The Obama Administration worked hard to encourage small business growth last year. Washington even tried to encourage the formation of new companies hoping to transform a significant amount of the nation’s unemployed in to entrepreneurs. Through the United States Small Business Administration as well as numerous tax incentives, 2011 was supposed to be the year of the entrepreneur.
The results of a new survey revealed disappointing results. According to a quarterly survey conducted by Challenger, Gray & Christmas, 2011 wasn’t only disappointing, but the number of new entrepreneurs in 2011 was the lowest it has been since the survey began 11 years ago. The survey targets 3,000 workers who are re-entering the workforce and leans towards skilled workers that are often middle level managers.
Over the past two quarters of 2011, only 3.2% of middle level employees who are unemployed decided to open a business of their own. This is half the rate from the same time frame in 2010. The first two quarters of 2011 weren’t much better with only 3.3% of unemployed managers and executives deciding to pursue the entrepreneurial path. In 2001, after the dot.com collapse, 8% of unemployed workers pursued the entrepreneurial path making the current numbers that much more disappointing.
According to the authors of the report, although Washington pushed through a number of small business incentives, very little changed in the actual economic environment. Banks were still largely reluctant to make loans and workers who were unemployed had few options when it came to funding their startup endeavors.
On the other side, consumer demand may have picked up slightly at the end of 2011 but the overall demand for goods and services was still soft which kept entrepreneurs on the sidelines.
Although this survey was largely disappointing, other metrics look more positive. Other surveys, focused on existing business owners, found that small business owners are growing increasingly optimistic about the small business environment and that may lead to more hiring and the formation of new businesses as the economy continues to improve and credit markets loosen even more.
If you’re planning to start a business, don’t wait until everybody is once again optimistic. Instead, try to start your business while the economy is still depressed. Business owners know that during challenging times, pricing is more competitive setting up a buyer’s market when it comes to large scale business purchases.
Still too afraid? Consider scaling in to your business. Start it as a part time endeavor and slowly expand it as the economy picks up.