Fewer new businesses may mean more older ones are surviving


A study recently found a decline in business start-ups. One expert, however, points out that this also shows a decrease in business failures. He explains that business owners have gotten better at running their companies, leading to fewer business failures.

The implications of the study are far-reaching and more than a little complex. Since 1978 the number of new employers has been halved, while the number of employers in operation has grown by 5 percent. This means fewer businesses are starting out, but the ones that survive are more successful. The study, using data from the U.S. Census Bureau, also found New Jersey experienced a relatively small decline in employment by new businesses compared with the rest of the country.

The current economy isn't the sole source of decline in new business. The study found the number of start-ups has been decreasing since 1978. This may not necessarily be a bad thing. Older, successful businesses aren't facing competition from new start-ups, and new businesses often provide similar products to the same customers.

The decline in fresh businesses is troubling to many, particularly because they are a source of job creation. However, this likely means that existing business are being managed better. This isn't to say new businesses aren't valuable and worthwhile but it highlights the importance of starting out right.

A successful new business in New Jersey can reap the benefits of proper start-up formation for years to come. A business's organization can help facilitate both everyday decision-making and more significant shifts in direction. Some start-ups may even fail because they are not appropriately formed at the beginning. An experienced business lawyer can provide valuable guidance to give a start-up the tools it needs to succeed.

Source: Bloomberg Businessweek, " The silver lining to the drop in startups," Scott Shane, May 8, 2012