By Pete Carvell
Recently, I’ve heard from several different people that they think business startups have been declining. Is it true, I wondered?
To answer the question, I did some research, checking with two well-respected sources: The Kauffman Index of Startup Activity and Inc. magazine, along with metrics compiled by SCORE nationwide from its annual Client Engagement Survey conducted by PricewaterhouseCoopers.
While it is true that the rate of entrepreneurship remains below that of the 1970s, when it began a three-decade decline, we are now seeing a more positive picture beginning in 2015.
Here are a few of the findings.
- The rate of new entrepreneurs in the U.S. increased from 310 out of 100,000 adults in 2015 to 330 out of 100,000 adults in 2016. This represents an increase of 15 percent in two years, compared with 2014 when the rate was 280 out of 100,000 adults.
- The “opportunity” share of new entrepreneurs – the proportion of new entrepreneurs driven primarily by “opportunity” rather than “necessity” – is now at 84 percent, more than 10 percent higher than it was in 2009 at the height of the Great Recession.
- 2016 was also a good year for diversity. The number of women who started businesses reached its highest rate in almost 20 years, rising from 220 to 260 per 100,000.
- Increasing diversity is highlighted by the fact that 40 percent of new entrepreneurs are comprised of African Americans, Latinos and Asians. Of interest is that the share of new entrepreneurs who are Latino has more than doubled since 1996, from 10 to 21 percent.
- Immigrant entrepreneurs now account for 27.5 percent of all new entrepreneurs in the U.S. due to the increasing immigrant population and the fact that they are more likely than the native born to become entrepreneurs.
SCORE performance numbers reflect the growth
In 2016, SCORE helped to create more than 54,000 new businesses, which was a slight increase over the prior year. However, nearly 79,000 new jobs were created, for an increase of 20 percent over 2016. The Austin area SCORE is credited with starting 525 new businesses, which represents a 19 percent increase over the prior year. Nearly 560 new jobs were created, an increase of 3 percent.
Nationally, 58 percent of SCORE clients are women and 35 percent of clients are minorities. These numbers have been increasing every year, reflecting the change in client demographics. The number of SCORE clients helped who were already in business grew from 25 percent to its current rate of 35 percent, which indicates that SCORE is no longer seen strictly as an organization that only helps startups. Also, the number of SCORE’s women and minority volunteers is now at a high of 27 percent, reflecting the national emphasis on recruiting for greater diversity.
Overall, it appears that SCORE is keeping pace with national trends and is well positioned for the future.
Will the growth rate continue?
There are several factors that will no doubt slow entrepreneurial growth. Uncertainty regarding the economic policy of the new administration, the impact of minimum wage legislation, the future of the Affordable Care Act, the availability of capital for small businesses, the impact of regulatory changes and, surprisingly, the challenge of small businesses finding qualified candidates – these are all challenges that may affect the growth rate of new business in the U.S.
To conclude, the evidence is clear that entrepreneurship has recently begun to grow again, which is great news for the business world and the economy overall.
About the Author
A graduate of Princeton University. Spent three and a half years in the U.S. Navy in Washington D.C. and Guantanamo Bay, Cuba
Worked for General Motors International for 36 years with management assignments in Peru, Brazil, Europe and Mexico. Joined SCORE in 2002 and has held positions of Chapter Chair, Assistant District Director and currently District Director for central/south Texas.