by Ray Hayes
If I told you small business growth had stalled would you believe me?
If not, I have a bit of information that may change your mind. On average 600,000 small businesses are created each year and only a fraction of those business survive for 360 days. Since 2014, the United States has been hovering around 400,000 new small businesses a year. During the late 2000’s, the Great Recession was to blame for the lack of small business development, but with recent adjustments, small firms should be growing at pre-recession levels right?
According to Jason DeMers of Time Magazine, the answer for the lack of small business growth is complicated:
- Exaggerated fears – At least 60 percent of small businesses close within three years making it difficult to garner funding from financial institutions. Banks perceive more risk in lending to newer businesses which result in limited capital for smaller organizations. Due to this fact, “they [new entrepreneurs] never get funding, [thus] they never have the chance to gain entrepreneurial experience.”
- Walmartization – Walmart has everything you need, from the basic plumbing equipment to groceries. American’s are consequently moving away from small business chains to the lower cost conglomerates. As a result, the more money big businesses make, the more they give back to local communities overtaking local businesses.
- Lumping funding – Investors look for businesses with high potential and solid financial numbers. If a startups and small businesses does not meet these requirements, they are deemed to risky despite their possible unique business model. “This means fewer total businesses get the funding they need to grow, with a minority of exceptional businesses getting a ton of capital they probably didn’t badly need in the first place.”
- Millennial barriers – There are a ton of Millennial entrepreneurs and reports indicate that they are creating a ton of new businesses throughout the world. So what’s the problem? Well, a small percentage of Millennials are starting businesses in the United States. According to John Lettieri, co-founder of the Economic Innovation Group, during his testimony to the US Senate back in July of 2016, “Millennials are on track to be the least entrepreneurial generation in recent history.” One of the main reason behind the lack of businesses in the US is student loan debt therefore Millennials are hesitant and unwilling to risk their luck on creating a startup. “A lack of encouragement for millennials to take the plunge compounds this effect.”
In conclusion, we shall overcome. Unfortunately, there isn’t a quick fix to the problem however if we begin at the early stages of childhood and educate the youth about healthy business practice and the importance of owning your own business things may change. As soon as we come of the storm, “the stronger our economy is going to grow.”