At a One-Year-Old Firm, 44.5% of the Jobs Lost Go When the Whole Business Closes. At 26 Years or Older, 5.9%

When a young business loses jobs, close to half go with the business itself. When an old one does, it mostly shrinks and carries on. Here is what ten years of federal business records show, age by age.

Three ways a job goes

The Census Bureau’s Business Dynamics Statistics (BDS) follow every employer business in the country from one March to the next. When a job disappears, the records show which of three things happened. The whole firm closed. One of its locations closed while the firm carried on. Or a location that stayed open got smaller. The BDS publishes all three by the age of the firm, which lets you ask how a business of a given age usually loses the jobs it loses.

Over the ten years from 2013 to 2022, the answer moves steadily with age. At one-year-old firms, 44.5% of the jobs lost went because the whole firm closed. At two years it was 39.5%, at five 32.5%, at 6 to 10 years 27.3%, at 16 to 20 years 17.8%. At firms 26 years or older it was 5.9%. Each age group sits below the one before it. Across all firms the share was 15.9%.

At one year old, it is an even split

Put the other two routes next to it and the shape gets clearer. At one-year-old firms the jobs lost split almost evenly: 44.5% with a closing firm, 44.6% by shrinking at a location that stayed open, and 10.9% from a location that closed while the firm went on. From two years old onward, shrinking took the larger share in every age group, and by 16 to 20 years it was 70.6%.

The oldest firms lose jobs a different way again. At 26 years or older, closing a location while the firm carried on accounted for 20.7% of lost jobs, more than three times the share that went with the whole firm closing. Shrinking accounted for 73.4%. Those firms are also where most of the losses are: about 52% of all the jobs lost in these ten years were lost at firms 26 or older.

At a one-year-old firm, nearly half the lost jobs go with the business itself. At a firm 26 or older, about one in 17 does.

The pattern holds year by year

Ten years combined could hide a lot of movement, so it is worth checking each year on its own. In every year from 2004 to 2022, one-year-old firms had the highest closure share of any age group and firms 26 or older had the lowest. In 15 of those 19 years the share fell at every single step in age; in the other four, two neighbouring age groups swapped places somewhere in the middle.

For firms 1 to 5 years old taken together, the share was 38.4% over the ten years and stayed above 34% in every year back to 1979 except one. The exception was the year to March 2021, when it fell to 29.5%, the lowest in any year back to 1979. The share for all firms was also at its lowest that year, 11.4%. The records show the drop; they do not say what was behind it.

What to take from this if you run a young one

If your business is in its first few years, the records say the jobs it loses are much more likely to go all at once, with the business itself, than the jobs at an older firm. Older firms mostly lose jobs by shrinking and keep going. That is a reason to treat the early years as the stretch where staying open is the main thing to protect, and to watch for the point where your own business starts to have room to shrink instead.

Three limits. These are employer firms only, counted each March. Firm age and firm size travel together, since young firms are mostly small, and these tables cannot separate the two; the size view is in the related piece below. And the records count what happened to jobs, not why: they cannot say what any owner decided or what a closing firm was up against.

Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com

This article is for educational purposes and is not a substitute for professional financial or legal advice.