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Business Vitality - Establishments Surviving 5 Years

Establishments Surviving 5 Years

49.8%

7th of 13 States
Colorado Data
1-year survival (Businesses started 2017)
Colorado: 81.1%
United States: 79.4%
10-year survival (Businesses started 2007)
Colorado: 31.9%
United States: 33.7%
What is this measure? The U.S. Bureau of Labor tracks statistics related to employers and employment through the Business Employment Dynamics program. It uses data gathered through the QCEW program to summarize business longevity and employment by business start year. This covers private employers only; sole proprietorships are not included in this estimate. This measures business establishments, not total businesses, which means that a second location opened by the same business entity would be counted separately. This data is only available at the State level, and the comparisons below are to states chosen because these states consistently trade workforce (people who move for a new job) with Colorado as estimated by Census Bureau Job to Job flows.

Why do we track this? Some portion of new businesses will fail. Some of the causes for business failures lie within a business's design, management or financial structure. Even luck and timing may boost or stress a fledgling company. Some of the factors that lead to problems in new businesses can be mitigated with support and education for novice business owners, such as those provided by Small Business Development Centers and smart regulatory policies that support healthy business growth and competition. Small businesses create and sustain new jobs, and as these businesses grow they impact a community through employment, tax revenue and the benefit of the goods and services they provide to a region.
About half of all new business establishments do not survive past their first five years. However, some states see a larger proportion of successful businesses than others. Prevailing economic conditions can impact the survival of firms, and younger firms may be more susceptible to negative impacts from external forces such as a recession or natural disaster.
Generally speaking, more than two-thirds of businesses that survive their first 5 years will make it to 10 years. Each data point represents the proportion of the five year surviving establishments still in business in their 10th year.
This chart shares the Businesses started per year as recorded by the BLS. States with larger populations generally have more new businesses, as would be expected. Take a look at the next chart (below) to look at the relative rate of business creation per population size.
The rate of business survival is just a part of this topic. If more businesses are started in a region, then even if half of them don't survive the first five years, the total number of surviving (and hopefully growing) businesses positively impact an economy. This chart uses Census Bureau data regarding the number of business applications for an Employer Identification Number (EIN), one of the first steps required in starting a Business. It divides this by the population of each state to show the relative rate of new business creation. Higher numbers mean that more businesses are started (as defined by applying for an EIN for tax purposes) relative to the total population of that state. A dip in this value would represent a potential slowing of business creation relative to population growth. The data used in this chart's definition of "business start" includes more businesses (such as single person LLCs or businesses that have not yet hired employees) than the BLS statistics used in previous charts, which only counts businesses with employees.
Why did we use this source? The BLS BED program includes all private industry employers who must participate in the Unemployment Insurance program. The data is free to access, use and share. It is consistently produced every year. The Census data set used in one of the charts does not track business survival and has a broader definition of "business start" than the BLS data.

Data Sources

  • U.S Bureau of Labor Statistics Business Employment Dynamics. "Establishment Age and Survival Data" at National and State levels. Values reported as of March 1 for each year.
  • U.S. Census Bureau Business Formation Statistics. Values presented here are calculated in a Q3 previous - Q2 current year manner to align more closely with July 1 current year population estimates. "Business Applications" excludes EIN applications for non-businesses (such as household employers or trusts) and EINs in NAICS sector 11 (Agriculture, Forestry, Fishing and Hunting)
  • U.S. Census Bureau Population Estimates. Population estimates as of July 1 for each year since 2010.

Related Dashboard Measures

Additional Information and Other Data Sources