The Small Business Data Conundrum (Part 7): How Old is Your Business?

"Age is an issue of mind over matter. If you don’t mind, it doesn’t matter." — Mark Twain

For large corporations, the exact age of the business is often irrelevant except in broad ranges, as their access to capital, established market presence, and long-standing brand reputation typically matter more than the precise number of years in operation. A decade more or less typically has little impact on financial decisions or regulatory considerations. On the other hand, for consumers, age is precisely measured from birth, with a variety of regulations dictating acceptable ages for different activities—driving, voting, drinking, and retirement, among others.

Small businesses, however, exist in a unique middle ground where determining their age is anything but straightforward. Unlike consumers, they don’t have a clear-cut birthdate, and unlike corporations, which often have well-documented founding dates, structural changes, and extensive records, small businesses' history can be fluid and subjective. There are multiple ways to define when a small business actually starts:

• When the owner begins working on the business

• When the business is legally registered

• When the business officially opens its doors

• When the business makes its first sale

And these complexities only grow when considering acquisitions. If someone buys an existing business, does the age reset to the takeover date, or does it retain the original founding date? Different institutions and data providers answer this question in different ways, creating inconsistencies in how small businesses are classified by age. For example, the Small Business Administration (SBA) might define a business's start date differently from a commercial credit bureau, leading to confusion in loan eligibility assessments.

While this may seem like an esoteric issue, business age can be a critical factor in lending decisions. Many lenders exclude brand-new businesses from consideration due to the high failure rates of startups. However, if a business has been operating informally for years before registering or opening a storefront, should it still be considered brand-new?

Beyond lending, government programs and regulations frequently use business age as a criterion for eligibility. For example, some federal small business grants require businesses to be at least two years old, while state procurement programs might have different thresholds for bidding eligibility. Whether for tax incentives, grants, or procurement programs, the definition of business age can significantly impact access to opportunities.

Given these complexities, there’s a strong argument for more flexible and inclusive methods of measuring business age. One possible approach is a hybrid model that takes into account multiple milestones, such as initial business activity, registration date, and first revenue-generating transaction, providing a more accurate picture of longevity. A nuanced approach—perhaps incorporating multiple data points—could better reflect the true stability and experience of a business, rather than relying on a single registration date or an arbitrary cutoff.

Ultimately, how we define business age has real-world consequences, influencing credit decisions, policy determinations, and business support programs. As data-driven decision-making expands, establishing standardized yet flexible frameworks for determining business age will become increasingly essential.