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Bankruptcy rates, reported by Dun & Bradstreet and the SBA, in the US have fluctuated around 1.2% of existing companies with employees for the last 15 years. After reaching a peak of almost 1.7% in 1991, the rates of bankruptcy have been falling until 1997 when they rose again. Unfortunately, more recent data on rates of failure are not available because calculation of the rates depends upon estimation of the number of businesses in the US. These are not officially available yet. However, the number of business bankruptcy filings in the US has decreased by 18% from 1997 to 1999. Moreover, the recent rash of dot com company failures in the last six to eight months are far too new to be seen in any traditional statistics.
These overall bankruptcy rates include all ages, types and sizes of companies. Intuition would indicate that younger companies have higher failure rates than older companies. A study by US Small Business Administration completed in 1991 of companies in existence in 1986 indicated that this intuition is correct. Companies that were less than two years old in 1976 had a 34% ten-year survival rate whereas companies over twenty years old had a 49% ten-year survival rate. Similarly, larger companies had a greater ten-year survival rate than smaller companies.
The Wall Street Journal and the SBA estimated in 1999 that 65% to 70% of new business will fail within the first five to eight years of operations. And, Bottom Up asserted in 1998 that the failure rate for high-tech start-up companies is three times higher than others. (Bottom Up was a web site for high tech entrepreneurs, itself no longer operating.) Dot com business failures have been exceeding high. By the end of January 2001 18% had closed their doors since December 1999, according to Challenger Gray & Christmas. However, you look at it, business failure is a fairly probable event. It is rare that a company has a long-term survival rate.
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