23% of Small Business Owners (Approximately 6.21 million) Report "No Pay for a Year"; New Zealand, Singapore, US, Best Places to Start and Run a Business

Citing a new survey by Citigroup, CNBC Reports All Work, No Pay for Some Small Business Owners.

Here are some interesting highlights.

• Over the past few years, business owners report that they have, at one time or another, taken less profit (78 percent), worked more hours than usual (70 percent), and used their own money to help the business survive (69 percent).
• 54 percent of respondents say they have gone without a paycheck in order to keep the business running.
• 23 percent of owners have gone without pay for one year or more.
• More than one-third of owners (38 percent) said their employees worked overtime without pay
• 18 percent of owners said employees either missed paychecks or had paychecks delayed.
• Access to financing doesn’t come up in the top five most important issues among small businesses. Instead, business owners cite lack of sales and consumer confidence.

I would like to show a link to the Citigroup report but I cannot because CNBC did not provide one. Readers know this is one of my pet peeves, so I am calling them on it.

Recession Brought Small-Business Boom

Inquiring minds just may be wondering how many small businesses there are. A report written May 20, 2011 may surprise you.

Please consider Recession Brought a Small-Business Boom

“Compared to 2007, there was a huge increase in the number of business failures in 2008, 2009, and 2010. In fact, the number of business failures in 2009 was almost twice that of the amount of failures in 2007,” writes Byron Vielehr, president of global risk and analytics at D&B, in response to questions emailed by Portfolio.com.

“2009 and 2010 bore witness to the highest percentage of startups in more than a decade. The rate of new businesses had also been steadily climbing since 2006. As a result, the number of businesses in 2010 compared to 2007 is higher.”

As of 2010, D&B estimates, there were about 23 million small businesses in the United States, employing nearly 81 million workers.
27 Million Small Businesses

Citing the Small Business Association (SBA) Get Busy Media reports 27 million small businesses in Small Business Stats for Small Business Week 2011

According to the SBA

• There are 27+ Million Small Businesses in the US.
• Between 60% & 80% of all new jobs created in our country can be attributed to Small Business.

Startup Times and Costs

There are some interesting charts and graphs in the article. Here is a clip showing several pertinent pieces of information.

Singapore and New Zealand are the best two places to start a business and run a business. The US is 4th and 3rd respectively.

It would be interesting to see where Greece, Italy, Spain, Ireland, and Germany fall, but there are no links to the data or studies.

Ease of Startup Explains Recession Boom

Notice the success stats on the above graph do not add up.  If 44% of new firms survive 4 years, by implication 56% don't. Yet somehow only 49% fail in 5 years. 

Regardless, the above chart explains the startup boom at the height of the recession. Millions of people started businesses and most of them will not make it.

Stats from 2007 and 2008 as to how many businesses will last 5 years are invalid. Business climate is far more unfavorable now.

Crunching the Numbers

If there are 27 million small business owners and 23% have not received any pay for a year, there are 6.21 million business owners who received no paycheck for at least a year.

Notes About Unemployment

Bear in mind, that making money or receiving a paycheck is irrelevant to the BLS when they compute the unemployment rate. If you work as little as 1 hour, whether you collect a paycheck or not, you are considered employed.

In addition to the 6.21 million business owners with no paycheck, factor in those selling trinkets on EBay out of desperation and collecting a few dimes in the process.

Also factor in factor in all those starting multi-level marketing
schemes and calling it a business. How many get sucked into that losing proposition every year? Yet, to the BLS, it's a job if you worked any hours.

The ease of starting a business in the US is a great thing. Unfortunately, making money in a small business startup is not so easy.

Historic trends suggest half of small businesses will fail within 5 years, and I highly suspect future trends will be much worse.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
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