The Mystery of Business Births and Deaths in the U.S.

Business births and deaths are a mystery because it is nearly impossible to determine how many small businesses—whether they have employees or not—actually start up each year, and how many fail each year.

It appears that the following report is the only document available today that attempts to solve this mystery… while discussing the shocking truth about business starts and endings.

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“U.S. Business Data Worst in World—and Getting Worse.”

—Jerry Useem, Editor, Inc magazine – 1996

This was the title of an article written by Jerry Useem 20 years ago!—and the situation did indeed get worse.

Even today, government agencies put most of their business statistical energies into only 17% of all businesses in the U.S. and come up with information that is generally several years old—or older.

The business community is even worse, because they can’t seem to decide what the definition of a business is, let alone what’s happening to them—or why.

It seems that very few people even care what happens to small businesses as long as new ones are always coming along to replace those that die… hopefully quietly and without any fuss.

To counter this general lack of interest on the part of government and the business community I created a report—Business Survival Reality: The Mystery of Business Births and Deaths in the U.S. and I update it annually to determine trends in business activity.

In this report I try to make some sort of sense out of the lack of information, and the misinformation, published by government agencies, business pundits, and guru economists.

I have also, from time to time, asked people in the business community to review this report and make suggestions. I have received some interesting feedback, such as:

  • Who cares?
  • The numbers are so large they can’t be correct.
  • Only IT and high-tech businesses are important.
  • Businesses without employees don’t matter.

So, why should anyone care how many businesses start up, or fail? I answer this question in the report, but here are a few samples of the reasons presented:

  • First and foremost: What a society measures is what a society values. If we don’t want to know how many small businesses start and fail—our American society must not value them very highly.
  • Large corporations have fled to foreign shores—and taken their jobs with them, so our economy must now rely more and more on the success of small businesses—and the reasons for their success or failure.
  • Our government seems to have little interest in small business and piles on regulations that contribute to business failures. The annual cost to Americans to comply with government regulations now cost more per U.S. household than the cost of health insurance. Does our government even know how their actions affect small businesses? They certainly should!
  • Government data always filters down to public policy. If the government data is highly inaccurate, what does that say about public policy?

There are many more reasons why we want business start up and failure data to be accurate, but I’m sure you get the idea.

In a prior post I asked the question: What percentage of new businesses started in prior years do you think will make it more than one year?

Sadly, no one knows how many businesses did survive for more than one year, but the report discussed above provides about the best idea we have of what is happening to U.S. startups—when looking at the total number of businesses.

Download a copy (no opt-in) of this report and then let me know what you think. The U.S. economy is in the doldrums and if the business community doesn’t rally together to solve this problem of business failures in the U.S.… then God help us.

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