You’ve probably heard some version of the line: most startups fail. Sometimes it’s 90%. Sometimes it’s 99%.
That second number isn’t a real statistic. But the real data is more interesting than the myth, especially if you’re weighing a “boring” business against a startup.
So I dug into it.
The baseline: all new businesses
The best data comes from the Bureau of Labor Statistics, which tracks how long new business locations stay open. According to its latest figures, about 78% of new establishments survive their first year, 51.4% make it five years, and 34.7% make it to ten.
So roughly one in five closes in year one, half by year five, and two in three by year ten. And the first year is the most dangerous stretch: survival rates drop most steeply in a business’s first year of operation, and that pattern holds across every major industry.
Tech startups: a long-shot game
There’s no single perfect number for tech, but two data points tell the story.
Venture-backed startups. Harvard Business School’s Shikhar Ghosh studied more than 2,000 companies that raised at least $1 million in venture funding. He found that as many as 75% never returned cash to their investors, and 30 to 40% liquidated, with investors losing everything.
The big wins are rare. Of the more than 10,000 software companies that received venture funding since 2003, only 40 grew to be worth over $1 billion. That’s 0.4%.
The closest government category. The BLS doesn’t have a “tech” category, but its information sector — publishing, software, telecom, and similar businesses — is a reasonable proxy. Among businesses that opened in 2013, only 29.1% of information-sector establishments were still operating ten years later, one of the lower survival rates of any industry.
Tech is built for big outcomes. A tiny handful win huge, and most don’t make it.
Trade businesses: a front-loaded game
The BLS doesn’t track painting or plumbing on their own, but construction which includes most trade contractors is the closest category. And the latest data looks very different from tech.
In the latest figures, construction businesses survive at 79.7% after one year, 56.5% after five, and 42.6% after ten. Better than the average business at every milestone.
The first year is still the hardest. In past data, construction saw the steepest first-year drop of any major industry. But the ones that get through tend to last.
And here’s the part I find most important. When people in the trades explain why so many new businesses fail early, they rarely point to a lack of customers. As one plumbing industry publication put it, most in the industry agree that a lack of business knowledge is a big contributor as many shops are started by skilled tradespeople who’ve never run a business.
Why the difference? My take
A tech startup usually has to invent two things at once: a product, and a market willing to pay for it. Most of them never get the second one.
A trade business doesn’t have that problem. Houses need painting. Pipes leak. Lawns grow. The demand already exists, customers already know what they’re buying, and you can get paid from your very first job.
So the risk in the trades is different. It’s not “will anyone want this?” It’s “can I run the business well?” — pricing, estimating, cash flow, hiring, and getting through the first year.
That’s good news, because those are learnable skills. I’ve written about my own mistakes here like underestimating the prep work on an older home last month. Every one of those is something you can get better at. You can’t learn your way into a market that doesn’t exist.
A few honest caveats
These numbers measure different things. Business survival and investors getting their money back aren’t the same measure, so this isn’t a perfect apples-to-apples comparison.
Closing isn’t always failing. Some owners retire. Not every closed business went under.
Construction is a broad category. It’s the best available proxy for the trades, not a perfect one.
But the overall picture holds: trades carry a hard first year and steadier odds after that. Tech is a long shot with a huge payoff for the few who win.
The takeaway
If you’re weighing a startup against a blue-collar business, don’t just ask which is more exciting. Ask what kind of risk you want to take on.
With a startup, you’re mostly betting on whether the market shows up. With a trade business, the market is already there and the bet is on you.
Zac
Quick question for you
I’d love to know more about who’s reading this. Hit reply and tell me which one fits you best:
I’m thinking about starting a trade business.
I already run one.
I’m thinking about selling or stepping back from a business.
I’m just curious about the space.
And if you have a second: what’s the biggest challenge you’re facing right now?
I read every reply, and your answers help shape what I write next.
P.S. If you know someone weighing a startup against something more practical, forward this to them.