A Surprising Finding On New Business Mortality Rates

The common view is that four out of five new U.S. businesses fail within five years of their startup. Yet roughly 400,000 entrepreneurs take the plunge each year. Why do they bother?

The answer, says economist Bruce A. Kirchhoff of the New Jersey Institute of Technology, is that their chances of surviving are far greater than reported. In a new study, Kirchhoff traces the fortunes of some 814,000 businesses started in 1977 and 1978 over the following eight years. His findings indicate that over half survived in one form or another--28% under their original owners and 26% under new owners. An additional 28% were shuttered voluntarily, while only 18% actually failed in the sense that they left outstanding liabilities.

In other words, says Kirchhoff, "entrepreneurs aren't stupid. They look around and realize their chances of success are far better than the experts claim."

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