Michael Jeanfreau, Senior Economist

The constant churn of business formation and closure is a normal feature of a healthy economy. New businesses open, others shut down, and the competitive process reallocates resources to their most productive uses. Startups introduce new products, services, and innovations. If they operate efficiently and meet market demand, they survive and grow. If not, they eventually give way to firms that are better positioned to serve customers and allocate resources. This filtering process is one of the primary ways economic efficiency improves over time.

Business Employment Dynamics (BED) data from the Bureau of Labor Statistics tracks when businesses start, how long they survive, and how they grow. BED data measures business activity at the establishment level, where an establishment refers to a single physical location at which business operations occur. Some establishments are part of multi-location firms, while others are stand-alone operations. In this dataset, a new establishment is any business location that did not exist in the previous quarter, whether it belongs to a newly formed firm or is a new location for an existing company.

This article builds on an earlier discussion of startup formation in Utah by shifting focus toward the survival, growth, and employment patterns of these businesses after they are established. 

Throughout this analysis, results for firms aged 25 years and older are excluded. The earliest year of BED data is 1994. Therefore, only a limited number of cohorts in the BED data have reached these ages, which makes the data increasingly sparse and more sensitive to small variations. Excluding these older firms avoids distortions that can appear when only a few surviving businesses remain in the sample.

BED figures are reported on a “year ending March” basis. For instance, the “Year Ending March 1997” series covers April 1996 through March 1997. This means that the data primarily reflect conditions during 1996, with only the first three months of 1997 included.

Average Establishment Survival Rates in Utah

Business survival rates tend to follow a predictable pattern. The chart above presents the average survival rates across all available starting years, or cohorts, offering a baseline for understanding business longevity in the state. Only those businesses that survived to their first March are included in the BED data. After one year, the survival rate drops to approximately 77%. By the fifth year, only about 47.5% of firms remain active, meaning more than half of new businesses do not make it beyond the five-year mark.

This gradual, but steady, decline continues as firms age. By year 10, survival falls to roughly one-third, and by year 20, fewer than one in five businesses are still operating. The curve illustrates an intuitive pattern: the older a firm becomes, the more obstacles it must successfully overcome, and the pool of survivors narrows considerably over time. 

Firm Dynamics

As a cohort of establishments age, the number of surviving establishments (red) declines steadily as weaker firms exit the market. Average employment among survivors (orange, right axis) rises over time, reflecting the growth of successful firms expanding their workforce while less successful firms either stagnate or exit entirely. Total employment (blue, left axis) is highest at year zero, when the cohort includes all firms, and generally declines as attrition reduces the number of active businesses. Even though average employment per survivor increases, the shrinking pool of firms leads to a net decline in total employment over time. Essentially, the high initial entry volume of many small firms is met with rapid early attrition and is followed by a gradual concentration of employment among a smaller set of survivors.

Number of New Establishments in Utah

In recent years Utah has experienced a surge in new establishments, as seen above. This chart tracks the number of new startup establishments over time. Utah saw modest growth in startup activity through the late 1990s and early 2000s, peaking in 2006–2007 before the Great Recession. The subsequent economic downturn led to a decline in startup formation, with new business creation bottoming out around 2010–2011.

From that low point, the recovery in startup formation was slow throughout much of the 2010s, only gradually climbing back to pre-recession levels. However, a notable trend in this data is the surge in startup activity following the 2020 recession. Starting in 2021, Utah experienced a notable spike in new business formation, with annual startup counts reaching levels far above any previous year on record. Startup activity remains elevated compared to prior decades.

This post-recession surge may reflect a mix of factors: a wave of entrepreneurial experimentation as individuals reassessed careers during lockdowns, increased access to online business platforms, as well as the rapid acceleration of remote work opportunities that lowered startup barriers.

Total Employment of Startups in Utah

Despite the higher establishment numbers, employment in new establishments in Utah has not risen at the same rate due to decreasing average employment in new establishments. The chart above tracks total employment among Utah’s new startup cohorts by year. In the late 1990s and early 2000s, new startups typically generated between 40,000 and 50,000 jobs per year. That level fell considerably during the 2010s, with total startup employment dropping into the 30,000 range for nearly a decade. While the number of new businesses surged dramatically following the 2020 recession, total startup employment only returned to levels seen two decades earlier.

This long-term decline in average employment per new business is not unique to Utah. Similar patterns have been observed nationally and are often attributed to structural shifts that have made starting a business cheaper and easier. Lower barriers to entry, technology-driven efficiencies, and the availability of outsourced services have allowed more firms to launch with smaller staff. The result is a growing number of startups employing fewer people at inception, even during periods of record business formation.

Average Employment in New Establishments in Utah

Average employment per startup in Utah has declined steadily over the past three decades. In the 1990s, new establishments typically launched with between 6 and 7 employees on average, peaking at 7.3 employees in 1997. Through the 2000s and 2010s, that number gradually declined. By the mid-2010s, new establishments averaged around 4 to 4.5 employees. The most recent data from 2024 shows new startups averaging 3.6 employees at inception.

The Great Recession

The health of the broader economy can have an effect on new establishment survival rates. While it is difficult to start and maintain a business in any economic climate, starting a business during a recession can increase the chances of failure. This can be seen in the comparison of survival rates for establishments started in 2004, 2008, and 2017. While economic conditions were generally good in 2004 and 2017, they were poor in 2008 at the onset of the Great Recession. Startups founded in 2008 struggled more than those launched in stronger periods. 71.1% of the 2008 cohort made it through the first year, compared to 77.6% of businesses started in 2004 and 79.2% in 2017. By the third year, survival for the 2008 group had dropped to 50.1%, while the 2004 and 2017 cohorts were at 61.3% and 65.8% respectively. At the five-year mark, the gap remained. 42.4% of 2008 firms were still operating, versus nearly half (49.2%) of the 2004 group and just over half (51.0%) of the 2017 group. These figures show how businesses born during the recession faced greater attrition from the start, and the disadvantage continued over time. Looking at results by year of birth, or by the broader economic conditions firms entered into, illustrates how the business cycle shapes survival outcomes.

Conclusion

Utah’s startup landscape illustrates both the promise and the fragility of new business creation. Surges of entrepreneurial activity, like those seen after the pandemic, bring energy and experimentation, but sustaining that momentum is more difficult. Survival depends not only on individual decisions but on the economic environment into which firms are born. Patterns across decades suggest that economic downturns can have lasting effects, while recovery periods create more durable foundations. As startups launch with smaller teams and lighter footprints, the question is less about how many new businesses appear and more about which ones can endure long enough to shape the state’s future economy.

Recent years have seen increased startup activity in Utah but also signs of rising early-stage risk. At the same time, businesses are launching with smaller teams, lower costs, and faster experimentation, which continues to reshape what new firm formation means for employment and long-term growth.