A palpable drag on the economy is high unemployment – still sitting above 9%.
Historically small businesses lead the way for job recovery. But that’s changing.
A new study by the Kauffman Foundation – Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation – is revealing.
The report reveals:
- The number of new business formation is decreasing since 2006
- The survival rate of new business is decreasing since 2006
- The number of jobs new businesses create is decreasing
- Average number of employees employed by start-ups is shrinking
- Businesses that do survive their early years are adding jobs at a slower pace than the historic norm in recent years
And not included in the report, but another key issue for business growth is the gap between the education of the workforce and the skills needed to do the work. And in markets where the gap is larger than other markets, unemployment is also higher.
What we don’t have a good handle on is why these decreasing trends are happening. One reason, we believe, is the predominance of web-based services resulting in the need for less people to support a new business. In the 1990s, new businesses opened their doors with about 7.5 jobs on average; the current figure is now nearly half that — around 4.9 jobs on average.
As small business owners, entrepreneurs or if you are contemplating starting a new business, it is important to be aware of the trends we are now seeing in small business formation and survival. But even more important than knowing the trends is understanding what they mean for you, your business, and your proposed business model.
Fundamentally, it is critical to develop your business model and your growth objectives. Next, we find what many miss or overlook (and is a cause of new business failure) is preparing for the inflection points you are likely you hit along the way. An inflection point is where you need to change your operating model so as to sustain growth; and all businesses we know have them, including ourselves. An inflection point could be the need for a sales staff, more professional management, clear brand identity in the marketplace, a formalized HR process or other infrastructure, etc.
We have found that the first inflection point usually appears within the later part of the first two years of a firm’s existence – unless of course the firm is experiencing hype-growth then it will occur quicker. Next blog, we’ll discuss inflection points in more detail and the impact they have on small business early growth.
For more information on customer service and business growth, see our free articles and white papers at: www.kubicalaforestconsulting.com
Copyright 2011 Kubica LaForest Consulting
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