Tag Archives: Kauffman Foundation

Entrepreneurship Reverses Downward Trend

The Kauffman Foundation has been publishing the Kauffman Index of Entrepreneurship for the past 18 years and this year they have expanded their effort with additional data and more in-depth analysis.

The first installment of this new Index is titled “Kauffman Index: Startup Activity” and was released last week. This installment covers national startup data. City, state, and regional information will be released on June 6th.

The most important finding in this 2015 Index is that the decline in entrepreneurship has been reversed after a number of years of steady downturn.

These new numbers represent the greatest year-over-year increase in entrepreneurship over the last two decades.

Does this mean the U.S. is experiencing a revival in entrepreneurship?  Not necessarily, because we are still in a long-term decline of new business creation.

Take a look at the chart below, which depicts the rate of new business creation per thousand population:

New Businesses - 2914

 

The biggest disappointment in Kauffman’s new numbers is the declining number of female entrepreneurs. Since the Kauffman Index started in 1997 the share of new entrepreneurs who were female fell from 43.7 percent to 36.8 percent in the 2015 Index.

Summary

Here are more highlights from the 2015 edition of the “Kauffman Index: Startup Activity.”

  • Approximately 6,360,000 new businesses were created during 2014.
  • 63.2 percent of new business owners were male.
  • The share of new entrepreneurs with a college education jumped from 23.7 percent in the 1997 Index to 33.0 percent in the 2015 Index.
  • Those with a high school, or less, education still make up the majority of new business owners with 44.6 percent in the 2015 Index.
  • Younger entrepreneurs, ages 20 to 34, continue to decline—from 34.3 percent in the 1997 Index to 24.7 percent in the 2015 Index. (Those under age 20 are not counted.)
  • Older entrepreneurs, ages 55 to 64, continue to increase—from 14.8 percent in the 1997 Index to 25.8 percent in the 2015 Index. (Those over age 64 are not counted.)
  • Immigrant entrepreneurs increased from 13.3 percent in the 1997 Index to 28.5 percent in the 2015 Index. (See my article on immigrant entrepreneurs here.)
  • Immigrants continue to be twice as likely to become entrepreneurs as U.S. native-born.
  • Entrepreneurs are becoming more diverse, with over 40 percent of new entrepreneurs in the 2015 Index being non-white.

You can download a complete copy of the new Kauffman Index here.

Another important finding in the 2015 Index is that more new entrepreneurs are people who had jobs, but wanted to strike out on their own to explore the world of entrepreneurship. This is called “Opportunity” entrepreneurship.

Those starting a business because they have few alternatives are “Necessity” entrepreneurs, and their numbers are rapidly declining.

 The Future

It’s great to see the turnaround in new business ownership… but what is the long-term prognosis for success of the 6+ Million new businesses that were started during 2014?

The sad truth is that few of them will survive very long. I recommend that you download a copy of my free report titled “Business Survival Reality” from the sidebar. An updated version of this report will be available around mid-June, and if you enter your email in the subscription box I will notify you when the new report is ready.

So, there you have some highlights from the 2015 “Kauffman Index: Startup Activity.” Please leave your comments and thoughts below—we’re talking here about America’s future.

*

“1 Million Cups of Coffee”–For Entrepreneurs

The single biggest reason for small business failures is a lack of (real) business knowledge on the part of the business owners.

Too many people start a business without knowing about the speed bumps and pitfalls they will encounter along the way. The result of this lack of knowledge is shown in the free pdf report Business Survival Reality.

Classroom education and books can only go so far in training an entrepreneur—the real learning occurs from listening to, and interacting with, others in the business community.

That is why the Kauffman Foundation created the “1 Million Cups of Coffee” program. The concept and format are simple, and were developed by the foundation at their Kansas City headquarters.

This idea has now spread to a couple dozen cities across the U.S. from coast to coast, and is rapidly growing.

For a little more insight into this program, take a look at the recent video of their 1st anniversary celebration held in their Kansas City headquarters:

 

 

Meetings in each city are sponsored by the Kauffman Foundation, with local involvement, and are held every Wednesday morning—with lots of coffee served.

“I Million Cups” brings entrepreneurs (established, just starting, and aspiring), mentors, advisors, and experts all together in the same room to share what they have learned about entrepreneurship.

This program is for all entrepreneurs, including those who are only thinking about starting a business. The opportunity to learn from those who have gone through the trials of entrepreneurship is a matchless learning opportunity.

Every person starting, running, or aspiring to start a small business needs to be involved in some kind of local business network. If you are lucky enough to be in one of the cities holding “1 Million Cups” events, you really should spend some time at them—you will learn things rarely discussed in formal classes.

For more information on the “1 Million Cups” program, go to the 1 Million Cups website.

To find a city near you that holds “1Million Cups” events, go to the website’s events page.

If there is no such event in your city, contact your Chamber of Commerce or business development organization to see if they can’t start one up. It takes community involvement, along with support from the Kauffman Foundation, to get a successful “1 Million Cups” event program established.

I would like to hear from anyone who has attended one of these events—or have experienced the benefits from local networking with other small and micro business people.

*

Entrepreneurial Activity During the Recession

The new Kauffman Index of Entrepreneurial Activity has just been released for 2009 and the report indicates that 2009 had the highest number of new U.S. business startups since the index started in 1996. There were an average of 558,000 new full-time businesses started each month of 2009, for a total number of startups of 6,696,000 for the year.

You won’t find anything close to this number published by the U.S. government, because most government agencies do not count non-employer businesses as startups—even though they make up 70% of all American businesses (and contribute a Trillion dollars to the GDP). Thankfully, we have the Kauffman Foundation.

Here are some of the highlights for 2009: (The following numbers are expressed as the number of new businesses created each month out of 100,000 adult population.)

  • 340 out of 100,000 adult population created a new business each month of 2009. This is also the third straight year of increased rates of new business startups.
  • Men created new businesses at the rate of 430 per month…a slight increase over 2008.
  • Women created new businesses at the rate of 250 per month…also a slight increase over 2008.
  • African-Americans had the highest rate of increase in entrepreneurial activity in 2009, with 270 new businesses. In 2008, the rate was 220 per month.
  • Latino entrepreneurial activity dropped from 2008, but still had the highest rate for 2009 at 460 new businesses…against 480 new businesses in 2008.
  • Immigrant-owned startups were higher than native-born, with 510 new businesses. Native-born entrepreneurs started 300 new businesses in 2009.
  • The oldest age group (fifty-five to sixty-four) continued their upward trend of startups with 400 new businesses in 2009.
  • The youngest group (twenty to thirty-four) had the lowest new business creation of any age group, at 240 new businesses.
  • The West continued to lead the country in creating new businesses, with 380, while the Midwest continued in last position with 270. However, the Midwest did show a sharp increase from the 230 new businesses created in 2008.
  • Houston had the highest rate of new businesses in large cities, at 630, while Seattle had the lowest rate at 160.

Remember, the above numbers represent the number of new businesses created each month, per 100,000 adult population.

Men, African-Americans, Latinos, older people, and immigrants seem to lead the activity of entrepreneurial startups. Sadly, the youngest group (twenty to thirty-four) peaked way back in 1996 at 280 new businesses, and have consistently been under that number ever since.

I wrote about the dearth of women entrepreneurs previously, but they too have not matched their peak startup year of 1996.

Obviously, the “startup” business is good. Three straight years of increases in the startup rate—right through the recession—seems to indicate that a small business can be created anytime, regardless of economic conditions.

So, for all of you who have been waiting “for things to improve,” I think right now might be the best time for you to start your business. Debbie Fields, founder of Mrs. Field’s Cookies, said, “The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try.”

*