Entrepreneurship growth rate slows

For the first time in four years, entrepreneurial activity declined in 2015.

The United States Census Bureau reported business closures exceeded startups by more that 70,000 (470,000 closures versus 400,000 startups) in 2011. This ominous threshold was first crossed in 2008. Prior to that time, startups exceeded failures by about 100,000 per year. Just as land provides sustenance for the population, new job creation provides both security and sustainability.

Economic development agencies are becoming more aware of the need to nurture entrepreneurship. The old adage of attract, retain and expand (ARE) is being replaced with CARE: (help) create, attract, retain and expand. Assisting aspiring entrepreneurs is a paramount activity for communities to help new business ventures avoid failure. According to CNBC, this is about 25 percent in the first year.

Optimism on Main Street is stagnating, as reported by the National Federation of Independent Business. Their index on this optimism, while higher than it was at the depth of the great recession, is still below the 42-year average. Communities need to help entrepreneurs overcome some of the sighted reasons for this by helping with skilled workforce preparation and understanding regulatory, local restrictions and general uncertainty related to the local economy.

Babson College recently released the Global Entrepreneurship Monitor 2015 Report. The survey had more than 200,000 respondents and reported that total entrepreneurial activity in the United States fell more than 2 percent (14 percent of persons employed full or part-time to 12 percent).

Another indicator is that Americans that saw an opportunity to launch a new venture fell from a high of 51 percent to 47 percent in 2015. However, of those who did launch, 69 percent were motivated by the pursuit of a recognized opportunity and more independence. Gallup CEO Jim Clifton speculates that entrepreneurs that create a business model for developing innovation are the vehicle that spurs economic activity.

Many communities lament the outflow of young adults. This talent pool of 35 to 44 year olds, only 17 percent of the population, represents the peak age for entrepreneurship. Providing a entrepreneurship-friendly community is key to both retaining and attracting this creative and energetic age group. Clifton declares, “Without a growing entrepreneurial economy … [both jobs and tax revenues suffer] leading to declining funding for education and infrastructure.” 

The purpose of economic development is to create wealth, not only for individuals but also for a healthy community. Healthy communities are the fuel for a prospering, attractive, viable and sustainable local economy.

Every October, the Michigan State University Extension Entrepreneurial Team partners with a local community to host the Connecting Entrepreneurial Communities Conference. Check out our website for details of the 2016 CEC Statewide Conference in Port Huron Oct. 5-6. Hope to see you there.

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