Helping With Your Financial Future

1 out of 5 small businesses close in just a year 

On Behalf of | Jan 16, 2025 | Chapter 11 Bankruptcy

Many people dream of becoming small business owners. They may take out business loans, find investors, and launch their new company. Unfortunately, for many of them, that dream doesn’t last very long.

Statistics show that about 20% of small businesses—one out of every five—fail within the first year. By the five-year mark, the survival rate drops to just 50%, meaning half of the businesses will have closed. After 10 years, only 33% of small businesses remain, with just one in three making it to the decade mark.

Why does this happen?

Business closures occur for a wide variety of reasons, and not all of them are directly related to decisions made by the business owner.

For example, some businesses fail because the local economy takes a downturn. Imagine someone opens a successful but expensive restaurant. If the economy hits a rough patch, consumers may tighten their budgets and stop dining out. The restaurant may still offer the same excellent food, but it suddenly doesn’t have enough traffic to remain viable.

In other cases, external competition causes the business to fail. A business may thrive for the first few years because it’s the only one offering a particular product or service. However, other business owners may recognize the opportunity and enter the market. If there aren’t enough customers to support multiple businesses, the original company may struggle to stay afloat.

Bankruptcy options

For business owners facing significant debt and concerned that their business may need to close, it’s crucial to understand all available legal options. One potential solution is to use bankruptcy to address the debt and work toward a resolution.