6/30/15 Death of Small Business


For generations, small businesses created more jobs than large corporations.

But this may be coming to an end.

The U.S. Small Business Administration defines a small business as a firm employing under 500 employees.  Or with annual revenues of less than seven and half-million dollars.

We may be seeing fewer and fewer small businesses.

Data compiled over several decades show that for the first-time in generations, more businesses are disappearing than are starting-up.

The Brookings Institution, a think tank, says “business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned-over.”

Brookings tells us that historically, a new business was started about every minute.  And one failed about every 80 seconds.  It’s now reversed.

The decline started nearly 40 years ago.  The dramatic change occurred about a decade ago when business failures began to spike and new business entries suffered a steep decline.  In 2008 more businesses disappeared than were created.

There are at least two reasons for this.

One is the rate of consolidation.  Some smaller businesses – rather than failing – are being acquired by larger firms.

The other is the growing and costly regulatory environment at the federal, state and local levels, which makes it more difficult for entrepreneurs to launch and sustain a small business.

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