U.S. businesses are being destroyed faster than they’re being created

[onehandle]

The American economy is less entrepreneurial now than at any point in the last three decades. That's the conclusion of a new study out from the Brookings Institution, which looks at the rates of new business creation and destruction since 1978.

Not only that, but during the most recent three years of the study -- 2009, 2010 and 2011 -- businesses were collapsing faster than they were being formed, a first. Overall, new businesses creation (measured as the share of all businesses less than one year old) declined by about half from 1978 to 2011.



The authors don't mince words about the stakes here: If the decline persists, "it implies a continuation of slow growth for the indefinite future." This lack of economic dynamism, particularly the steep drop since 2006, may be one reason why our current recovery has felt like much less than a recovery. As Matt O'Brien noted on Wonkblog last week, annual job growth rates have stubbornly refused to budge above 2 percent for the duration of the recovery.

The authors of the Brookings study dug beyond the national numbers to look at the change in new firms at the state and metro levels and found that they generally mirrored the national trends.

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/05/u-s-businesses-are-being-destroyed-faster-than-theyre-being-created

[RKP5637]

1. Also, IMO, many small businesses today are wiped out by large corporations some of whom suck the

lifeblood out of everything they come near.

[onehandle]

2. Yeppers. nt

[Victor_c3]

3. Yup

a new housing development goes up and a new strip mall is built next door with a whole slew of corporate chain stores and corporate restaurants. Small mom and pop stores that used to make up the main streets of the US don't even stand a chance.

Perhaps this is an oversimplification, but I believe that the unbridled growth of corporations and policies that favor them over small business is responsible for many of the issues ranging from financial to even social issues we see in our nation today.

[Demo_Chris]

5. I largely disagree. The larger the corporation...

The more loopholes and gaps in the services they offer. More, the larger the corporation, the slower they are to respond to both internal md external factors. Smaller competitors do not suffer this issue. The problem, in my opinion, is not so much that companies like Walmart are big, but that they are very VERY good at what they do. They are focused in a way that many small start ups are not. Given what I do, I meet new business owners every week, and an astonishing number seem to believe owning a successful business is no more difficult than hanging out a sign and waiting for the cash to pour in.

Retail vendors in particular are bad in this regard. They don't know how to sell, what they are selling, what the public is buying, why, and what separates them from their competitors. Some seem to make it point of pride never to study their competition at all. These are not business owners who took a carefully crafted business plan to a bank, they don't even know what a business plan is.

I am not saying the economy is going great and these failures are all a result of owner incompetence. It's not. Based on what I am seeing the economy is heading south yet again. And most of the business owners I meet are doing it more from desperation than anything else. Finally, banks are no longer lending, they make their income playing the markets and collecting bailouts.

[RKP5637]

6. Very good analysis! n/t

[snot]

4. Also, when 99% of us have no spare change,

we can't spend it on goods or services from new businesses.

[Cresent City Kid]

7. Technology has altered my industry - printing

The printing press is essentially the same as it has been but the business is drastically different. The corner print shop is virtually gone, the work has moved to large wholesale printers Vistaprint is similar to these except that they sell direct to consumers. The wholesale printers have freelance designers and brokers doing their sales and art for them, and efficiency has reduced the number of full time salary jobs available. The freelance design field is flooded with a mix of true professionals and jokers who think having Photoshop makes them designers. It's a cutthroat market and they have to charge high prices to make a living.

Another tech trend in business generally is that tiny startups make a huge splash and sell for millions but only employ 5 - 20 people. Efficiency is great but it will have an effect on the number of solid full time positions to be had.

[Nay]

8. I suspect that many startups fail because they start out way

undercapitalized. Someone I know started a repair business, was pretty successful after 4 years of using his own money, but was STILL unable to get a $4000 loan from the bank even though he already had way more than $4000 in that same bank. If banks aren't willing to lend to him, I can't imagine how any business gets enough credit to do what it needs to do.