A Blogger's Perspective: Part II

West Virginia Developmental Disabilities Council
Employment Projects Meeting
January 14, 2010
[Disclaimer] Never having attended a WVDD Council meeting, nor having a background in social services, the impressions recorded are admittedly written on a blank chalkboard.
If you missed Part I of this blogger's perspective, you may read it here.

In Part II, we'll see the direction the discussion took regarding the viability of self-employment and customized employment in West Virginia. The principle of self-determination and person centered services and supports were also addressed. What do jobseekers want, and what works?

So how viable is self employment? One participant said to Mr. Hammis: "Don't small businesses have a very high failure rate?"

He observed that studies actually showed that, while small businesses may not generate a lot of profits, a significant number were still in business after ten or more years.

The latest statistics from the Small Business Administration (SBA) show that "two-thirds of new
employer establishments survive at lease two years, and 44 percent survive at least four years." This is a far cry from the previous long-held belief that 50 percent of businesses fail in the first year and 95 percent fail within five years.

Brian Head, Economist with the SBA Office of Advocacy, noted that the latest statistics are a much more accurate assessment of new business success rates, and that "as a general rule of thumb, new employer businesses have a 50/50 chance of surviving for five years or more."

Rhonda Abrams, writing in the Money section of USA TODAY did a little investivigative reporting on small business failures and here is what she found out:
.
The other morning I was listening to the radio when I heard a distinguished professor from a distinguished university quoted, saying that 90% of new businesses fail.

Now, when I hear something like that, it's like hearing fingernails scraping on a blackboard; it gives me the creeps. I know those statistics scare people away from starting their own businesses, but I've looked at statistics of business births and deaths closely, and I know of no credible study showing anything close to a 90% failure rate.

So I picked up the phone and called the good professor. He couldn't remember where that number came from, and he quickly backed away from it.

"How do you define failure?" said Professor David Blanchflower, Professor of Economics at Dartmouth University, explaining that failure didn't really mean failure. "Failure usually includes companies that change their name or ownership or a person who is self-employed who moves to employment."

That's the rub...statistics you'll hear about business "failures" are likely to mean business "closures." In some cases, not even closures, just business changes.

Overwhelmingly, businesses don't die or fail; the owners close them for reasons unrelated to whether the business is making money.

So what is your chance of success? I think Birch's statistics are probably as accurate as any. His
survival rates:

• First year: 85%
• Second: 70%
• Third: 62%
• Fourth: 55%
• Fifth: 50%
• Sixth: 47%
• Seventh: 44%
• Eighth: 41%
• Ninth: 38%
• Tenth: 35%

"Once you've hit five years, your odds of survival go way up," Birch said. "Only two to three percent of businesses older than five shut down each year."

So … what about that 90% failure rate cited on the radio? I went to the station's Web site and replayed the story. Listening closely, I realized they didn't mention any time period. So, perhaps the professor is right after all. I think it's safe to assume that within some period of time — oh, let's say 50 years — 90% of all businesses will close. I can live with those odds.

Dave Hammis mentioned that nationally, statistics show earnings for wage earners is on a par with persons who are self-employed.



There were also comments on the importance of adapting to realities of the 21st century, such as embracing technology.