According to a recent analysis of Labor Department data from the financial services marketplace LendingTree, 22.1 percent of American private-sector businesses fail within one year of opening.
The rate of collapse naturally increases over time—to 65.3 percent after 10 years—but the study reveals significant disparities when it comes to how long businesses can stay afloat depending on the state where they are based.
Why It Matters
Conditions remain challenging for businesses in the U.S., with surveys by associations like the U.S. Chamber of Commerce showing that an increasing number are concerned about inflation, and cautious on both hiring and investments amid “growing unease about the economic outlook.”
What To Know
LendingTree’s report was based on an analysis of data from the Bureau of Labor Statistics, the results curated to show survival rates for new businesses over the one, five and 10 years which ended March 2025.
According to its analysis, business conditions were toughest in the nation’s capital, with Washington, D.C.’s first-year failure rate of 32.9 percent being more than 10 percent higher than the national average and 3 percent higher than second-placed Tennessee (29.3 percent).
The remaining states on LendingTree’s top 10, by their first-year failure rate, were:
3. Delaware (27.2 percent)
4. Oregon (26.7 percent)
5. Oklahoma (26.5 percent)
6. Missouri (25.9 percent)
7. Alaska (25.6 percent)
8/9. Georgia (24.9 percent)
8/9. New Hampshire (24.9 percent)
10. Wyoming (24.8 percent)
Contrastingly, Washington state had the lowest rate of failure after one year at 17.5 percent, though this grew to 68.3 percent by year 10, above the national average. South Carolina followed at 17.7 percent, with the remaining bottom 10 states scattered throughout the U.S.
49. Louisiana (19.6 percent)
48. California (19.7 percent)
47. Iowa (19.8 percent)
46. Illinois (20.3 percent)
45. New York (20.4 percent)
44/43. Indiana (20.5 percent)
44/43. Wisconsin (20.5 percent)
42. Minnesota (20.6 percent)
By sector, LendingTree found that new entrants into the information industry had the highest rate of failure, with 28.4 percent failing to survive past their first year.
“The information industry is relatively inexpensive and easy to get into, but that means that it’s an incredibly crowded space that can be challenging to stand out in,” said analyst Matt Schulz. “And even if you do stand out, it isn’t always clear or easy to figure out how to monetize that traffic and visibility you receive. That’s because many people enter this industry focusing on making the most of their creative talents and don’t think all that much about the business side of things.”
Professional, scientific and technical services—encompassing legal, accounting, engineering, among others—came in second with a first-year failure rate of 25.5 percent, followed by administrative and waste services at 24.3 percent.
What People Are Saying
LendingTree’s chief consumer finance analyst Matt Schulz said: “One of the biggest problems is going in without a real focus on what you’re trying to accomplish and who you’re trying to serve. Starting a business is hard and incredibly risky. If you don’t have a plan for the audience you’re targeting and what problem you’re helping those people solve, your odds of success just get smaller and smaller.”
Neil Bradley, executive vice president of the U.S. Chamber of Commerce, following the group’s recent small business survey, said: “Views of the national and local economies have turned more pessimistic, concerns over inflation have jumped, and plans for future hiring and investment dropped markedly. Taken together, this suggests small business owners are worried about the future state of the economy, but it remains to be seen if this will translate into changes in their current operations.”