Heather Strohm
Special to the Tribune-Star
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The old saying is “every cloud has a silver lining.” Basically it means think positively about every situation you experience. Why am I saying this? Well, because we all know the economy has had some definite challenges and unemployment continues to hover between 10 and 12 percent.
In Indiana, we are actually fortunate regarding unemployment, as Nevada has one of the country’s highest unemployment rates.
In 2012 not as many people are starting businesses and employing people. The number of U.S. companies that have started since the early 1980s continues to decline.
The Kauffman Foundation-Census Bureau produced a study on entrepreneurship and business owners, entitled “Where Have All the Young Firms Gone?” The study is actually quite interesting. Although the number of startup companies has declined fairly significantly, the number of businesses staying in business long term has increased. Here is the silver lining: Businesses are learning to run more efficiently.
During the 1980s, new businesses amounted to 13 percent. A little more than 30 years later, and the percentage decreases to 8. Of course this is an area of concern since new businesses have been a traditional source of job creation.
But now, business owners must look at how to stay in business and retain valuable employees. Bottom line? Owners must become more operational minded in order to retain qualified employees and reduce unnecessary expenses while simultaneously maintaining a strong culture, product or service and bottom line.
So why are fewer companies starting? First, new companies are not starting because current needs are already met in the marketplace.
Existing companies have a vast amount of knowledge they have gained from experience along the way, which has permitted them to operate more efficiently. With business owners performing better, there is less opportunity in the marketplace.
Research shows that in 2010, 2.1 percent of private sector workers were employed by new businesses versus 5.9 percent in 1977.
What is odd is that the decline experienced by new businesses did not impact the private sector otherwise. Actually, American industry increased by 6 percent of the population.
The decline in hiring by new businesses was countered by hiring in existing businesses.
In conclusion, it seems existing businesses are holding their ground. They have increased from a little more than 19 employees in 1977 to a little more than 22 employees in 2010, on average that is. One thought to ponder is: How we can help current business owners to stay in business longer, operate more efficiently, increase market share and thereby hire more employees to provide long term, mutually beneficial jobs.
Heather Strohm is the regional director for Indiana State University’s Indiana Small Business Development Center.
