New Data Shows Where US Businesses Fail Fastest

Washington, D.C. and Tennessee have the highest first-year failure rates for new businesses.

Apr. 12, 2026 at 9:09pm

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A high-end, photorealistic studio still-life photograph featuring a simple arrangement of premium business objects like a leather-bound notebook, metal pen, and glass paperweight on a clean, monochromatic background. The objects are dramatically lit with sharp shadows, conceptually representing the difficulties facing new enterprises.A minimalist studio still life captures the challenges and uncertainties facing new businesses in the current economic climate.Delaware Today

According to a recent analysis of Labor Department data, 22.1% of American private-sector businesses fail within one year of opening, with the failure rate rising to 65.3% after 10 years. The report found significant disparities between states, with Washington, D.C. having the highest first-year failure rate at 32.9% and Tennessee at 29.3%, while Washington state had the lowest at 17.5%.

Why it matters

Conditions remain challenging for businesses in the U.S., with surveys showing an increasing number are concerned about inflation and cautious on hiring and investments amid growing economic unease. Understanding where businesses are struggling the most can help policymakers and business leaders address the underlying issues.

The details

LendingTree's report, based on an analysis of Bureau of Labor Statistics data, revealed the states with the highest first-year failure rates were Washington, D.C. (32.9%), Tennessee (29.3%), Delaware (27.2%), Oregon (26.7%), and Oklahoma (26.5%). On the other end, the states with the lowest first-year failure rates were Washington (17.5%), South Carolina (17.7%), Louisiana (19.6%), California (19.7%), and Iowa (19.8%). By industry, the information sector had the highest first-year failure rate at 28.4%, followed by professional/scientific/technical services at 25.5% and administrative/waste services at 24.3%.

  • The data analyzed covers the one, five, and 10 years ending in March 2025.

The players

LendingTree

A financial services marketplace that conducted the analysis of Labor Department data.

Matt Schulz

LendingTree's chief consumer finance analyst.

Neil Bradley

Executive vice president of the U.S. Chamber of Commerce.

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What they’re saying

“One of the biggest problems is going in without a real focus on what you're trying to accomplish and who you're trying to serve. Starting a business is hard and incredibly risky. If you don't have a plan for the audience you're targeting and what problem you're helping those people solve, your odds of success just get smaller and smaller.”

— Matt Schulz, Chief consumer finance analyst

“Views of the national and local economies have turned more pessimistic, concerns over inflation have jumped, and plans for future hiring and investment dropped markedly. Taken together, this suggests small business owners are worried about the future state of the economy, but it remains to be seen if this will translate into changes in their current operations.”

— Neil Bradley, Executive vice president

The takeaway

This data highlights the significant challenges facing new businesses across the country, with over one-fifth failing within the first year and two-thirds closing within a decade. Understanding the regional and industry-specific trends can help policymakers and business leaders develop targeted strategies to support entrepreneurs and foster a more resilient small business ecosystem.