Michigan ranks among the top states nationwide for new business survival, with more than half of its newly launched enterprises remaining operational after five years, according to a report from the ecommerce platform Build Your Store that analyzed U.S. Bureau of Labor Statistics data for establishments opening between 2018 and 2020.
Michigan’s Five-Year Survival Rate and Regional Rankings
Michigan posted a five-year business survival rate of 54.7%, placing it behind only four other states in the country, according to the Build Your Store report analyzing U.S. Bureau of Labor Statistics figures. Other Great Lakes states also performed strongly in the study. Minnesota ranked first nationally with a 56.2% five-year survival rate, while Pennsylvania and West Virginia tied for second at 55.9%, followed by Illinois at 55.2%.
Conversely, Washington recorded the lowest five-year survival rate in the nation at 41.8%, despite holding the highest one-year survival rate at 82.5%, according to the data. Alex Rainville, assistant professor of strategy at the University of Michigan-Dearborn, noted that while the high ranking is a positive indicator, long-term economic trends require careful observation. “It’s always better to be higher than lower,” Rainville said. “I think it’s hard to say whether it’s indicative of long-term success… the trend is heading in the right direction, though.”
Factors Driving Business Longevity and Economic Uncertainty
Rainville pointed out that institutional quality, predictable infrastructure, and workforce caliber heavily influence business survival rates. Conversely, factors that foster uncertainty and unpredictability work against enterprise longevity. “It could be policy choices, changes in policy for no clear reason that make it harder for businesses to know what’s coming,” Rainville said. He added that southeastern Michigan has experienced a deliberate focus on entrepreneurial growth, supported by policy initiatives funneling resources into Detroit over recent years.
The state’s high survival ranking follows a pandemic-era dip in business survival rates. Initiatives to encourage entrepreneurship in Metro Detroit have also played a role.
Entrepreneurial Growth in Southeast Michigan
Individual business trajectories reflect the broader statistical gains tracked by federal agencies. Nick Joe Kelley started Elite Paint Home Renovations as a side venture painting homes before turning it into a full-time business in 2020. During its founding year, Kelley operated with a team of three and used Facebook marketing to generate $500,000 in year-end revenue.
In its second year, Elite Paint tripled its revenue by hiring eight additional workers, though Kelley managed customer service, project management, and sales concurrently without an office administrator. To scale operations sustainably, Kelley established step-by-step processes for painting and spraying. By the third year, the Roseville-based business opened a physical shop and added an office administrator and project manager. Projected to generate $6 million in revenue, Elite Paint now operates from a 4,000-square-foot facility with 53 employees offering cabinet refinishing, wallpaper removal, and tile installation, while providing employees with insurance, paid time off, and a 401(k) plan featuring a 3% match.
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