Key Small Business Statistics - July 2005

How long do small businesses survive?

How long a business stays in business is influenced by many different factors. Geographic location, type of industry, size and age are some predictable factors in how long a business stays active. Unforeseen factors also affect survival of a business, including market influences such as the number and size of competitors and new entrants, as well as general economic conditions.

One way to answer the question of how long small businesses survive is to determine the probability of survival based on predictable factors. It is a more useful way than determining the average age of businesses because the majority of start-up firms do not operate for very long. The probability of survival is defined as the percentage of new firms that continue to operate when they reach a given age. Table 4 presents the survival rates from start-up, by region, for two sizes of business: micro-enterprises (those with fewer than 5 employees) and other small employer businesses (those with 5 to 99 employees). The table is based on firms that entered the market between 1984 and 1995; therefore, the highest age observable was 11 years. As an example, the table indicates that 30% of micro-enterprise entrants in the Atlantic provinces stayed in business for at least four years.

Table 4: Survival Rates of Micro-enterprises and Other Small Employer Businesses (Employer Businesses Only) by Region, Size and Age of Business (Percent), 1984–1995

Age (years)	Micro-enterprises (<5 employees)					Other Small Employer Businesses (5–99 employees)
	Atlantic	QC	ON	Prairie	BC	Atlantic	QC	ON	Prairie	BC
Source: J. Baldwin, L. Bian, R. Dupuy and G. Gellatly, Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit, Statistics Canada, 2000.
1	61	74	78	72	76	86	90	91	89	91
2	45	58	62	56	59	74	78	79	75	78
3	37	47	50	46	48	65	68	69	65	68
4	30	40	42	39	40	58	61	61	57	61
5	26	34	36	33	34	52	54	55	51	55
6	22	30	31	29	30	47	49	49	46	50
7	19	26	27	25	26	43	44	44	42	46
8	17	23	24	22	23	39	41	40	39	43
9	15	21	21	20	21	36	38	37	36	39
10	13	19	19	18	19	34	35	33	33	36
11	12	17	17	16	17	30	32	31	30	34

The percentage of new firms that remain in business after one, two or three years declines rapidly. That is to say, failure rates are high the first few years after start-up. This is even more true for micro-enterprises than for other small businesses. Moreover, beyond the first three years, survival rates of microenterprises continue to be well below those of other small firms. The likelihood that micro-enterprises require less investment could induce these firms to take more risks, which may explain the higher probability of exit.

The survival rates of micro-enterprises at any age are consistently lowest in the Atlantic region and among the lowest for other small firms. Small-firm survival rates are also lower in the Prairie provinces. The survival rates in Quebec, Ontario and British Columbia are very similar for all ages and both sizes of small firms, as displayed in Table 4.