Archived — Key Small Business Statistics - July 2012

How long do small businesses survive?

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One way to answer the question of how long small businesses are likely to survive is to determine the probability of survival based on predictable factors. Geographic location, type of industry, size and age are some useful factors in predicting how long a business stays active. Other, unforeseen, factors can also affect the survival of a business, including general economic conditions, as well as market influences such as the number and size of competitors and new entrants.

Survival is defined as the percentage of new firms that continue to operate when they reach a given age. The survival of businesses reflects their productivity, innovation and resourcefulness, as well as their adaptability to changing market conditions.

Figure 3 shows survival rates for Canadian small and medium-sized businesses with fewer than 250 employees. The rates represent the percentage of firms that survived until 2006 and were created one to five years prior to that. About 85 percent of businesses that entered the marketplace in 2005 survived for one full year. Survival rates declined over time. About 70 percent of firms survived for two years, 62 percent survived for three years and 51 percent of firms survived for five years. The fact that half of the businesses survive their first five years of operation suggests that these businesses are able to attain competitive advantage in their markets.

Figure 3: Survival Rates of Canadian Employer Businesses (with fewer than 250 employees), 2001–2006

Figure 3: Survival Rates of Canadian Employer Businesses (with fewer than 250 employees), 2001-2006[Description of Figure 3]
Source: Statistics Canada, Small and Medium-Sized Enterprises Data Warehouse, 2008.