May is National Small Business Month, a time to recognize the resilience, creativity, and determination that small business owners bring to their communities every day. This year, we are looking at a milestone that does not get enough attention: Year Three.
A Milestone Worth Celebrating
Here is something worth saying out loud this Small Business Month: making it to Year Three is a genuine achievement, and the data backs that up.
A lot of the conversation around small business survival focuses on Year One. And while that first year is genuinely challenging, the data tells a more interesting story. According to the U.S. Bureau of Labor Statistics Table 7: Survival of Private Sector Establishments by Opening Year, which tracks cohorts of new establishments across decades of data, survival rates follow a consistent pattern. Roughly 80% of businesses make it through Year One. That number falls to about 68% by Year Two, 60% by Year Three, and 54% by Year Four. By the time a business reaches its five-year mark, only about half of all businesses that ever opened are still operating.
That means roughly one in three businesses that make it past Year One still do not make it to Year Five. Year Three sits right in the middle of that stretch, and for most owners, it arrives quietly, without the fanfare of a launch or the relief of clearing Year One.
If you have made it this far, that is worth celebrating.
Why Year Three Feels Different
There is a reason Year Three can feel harder than Year One, even when the business is technically doing better.
In the beginning, there is momentum. You are figuring things out, wearing every hat, fueled by the energy of building something new. Early-stage support systems, including SBA resources, startup communities, and small business development centers, are designed to help new businesses launch. And there is a certain grace period that comes with being brand new: lower overhead, a lean operation, and the kind of determination that comes from having nothing to lose.
By Year Three, the business has moved from something you are building to something people are depending on. Customers rely on you, employees may be counting on you, costs have climbed, and the goal that got you started, just make it through Year One, is already behind you. Now you are navigating something different.
Current Business Climate
The Federal Reserve’s 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey, which draws on responses from more than 6,500 small businesses nationwide, captures the broader environment Year Three owners are stepping into.
The survey found that 77% of small businesses cited rising costs of goods, services, wages, or tariffs as a significant financial challenge, and 56% cited paying operating expenses. Firms continued to be more likely to report that revenues decreased over the prior year than increased, a trend that has persisted since the 2021 survey.
Those numbers reflect the general small business population. But they describe an environment where the margin for error is thin, and that context matters when you are running a business that is just finding its footing.
A September 2025 survey by Bluevine found that nearly 4 in 10 small businesses cannot cover more than one month of expenses in the face of a sudden financial disruption. The owners who make it to Year Five and beyond tend to be the ones who saw that gap and did something about it before a disruption arrived.
What the Data Says
Business survival does not come down to luck. Research consistently points to a handful of factors that separate businesses that grow from those that stall.
Businesses that track cash flow regularly, not just revenue and profit, are better positioned to handle the uneven stretches that are normal in any growing operation. Research by the JPMorgan Chase Institute found that firms with irregular cash flows were nearly twice as likely to exit as those with regular cash flows, and that businesses transitioning to more regular cash-flow patterns showed faster revenue growth. The goal is not to eliminate the dips. It is to see them coming far enough in advance to respond rather than react.
One of the most common missteps at the Year Three stage is waiting until a cash crunch to look for financing. By that point, options narrow and terms worsen. The Federal Reserve survey found that among small businesses that applied for financing in 2025, only 42% received the full amount they sought, with another 22% receiving nothing at all. Building a relationship with a lender when the business is stable gives owners flexibility they would not otherwise have when they need it most.
Early-stage businesses are often in execution mode, focused on keeping the doors open and filling orders. By Year Three, the owners who thrive begin thinking more deliberately about what the business needs to grow: the right clients, the right pricing, the right team, and in some cases, the right physical space.
Many Year Three owners have also drifted away from the mentors, advisors, and peer networks that helped them launch. Reconnecting with resources like AmPac’s Entrepreneurial Ecosystem, local Small Business Development Centers, or industry associations can provide perspective that is hard to find when you are deep inside your own business. SCORE’s own data show that mentored businesses were 12% more likely to remain in business after one year compared to the national average, and that 30% of owners who had even a single mentoring interaction reported measurable business growth, a figure that climbed to 43% among those with five or more sessions.
The Opportunity in Year Three
Year Three is a survival marker, but it is also the point where many businesses are positioned to make their most meaningful move forward.
The business has a track record now. There are real customers, real revenue, and real data about what works. That track record is exactly what opens doors that were not open before, including stronger financing, better partnerships, and more deliberate growth.
According to the Federal Reserve’s 2026 Report on Employer Firms, 46% of small businesses that sought financing in 2025 did so specifically to pursue expansion or a new opportunity. The businesses that are building cash reserves, maintaining clean financials, and thinking about capital as a tool for growth are the ones that use Year Three as a launchpad rather than a limit.
What AmPac Sees
At AmPac Business Capital, we work with small business owners across California, Arizona, and Nevada at every stage of growth. We see businesses at every stage of growth: some ready to expand, some working through the financial tightness that the data describes, and many who simply need a clearer picture of what their options look like before a need becomes urgent. If you are exploring what growth could look like, our entrepreneur ecosystem resources are a good starting point. If you are thinking about financing, our small business loan programs page lays out what we offer and who we work with. Either way, the right time to start a conversation is before you need one.
A Word for the Owner in the Middle of It
During National Small Business Month, attention often goes to new launches, rapid growth stories, and major milestones. But there is something equally important about the businesses quietly showing up year after year, adapting, learning, and continuing forward.
If your business is in Year Three, this month is a good time to look up from the work. Take stock of where the gaps are, and reconnect with the resources that can help fill them. The businesses that thrive at this stage are the ones that treat a hard stretch as an opportunity to grow, not just survive.