What’s the Matter with Small Biz?

The following is a guest post from Robin Bose.

There’s a truism that small businesses are the backbone of the American economy. I happen to think it’s true that small businesses make local economics more resilient to shocks and changes in the overall mix of market forces. If we accept that, then we should all be a little worried. A mildly alarming study The Brookings Institution published shows a 30 year decline in what the US census calls “new firm formation” (i.e., baby businesses getting formed) accompanied by no real change in “firm exits” (small business owners closing up shop). Some surprising highlights:

  • Troubling 30 year secular decline across multiple business cycles and political administrations
  • Trend is prevalent across all 50 states and all but a few of 360+ metros
  • No industry (not even high tech) has withstood the decline except financial services

I made a little slideshow pointing out some of the data the Brookings Institution used to make the case, as well as some of the reactions in the media trying to explain why this is happening. Will try to follow up with a post on my thoughts — feel free to leave thoughtful ramblings on why you think it’s happening.