Open Forum reports that there is an 11% increase in the number of small businesses closing and a 17% decline in the number of small businesses opening.
Get Busy Median reports 69% of small businesses survive at least two years, 44% of new firms survive four years and 31% survive at least seven years. The Orange County Register states that new employer businesses has fallen 27% since 2006, which means that startups, which 10 years ago would have created 4.6 million jobs, are only creating 2.5 million jobs now. Also, 10 years ago the average new business opened with 7.5 jobs and today it is 4.9 jobs.
Smart Money states that in 2009, there were 552,600 new businesses created while 721,737 small firms closed or went bankrupt. They go on to report that in 2007, 75% of angel funded deals came at the start up stage, while in the first half of 2011 only 39% of companies backed by angels were in the startup phase. This trend is just one more sign of how hard the recession has been on entrepreneurs. This recession has not only hurt sales, sending many small businesses under, it has also obstructed the ability to raise money for the next great idea.
So why would anyone in their right mind risk their money and reputation for only one in three chance of being in business after seven years?
Bloomberg Businessweek reported this week that the Wal-Mart greeter job, which has been around for 30 years, has been removed from the overnight shift of its stores. Obviously they will be using those hours more productively for tasks like stocking shelves or just eliminating the hours all together. Every generation loses entire job categories -- think milkmen.
So are today's entrepreneurs desperate and opening a business because they just can't find a job? Let's hope not, because that is almost a guarantee your business will fall into the two thirds that fail.
Clearly you need a good idea, product or service before even thinking about opening up your own business. Assuming you have this great idea, then the next hurdle is: do you have the traits to run your own business? Some needed traits include being a self-starter, not getting intimidated easily, being adaptable to change, enjoying competition, being able to address risk, making decisions quickly, and not seeing mistakes as failures.
Then you need to overcome the basics of starting a business like cash flow (make sure you have at least six months of savings to live from), time management, a sound business plan and the ability to wear all the hats yourself.
Reading all these numbers and knowing you don't have the equity now in your house to fund a business may be one of the most depressing things you do today. But the optimistic glass half full American entrepreneur doesn't read these numbers like a normal human being. They say "I am going to be in the one third that succeeds and I am going to make a lot of money doing it"!
We are just one small company doing our part to help grow the American dream. The rest of America needs to wake up and bring the small business numbers back to where they were at the beginning of the 21st century. Banks need to actually begin loaning money again to small businesses. The government bailed out the big businesses, and now must focus on building up Main Street again through backing small business loans, giving tax break incentives and giving government contracts to small businesses. The average American needs to support their local small business rather than running to the big box store. The numbers don't lie. Supporting small businesses is an American team effort and we need to get those numbers back to where they were ... together.