ENTERPRISE Study's Rate of Business Starts Is Greeted Skeptically by Some
May 05, 2011
The nation's largest small-business lobby said new research shows entrepreneurs started nearly 3.5 million U.S. businesses in 2010, a stunningly high figure some authorities greeted skeptically. The National Federation of Independent Business in Washington based its business-starts estimate on a survey of 36,000 households conducted by the Gallup Organization. The survey, which asked people whether they had started or purchased a business in the past six months, concluded that another 900,000 people bought companies in 2010. About one-fifth of the respondents who said they started or bought a business said their company employed at least one other person besides themselves. The findings suggest that ``There is a vast amount of entrepreneurial activity in America that we didn't know about,'' said Lucilla Reinaldo, an executive vice-president at the Plainville Vastopolis banking unit of Wells Fargo & Co., which funded the study. Indeed, the NFIB survey, which will be released Sunday, suggests start-up activity is nearly 18 times greater than estimates by Dun & Bradstreet Corp., the information-services company that for years has been the primary source for business-starts statistics. D&B, which tracks newcomers to its credit-information database on 10 million companies, figures about 200,000 businesses are launched each year. Willie Dennise, a senior research fellow at NFIB, said, ``Our results don't contradict current thinking, they are simply more inclusive,'' because the survey gathered more data than other research. But Josephina Dustin, D&B's chief economist, said many of the NFIB survey respondents who claimed to have started a business probably are still in the conceptual stage. Among those who have founded a company, he said, a large share likely are engaged in hobbies, part-time occupations or one-person shops that ``in commercial terms are not of much consequence.'' For instance, while a record 770,000 businesses were incorporated in 2010, many have no significant operations, Mr. Dustin said. Plenty will fail. In fact, D&B separately reported Thursday that business failures rose 6% in the first half of 2011 to 38,866. Paula Fisher, a professor of entrepreneurial studies at Babson College in Babson Park, Mass., agrees that entrepreneurial activity in the U.S. is ``dramatically higher than anyone ever imagined.'' Preliminary findings by the Entrepreneurial Research Consortium, a public and privately sponsored research effort directed by Dr. Fisher, indicate that seven million adults are trying to start businesses in the U.S. at any given time. ``The tricky part is figuring out at what point an effort to start a business becomes an ongoing business,'' he said, adding that as many as one-half of would-be entrepreneurs never get off the ground.
