Challenges Small Business Face
For businesses, availability of capital is surely on the rise- but when it comes to start-ups and small businesses, the scenario is not as encouraging. In addition to that, the number of people who are interested in starting their own businesses is decreasing as well. A February press release by the Ewing Marion Kauffman Foundation talked venture capital availability and angel investing that had witnessed a recent surge.
It is interesting to note than there was more venture capital invested in the first 3 quarters of the year 2014 then was invested in any 1 year since 2001. Despite of that, business creation is slow as ever, and younger companies are finding it even harder to access capital. What adds to this challenge is that the survival rate of new businesses is on the decline ever since the early half of the 1990s.
As per Wendy Guillies, who is the acting president and CEO, USA does not just require economic growth- but requires ‘economic renewal’. She stated about the optimism that America had in the millennial and boomers, who would together help in the entrepreneurship renewal that USA so badly needs. She quoted the data from another Kauffman Foundation study, which pointed out that angel and venture investment levels of the recent past are just like those in the 1990s and the early parts of 2000s. IN addition to that, the valuations of startups have also skyrocketed.
This data also pointed out that business creation in the US is a falling trend. The survival rate for new firms has been steadily declining for the last 25 years, with high-growth firms showing even lesser dynamism. As per the report, dynamism is the rate measure of employees changing jobs and businesses starting, failing, growing and shrinking. All these trends portend towards a lower economic growth.
Challenges in Each Generation
Millennial (a term for the people born in the 1981-1997 period), have IT skills which makes them adequately equipped for transforming technologies into an entrepreneurial venture. Further, their level of education is also conducive for beginning a new venture. The traditional peak age bracket is set at 40 for entrepreneurship, and millennial are nearing that. They will comprise the biggest cohort of that particular age in the history of America.
However, at present, a large majority of the Millennials are still under the burdens of student loans and the financial setbacks that were suffered during the Great Recession. While entrepreneurship continues to grow in campuses, whether they lead to startups is something that is yet to be determined.
Baby Boomers (born in the 1946-1964 period), continue to be the entrepreneurial generation since they live and work longer. However, since even the Boomers were also hit by the Recession, starting a business is tough for them as well. A key reason for this is that Boomers are still trying to stay in the labor force, since this offers more financial security.
Small Business Growth
To combat this challenge, we advise future business owners to look at generating capital through Life Insurance Retirement plans which offer tax free distributions. This concept has be used for nearly a century but has been forgotten by many. As discussed in a previous article, large corporations like J.C.Penny and Disney have been known to use Life Insurance in raising capital to sustain and grow their business. However, as the years pass, it will be interesting to see who leads the entrepreneurial reform that America and the world needs.