Year 1 to 63.8% in Year 2. In Missouri, it drops even harder, from 72.9% to 61.7%.
- Tap into local support whenever possible: States with strong ecosystems, like Connecticut and North Carolina, keep survival above 55% at Year 5. Support matters.
- Watch your overhead: Lower-cost states often have steadier survival. Alaska holds 56% survival at Year 5, despite lower first-year numbers.
Methodology
To identify how long businesses survive across the United States, DesignRush conducted a comprehensive analysis of state-level business survival rates from Year 1 through Year 5.
Data Source: U.S. Bureau of Labor Statistics – Business Employment Dynamics (BED).
The data was obtained from Business Survival Rate Tables, published by the BLS. We focused on data spanning March 2020 through March 2024, which captures survival trends for businesses launched within this time frame.
Data Analysis: For all 50 states, we extracted the percentage of businesses still operating after their 1st, 2nd, 3rd, 4th, and 5th year.
To calculate a single comparative metric, we computed the average survival rate across these five years for each state.
DesignRush previously ranked U.S. bankruptcies, showing how small businesses are struggling in states like Georgia and Wyoming.
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