With so much talk about the ailing economy, it may not seem like the best time to start a new business, but in our weekly work segment we look at some reasons why it might make sense to do it now. Takeaway contributor Beth Kobliner, author of Get a Financial Life: Personal Finance In Your Twenties and Thirties, joins us with two entrepreneurs who are doing well in the recession: Marva Allen, co-owner of Hue-Man Bookstore in New York, and Jo-Ellen Stammen, who runs her own design business. ...(continue reading)
What they see is [that] bigger, more established competitors may be having to cut back and lay off people, maybe not having that great service they used to have. So a new company could start, a small business could start, and really have that edge.
—Financial author Beth Kobliner on why starting a business during a recession can be a good idea
Facts from Beth Kobliner on starting new businesses:
- In general, people just aren't starting new businesses right now at the same rate they had been before the recession. In 2005-2007, about 200,000 very small companies were forming every month. By late 2008, in the depths of the recession, the rate had fallen 9% to 176,000.
- More small companies are failing than at any time since the government started keeping track in 1994. In 2005-2007, about 185,000 of these companies shut down every month. By late 2008 the failure rate had climbed 7% to 200,000 a month.
- It's been an especially rough year for construction and real estate, which accounted for about 22% of all start-up plans as recently as 2004.
- The construction industry is dominated by small companies, and companies of that size lost 682,000 jobs in 2008. Education and health care start-ups actually reported some growth last year, but it wasn't much (2.5%).
- People who start their own businesses are statistically more likely to be Hispanic or African-American; the number of Hispanic entrepreneurs in this country has doubled since 2000.
- People who start their own businesses tend to be older; according to the SBA, about 60% of all business owners are over 45.