Studies of patterns of business failure find that the majority of small startup businesses (those with <100 employees) subsequently fail. Moreover, most which fail do so within the first few years of operation. A 1989 report on small business in Ontario concluded that only about a quarter of new businesses were still operating 10 years after they started and almost half of all start-ups disappeared within three years.

A study of business mortality using market indicators to predict mortality and survival of publicly traded US companies over the period 1962-1985 found that only about half of the smallest public companies survived a decade or more. In contrast, about 80% of the largest public companies survived more than two decades. About 25% of the smallest businesses experienced unfavourable mortality (e.g., delisted, halted trading, suspended by the SEC) within a decade and, in fact, about 5% suffered this fate within one year. Only about 1% of the largest companies experienced unfavourable mortality over a twenty year period. Mid-size companies had higher favourable mortalities (e.g., merger, exchange, or liquidation) than either the larger or smaller businesses, but small public companies were also prone to being swallowed up by larger ones as opposed to simply failing.

Significant differences appear to exist in the way that business difficulties are resolved by small and large entities in Canada. Bankruptcies of large companies are rare, whereas they are a common occurrence for small businesses. In part, this is due to the fact that large companies may be reorganized through a receivership, they are less dependent upon their owners, and they are more likely to have saleable subsidiaries or divisions.

There is quite a bit of overlap between size and age variables. This makes it difficult to distinguish the effects of such age-related factors as management inexperience, lack of product and market maturity from the effects of size. Although size seems to be more significant than age, the mortality data for US public companies suggests that there is an incremental effect of being a new entity, beyond that of simply being small. Also, according to Dun & Bradstreet's analysis of business failures, inexperience was the major cause of 30% of business failures. In brief, ceteris paribus, newer businesses appear to have a higher risk of mortality than older companies. Canadian data about mortality of public companies was not available.

About 5,000 Canadian companies are publicly traded. There are comparatively few bankruptcies among them. For example, a search conducted to identify public company bankruptcies yielded only 40 such companies for the period 1985-1990.

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