In the early 1980s I graduated from university, packed my bags, loaded my Chevy Chevette, kissed my parents and siblings goodbye, and drove north to Washington, D.C. to make my fortune (not). I stayed with friends. Each day searching the newspaper for jobs and sending out resumes. After a month I landed a position as the receptionist for the International Franchise Association (IFA).
I loved my job and learned lots. All day I received calls from interesting and important people from around the world, people who either owned large franchises, regulated franchises and other small businesses, or were inquiring how to find a franchise that suited their entrepreneurial spirits. I even got to talk to one of President Reagan’s speech writers, California Governor Jerry Brown in his first gubernatorial incarnation, and repeatedly to the Soviet Ambassador to the US.
Each year IFA published helpful information for it’s membership. There was lots of interesting and useful information. On breaks I would grab a pamphlet and pour over statistics and narratives about small businesses. The most interesting information I ever ran across at these times was from the Small Business Administration (SBA) and was a compilation of data from several federal agencies: The number of businesses that open and close in a given year and the survival rate of new businesses.
Since I started writing Olive Crazy I have been intrigued by the large number of small olive oil retail businesses that have opened throughout the US and Canada. This growth has been heralded by some as enlightened consumerism and I hope that is the case. But what I hope won’t happen is that when the statistically-expected closures occur, as they will, that the closures aren’t touted as a lack of interest by the consumer market. That would be a false correlation. Market demand and ability or desire to keep a business open are not related.
Here is some of the latest information from the Small Business Administration on business closings and survival. The most recent data is from 2010 and can be found on the SBA website which is linked above.
How many businesses open and close each year?
An estimated 552,600 new employer firms opened for business in 2009, and 660,900 firms closed. This amounts to an annual turnover of about 10 percent. Nonemployer firms have turnover rates three times as high, mostly because it is much easier for them to go into business and cease operations.
Starts and Closures of Employer Firms, 2005–2009
Notes: e = Advocacy estimate. Bankruptcies include nonemployer firms. Source: U.S. Dept. of Commerce, Census Bureau; Administrative Office of the U.S. Courts; U.S. Dept. of Labor, Business Employment Dynamics (BED). Estimates based on Census data and BED trends.
What is the survival rate for new firms?
Seven out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years, and a quarter stay in business 15 years or more. Census data report that 69 percent of new employer establishments born to new firms in 2000 survived at least 2 years, and 51 percent survived 5 or more years. Survival rates were similar across states and major industries. Bureau of Labor Statistics data on establishment age show that 49 percent of establishments survive 5 years or more; 34 percent survive 10 years or more; and 26 percent survive 15 years or more.
Source: U.S. Dept. of Commerce, Census Bureau, Business Dynamics Statistics; U.S. Dept. of Labor, Bureau of Labor Statistics, Business Employment Dynamics (BED)
May the sun shine through your branches and may your small business thrive.