Small Business Turnover Statistics and SoWal

**Paula** · 02-12-2006, 02:50 PM

Given some of the discussions about the future success/failure of businesses in SoWal, I found this report on the web that gives some insight into success/failure rates. This way, people who are interested in SoWal businesses can compare the business turnover in SoWal with the U.S. Census data. Of course, I realize that SoWal is different and special in many ways and that one can always critique statistics, the design of the study. the limitations of the study, and the relevance to SoWal (which is unique in some ways, but not in other ways), but at least this is a starting point, especially for small business owners.

http://www.sba.gov/advo/stats/bh_sbe03.pdf

The report makes the points that:

60% of small businesses were surviving at the end of 4 years

17% were closed and owners felt the closure was due to failure

33% were closed and owners felt the business was successful upon closing of the business

Of the businesses that closed after 4 years, many of the owners considered
themselves successful when they closed.

Good employees, sufficient starting capital, and educated owner are predictors of survival rates after 4 years

I wonder if anyone collects the business success/failure data for SoWal and how it compares to the census. Then we'd be able to see trends over time to see how businesses fare as the area gets more upscale development.

I'm not going to step into this discussion any further because other SoWal posters have much stronger opinions and more local information about this than I do, especially people who are locals in the area. But I thought some people, including current or potential business owners in the area, would find this report interesting and possibly useful in light of the discussion on minimum wage/the future of small businesses in SoWal on another thread. Other SoWal posters might enjoy finding the flaws in the report or it's relevance to SoWal as well!

**SHELLY** · 02-12-2006, 03:38 PM

You're right Paula, it's a pretty old report using statistics from the "old world economy" (some of the data is 14 years old)--it might be interesting if SoWal Chamber of Commerce developed a localized up-to-date version of such a study. (But somehow I think the resulting product would not be useful in 'luring' new businesses to open here.)

What I got from the report was:

(1) If you've got a big business with more capital and sufficient employees you stand a better chance of being successful.

(2) Some people who've closed their businesses didn't fail--they may have went into business with the intention of retiring in X-years; or they expected or were tempted to sell out (Read: Sandors or Seagrove Mkt).

Many of the successful businesses in the panhandle will continue to be successful because they were established in the "olden days" when RE and costs were low; they are well-managed, and they have a following of local clientele. They also tend to have a staff of long-time, loyal employees who are already established in the area (when living was comparatively cheap).

New businesses (and mediocre businesses) are going to have a rough go of it. The real estate boom in the last couple of years has added a whole new dimension to the panhandle economy. We're only now starting to see how the area's rush to rapid upscale development is beginning to affect businesses.

**kurt** · 02-12-2006, 03:38 PM

Good employees, sufficient starting capital, and educated owner are predictors of survival rates after 4 years

Thanks Paula!

The above seems to be most of the battle here as well.

As has been mentioned, it's harder here than many places to find good employees. Extra capital is usually needed because of the slow season. And many owners are moving here and "starting over" with new businesses that they don't have experience in.

The flip side is that some people that live here, or move here and start a business, do have plenty of capital or a significant other with cash flow, and don't even need income from a business, just want something to do.