False Alarm
The truth behind a reported drop in start-ups.
If you've read the news reports regarding a recent survey of
business start-ups, you might think the small-business sky is
falling. That's because according to a study by the National
Federation of Independent Business (NFIB), the number of businesses
started in 1997 fell 4 percent, following a 14 percent drop in
1996. "But this is a marginal change," says William J.
Dennis, a senior research fellow at NFIB. "There are still a
lot of people out there starting businesses and looking for
help."
Bruce D. Phillips, director of economic research at the SBA
Office of Advocacy, agrees the statistics shouldn't be blown
out of proportion. "You need six, seven or even eight
[surveys] saying the same thing before there's cause for
concern," he says.
What's really happening? According to Dennis, only about
one-fourth of the respondents employed people other than
themselves, while slightly less than half operated their businesses
at least 40 hours per week.
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In contrast to NFIB numbers, which primarily represent the
self-employed, Phillips says SBA data on start-ups with employees
showed record growth between 1993 and 1997. This, plus consumer
confidence and strong growth in the economy, leaves Phillips
satisfied that nothing unduly alarming is occurring.
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