Surviving Twenty-Six Years Cuts Your Odds of Closing by 61%. In Health Care It Cuts Them by 35%.

Census firm-age data for fifteen US industries says age is worth twice as much in some of them as in others — and that the industry with the safest first five years is the one where surviving changes least.

What twenty-six years is worth, by industry

The calculation is deliberately plain. For each industry, take the firms aged one to five and work out what share of them closed during the year to March 2023. Do the same for the firms aged twenty-six or more. The gap between those two rates is what a quarter-century of trading is worth in that industry. In the median industry it removes 61% of the annual risk. At the top of the range it removes 77%. At the bottom, 35% — health care and social assistance, where a new firm closes at 10.5% and a twenty-six-year-old one at 6.8%. One caveat belongs with the top of that range rather than underneath it: transportation and warehousing owes its position to trucking, which is 72% of its young firms and closes at 25.3% — the highest young-firm rate anywhere in the data. Take trucking out and the industry reads 74%, behind educational services.

The industry that is safest to start in is the hardest to age out of

Health care and social assistance is the outlier and it is an outlier twice. It has the lowest young-firm closure rate of the fifteen — 10.5% a year, against a median of 14.1% and 12.1% for the next lowest, manufacturing — and one of the highest mature rates, 6.8%. A dental practice, a home-care agency or a therapy group is unusually likely to still be there in five years and, once it is, unusually likely to close anyway. The highest mature rate of all belongs to professional and technical at 7.1% — an industry where the firm is often one person’s expertise and closes when that person stops. Both patterns point the same way: where a business is a practice rather than an asset, time does not compound.

Where the business is a practice rather than an asset, time does not compound.

A low failure rate early is not the same as a durable business

Put the two rates side by side for the six industries with the safest first five years and the pattern is hard to miss. A low early closure rate usually means steady, local, non-cyclical demand — patients, pupils, repairs, the things people buy whether or not the economy is co-operating. That same steadiness is why nothing much accumulates. There is no back catalogue, no installed base, no contract book that outlives the founder’s attention. The industries where age helps most are the ones where the firm ends up owning something: routes, plant, inventory, a name people ask for. If your own early years have felt unusually stable, the question worth asking is what exactly is being built up while they pass.

Three limits. This is a single year, and 2023 was a heavy one — 523,958 firms closed, the most in the eleven years published since 2013 — so read the ranking rather than the levels. The data covers employer firms only, so a one-person practice with no payroll is not in it. And two of the industry totals are built by adding up their sub-industries, because the Census Bureau publishes no single row for manufacturing, retail or transportation; two of those sub-rows have a closure figure withheld for confidentiality, and assuming the worst — that every firm behind a withheld figure closed — moves no industry more than 1.8 points and changes nothing in the order above.

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.