• WisBusiness

Friday, May 16, 2014

MaryBeth Matzek: Fewer businesses get out of the starting gates

By MaryBeth Matzek
Thinking of starting a business? The field may not be as crowded as it once was.

A recent report from the Brookings Institute found that between 2009 and 2011 the number of businesses failing outpaced the number of new businesses being created for the first time ever. While that may not necessarily be news – it’s a given not every entrepreneur will be successful -- the research also revealed that Americans started 27 percent fewer businesses on 2011 than they did in 2007.

Ryan Kauth with the Wisconsin Small Business Development Center (SBDC) in Green Bay wasn’t surprised with the findings. “It’s definitely a trend that is going on and it’s not unique to Wisconsin. Overall, there are fewer people starting businesses from scratch or taking over an existing business,” he says.

The Brookings Institute isn’t the only study or research pointing to a decline in new business start-ups. The Kaufman Index, which combines U.S. Census and Bureau of Labor Statistics monthly survey information, says the Badger State is the fifth worse state in the country when it comes to entrepreneurship with 170 adults creating businesses for every 100,000 people. Then there’s pure data sites like www.youreconomy.org – a website full of all kinds of economic data down to the county level – that also shows business creation in Wisconsin is way down, says Mark Lange, executive director of the Division of Entrepreneurship and Economic Development (DEED) at the UW-Extension.

“That just gives you the data. No interpretation, but you can tell just by looking at it what’s going on,” he says. “There’s clearly fewer businesses being created.”

But as for the why, that’s a little murky.

Kauth says access to capital or overall concerns about the economy could have some entrepreneurs-to-be staying on the sidelines. “People wonder if the business will be successful and how difficult it may be to get funding,” he says.

Besides worrying about paying to get the business off the ground and keep it running, other concerns could include regulations and taxes. Or maybe it’s demographics: Baby boomers make up a large percentage of the population and as you get older, you’re less likely to start your own business.

Lange says another thing lurking in the data is that the new companies actually being launched aren’t generating as many jobs as they used to. “Part of that is that many start-ups contract out for services rather than hire on. For example, they’ll contract out an accountant instead of having one on staff,” he says.

While we won’t know for a while, Kauth thinks business creation may again pick up. “I’ve been getting more phone calls lately asking for help with getting started. That can only be a good thing,” he says.

**Microloan program gets boost**

The Advance Microloan Program run by the Green Bay Area Chamber of Commerce received a $100,000 grant in matching funds this week from the Wisconsin Economic Development Corp. after raising an additional $100,000 from area financial institutions.

The program now has $584,000 in available funds and assets of more than $1 million. The Advance Microloan Program has approved 28 loans worth more than $900,000 since it started.

The 3-year-old program helps startups and early-stage companies in the region with financial support ranging from $5,000 to $100,000. The WEDC funds come from the state’s Capital Catalyst Program and are targeted for technology-based businesses in Green Bay.

**Going with the flow**

While it may be tough to get a business off the ground, once it’s there most Wisconsin business owners are optimistic about their future, according to the 2014 U.S. Bank Small Business Annual Survey.

Forty-eight percent of survey participants described the state’s economy as “good,” “very good” or “excellent” and 52 percent said it was “fair” or “poor.” As to their own business, 71 percent of respondents said they were in “good,” “very good” or “excellent” health.

The survey polled more than 3,000 small business owners – including 200 in Wisconsin – about their biggest concerns. Wisconsin business owners are more optimistic than in previous years, but still remain cautious about the economy’s direction. When it comes to what they’re worried about, innovation and plans for future hiring and capital expenditures top the list.

-- Matzek, a freelance writer and editor, is the owner of 1Bizzy Writer. She has worked in the past as a news editor at Insight Publications and as business editor at the Appleton Post-Crescent.


Comments: 9

At May 16, 2014 at 10:11 AM, Blogger Doug Swanson said...

Remember in 2007 and 2008 many people started businesses because that was the only way they could be employed. They were being fired left and right and starting a business was a way to survive. Now with the economy better (not good, but better) that's no longer the case. Although I don't understand how if "it's working" that Wisconsin is the 5th worst in that category.

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