Now’s the Time to Be an Entrepreneur!

Kauffman Index - 2016 - Startup Activity - National Index
The Kauffman Foundation recently released their “2016 Index of Startup Activity,” which presents some interesting results for last year’s entrepreneurial activity.

Here are a few highlights:

The Good News

1. Overall Startup Activity

For the second year in a row, startup activity continued to rebound from the low point of two years ago—the lowest level of startups in the past 20 years.

The Kauffman Index tells us that an average of 550,000 entrepreneurs per month started new businesses in 2015. This means approximately 6,600,000 new businesses were started in 2015. (Please be aware that this number includes ALL full-time business startups, not just those with employees.)

This rate of startups for 2015 was based on 330 adults out of 100,000 starting new businesses during 2015. This compares to only 280 adults out of 100,000 starting a business in the 2014 Index (for the year 2013).

2. Good News For Female Entrepreneurs

More good news is that female entrepreneurs had the largest increase in the rate of new startups in 20 years, tied with a comparative increase in 1998. Women created new businesses at a rate of 260 adult women per 100,000.

More important, 84.6% of new female entrepreneurs are considered “opportunity” entrepreneurs—that is, they did not come out of unemployment. This compares to 78% of male entrepreneurs not coming out of unemployment.

3. Immigrants Have the Highest Rate of New Business Startups

Immigrants started new businesses in the U.S. at almost twice the rate of native-born entrepreneurs.

Immigrant entrepreneurs now make up 27.5% of all new entrepreneurs in the U.S. This number is up from 13.3% in the 1997 Index.

This means that immigrants are much more likely to start a new business than are the native-born. This may explain why 41% of Fortune 500 companies have been started by an immigrant, or the child of an immigrant. (Mr. Trump—Please take note!)

The Not-so-good News

1. Comparative Startup Levels

Even though startup activity is rebounding, the rate of new startups is still below the level of activity we had before the Great Recession.

With underemployment savaging the U.S. workforce it is a little surprising that the rate of new startups has not grown faster than it has. So, maybe now is a good time for you to consider being an entrepreneur.

2. Startups With Employees Continues to Decline

This is a new category in the Kauffman Index and it measures the ratio of new startups with employees divided by the number of existing employer businesses.

Data is only available through 2013, but it shows that this category of startups has been trending downward for quite some time. In fact, 2013 was the second lowest year on record only beat out by the Great Recession year of 2010.

This is not an encouraging statistic inasmuch as small business is the business segment that normally provides the most new jobs.

3. Number of Young Entrepreneurs Continues to Decline

I think it is interesting to note that the population of younger entrepreneurs is also in a long-term decline—although the age group 35-44 did experience an increase from 2014 to 2015.

Here is a table comparing the rate of new entrepreneurs by age group:

Entrepreneurs by Age

Are our younger generations discouraged about starting a business of their own? I wonder.

* * * * *

The above is a brief overview of the findings of the 2016 “Kauffman Index of Startup Activity.” You can read the entire report here. 

Obviously, entrepreneurship is rapidly rising, so now would be the perfect time to start that business you’ve been thinking about for so long.

But wait…. !

The truly sad part of all the above good news is that the vast majority of these new business enterprises will quickly fail. In the next article we’ll take a look at the reality of business success and failure over recent years.

What percentage of the new businesses started in 2015 do you think will make it more than one year?

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