The Wall Street Journal breaks down the biggest reasons small businesses fail, drawing on national data, expert insights, and real-world examples of entrepreneurs navigating early-stage risk.

They turned to UCLA Luskin’s Robert Fairlie for his expertise, citing his finding that “only half of new businesses survive two years, and only a third last five years.” The piece underscores how early-stage entrepreneurs often underestimate cash-flow needs and overestimate initial demand, leaving them vulnerable within those early years of growth.

It also points to the advantages held by those with prior business exposure — whether through family enterprises or past industry experience — which can translate into stronger planning, better decision-making, and higher sales. “The children of family-business owners were more successful and less likely to exit,” with family work experience linked to roughly 40% higher sales, says Fairlie.

Fairlie also guides the discussion on financing gaps, especially for minority-owned businesses, explaining that they’re more likely to exit due to limited capital access. His data shapes its core conclusions about why startups struggle and what factors boost survival.