HONOLULU (KHON2) — Opening a business is difficult and the fail rate within the first year is tough to get over.
LendingTree conducted a new study that analyzed the latest U.S. Bureau of Labor Statistics (BLS) data to find the failure rate for businesses across the nation.
They found nearly one in five business fail within the first year and Hawaii reportedly has the highest fail rate.
The study reported businesses can falter for different reasons like financial constraints, workforce problems, owner burnout and more.
Depending on where you are opening a business matters as well. For instance, opening a snowboarding shop in Honolulu won’t phase well compared to opening one in Reno, Nevada.
They report the business failure rate in the U.S. within the first year is nearly 20% or roughly 1 in 5.
The study looked at businesses during the start of the pandemic, which was notably a rough time to open a new business.
Despite Americans opening these businesses amid the start of the crisis, they fared better than people who began one the year before. Their study showed the business failure rate in March 2020 for businesses that opened a year earlier (in March 2019) was 21.6%, which is more than three percentage points higher.
Thirty-one states and the District of Columbia have a higher percentage of businesses that fail in the first year than the nationwide rate of 18.4%. Hawaii tops that list at 25.4%, followed by D.C. (25.1%) and Kansas (23.2%).
Their study found 38% of failed startups blame running out of cash and not being able to raise new capital. Insufficient cash-flow can come down to several things. Operating on lean margins, lack of product market fit, failure to capitalize on opportunities and more.
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To read the full report by LendingTree and to see where other states landed on the list head to their website.