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Contributing Authors

	Joe Kennedy Author of The Small Business Owner's Manual
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	Stephanie Chandler Author of The Business Startup Checklist & Planning Guide
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	Steven D. Strauss Author of The Small Business Bible
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	Tom Severance Author of Business Start-Up Guide
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Statistics

According to the U.S. Small Business Administration, small businesses (defined as companies with 500 or fewer employees):

Represent 99.7 percent of all employers.
Pay 44.3 percent of total U.S. private payroll.
Generated 60 to 80 percent of net new jobs annually over the last decade.
Create more than 50 percent of non-farm private gross domestic product (GDP).
Are employers of 39 percent of high tech workers (such as scientists, engineers, and computer workers).
Are 53 percent home-based and 3 percent franchises.
Made up 97 percent of all identified exporters and produced 29 percent of the known export value in fiscal year 2001.

In the United States, there is one female entrepreneur for every 1.5 male entrepreneurs. Of minority-owned businesses, 39.5 percent were Hispanic-owned, 30 percent Asian-owned, 27.1 percent Black-owned, and 6.5 percent American Indian-owned.

Around 50 percent of U.S. entrepreneurial activity is accounted for by individuals between 24 and 44 (compared to 55 percent worldwide). Americans between 45 and 64 years of age account for 36 percent of the U.S. entrepreneurial activity, much higher than the global average of 22 percent.

The Survival Rate of New Businesses

The number of businesses estimated to open and close each year averages roughly 10 percent of the total number of small businesses in the U.S. In 2003, the estimates reveal that 572,900 new firms entered the marketplace and 584,800 businesses closed.

Two-thirds of new employer firms survive at least two years, and about half survive at least four years. Owners of about one-third of the firms that closed said their firm was successful at closure. Major factors in a firm remaining open include an ample supply of capital, the fact that a firm is large enough to have employees, the owner’s education level, and the owner’s reason for starting the firm in the first place, such as freedom for family life or wanting to be one’s own boss.

Business survival also varies by industry and demographics. The industry with the highest 1992-1996 survival rate for firms owned by white non-Hispanics was oil and gas extraction (82 percent survival rate over the four-year period). African Americans were most successful in legal services (79 percent), and Hispanic and Asian Americans in health services (66 percent and 76 percent, respectively).

To read more about these business statistics, visit: www.sba.gov/advo/stats/sbfaq.html. While there you may also want to read Business Success: Factors Leading to Surviving and Closing Successfully by Brian Headd, Center for Economic Studies, U.S. Bureau of the Census, Working Paper #CES-WP-01-01, January 2001; Advocacy-funded research by Richard J. Boden (Research Summary #204).

Why Do Businesses Fail?

According to statistics cited on the U.S. Small Business Administration website, 50% of businesses fail within the first year and as many as 95% fail within the first five years. These statistics are startling, but keep in mind that many business licenses are applied for on a whim and then the owner later decides not to pursue a business. It is likely that these occurrences affect the statistics. The fact remains that an alarming number of new businesses fail each year. The SBA lists the following as the most common reasons for failure:

Lack of experience
Insufficient capital (money)
Poor location
Poor inventory management
Over-investment in fixed assets
Poor credit arrangements
Personal use of business funds
Unexpected growth
Competition
Low sales

In examining these factors, the common denominator seems to be a lack of planning. If you are willing to put forth the effort to meticulously plan your endeavor, you will have a significant advantage over the businesses that aren’t managed properly. Keep the above factors in mind and address them long before you flip on the open sign.

Is Corporate America Really Providing Security?

The new millennium has marked a time in America when unemployment rates have reached staggering levels. Many of us have watched the pink slips handed out to our friends and loved ones or have been victims of this cruel fate ourselves.

Who can forget the financial disasters experienced by the employees of Enron? Not only did they lose their jobs, but many had the bulk of their retirement savings invested in a company they believed in. It was an example of employee loyalty that ultimately led to hundreds of cases of financial devastation.

Perhaps we have been conditioned to believe in the sanctity of corporate America. Our parents’ generation went to work for a company and stayed there for 35 years, retired and collected a pension. Many of us learned to follow in these same footsteps.

But times have changed and today there are few companies that even offer pension plans. Even fewer are the numbers of people who stay put in the same company for 30+ years. Instead, many Americans devote several years to a company, then move on to a different company seeking better salaries, working conditions or status. Just as it’s easy for employees to move from job to job, the corporations themselves often treat employees as expendable resources.

This economy and the massive job losses have prompted a renewed interest in business ownership. If corporate America isn’t safe, then what are the alternatives? Many believe the only option is to put their fate in their own hands.