The last few years have been extremely good for many small businesses across the country, but not all of them have enjoyed the success that typically comes with an overall improving economy. Moreover, it seems that when small businesses nationwide fold, there aren’t enough entrepreneurs moving in to take their place to keep the number of such companies growing.
In terms of the pace of startup activity per capita, the U.S. now ranks 12th in the world, according to recent data from Gallup. Further, the rate at which companies are folding is now greater than that of the rate at which they’re being formed. In fact, this has been the case for a few years now.
Perhaps unsurprisingly, the trend seems to have begun in 2008 or so, when the economy was still in the doldrums brought on by the national economic downturn, the report said. And it’s really only more recently that there seems to have been any sort of recovery in the nation’s small business birth rate, starting to tick up in 2010, but still well below the rate at which these companies closed their doors.
Part of a bigger trend
What’s concerning about the numbers for many entrepreneurs though is that the small business start rate has, for the most part, been slowly sliding downward for the last three decades, the report said. The rate at which they were being closed, meanwhile, has stayed more or less in the same range, with even the uptick in these decisions seen as a result of the economic downturn more or less being in line with those seen in the late 1970s and early 1980s.
Likewise, the net number of small businesses declined sharply in 2008 after spending much of the previous three decades adding between 100,000 and 150,000 or so new companies nationally every year, the report said. Now it seems that losing between 50,000 and 100,000 per year is the “new normal,” at least until the effects of the still-burgeoning recovery really take hold.
Owners who want to ensure they have the best chance for success in the coming months and years might want to think about the ways in which they can streamline their expenditures. For instance, if they can find more affordable small business insurance such as policies for liability insurance, they might be able to save thousands annually that they can put toward improving other aspects of their company finances.