I ran across the bit of disheartening information recently in the NY Times. It has to do with fewer people starting a business, and in fact the number of new businesses created and start ups is close to a 40 year low (which occurred just a couple years ago). The census bureau, which reports on this data, shows that only 414,000 businesses were created in 2015, which is the latest year in which the data is available. This low business creation is terrible news as we wrap up 2018 Small Business Week, which ends today May 5th.
Now 414,000 does sound like a big number, however it is down around 30% from the 558,000 that were created in 2006, which was before the recession started. The US economy is obviously far from a recession, so why are so few businesses being created?
Being a SCORE mentor and an entrepreneur myself, I think that this trend is sad to see. While starting a business is very risky and many fail, for those who take the chance it can help build confidence and pride. And even better, for those succeed it can lead to incredible sense of fulfillment from building something from scratch. It can lead to financial reward, maybe flexibility in lifestyle, challenge yourself, allow you to “call your own shots”, gain new skills and has tons of other benefits. Heck, even if someone were to fail just stepping up to the plate and taking a chance is a great feeling.
Reading through multiple articles on the topic, there seems to be no easy to explain reason why the number of start ups continues to decline, with only 414K created in 2015. Some experts say that it is harder to challenge bigger or established companies. For example, would someone want to start an internet company that competes with the well-entrenched players? Or would someone want to start a retail store with Amazon disrupting the industry, and who can even think of matching that behemoth? Or start a manufacturing company with all the issues around trade?
Other experts say it may be the aging of the population, and as people age (baby boomers, etc.) they may be less likely to take on any risk. Maybe they would rather get the steady paycheck from a corporate job. Maybe they think they missed their window to start a company.
Another reason is people may not want to take the risk after they made it through the great recession. Maybe they saw more businesses fail (which they did during that time), so they do not want to take a chance. However there were also millions of lay-offs in the corporate world, so that risk is there too.
Whatever the reason, it is unfortunate to see the number of new start-ups continuing to decline. But of course, as we mentioned, immigrants are definitely going down the path of being entrepreneurs….for many reasons they are still starting companies and taking that chance. I personally hope the trend will reverse itself, and entrepreneurship/business creation is both great for the country and it can be great for the person who starts a company.