Main Street Entrepreneurship Activity Ramps Up Nationwide and in Most States and Metros, Annual Kauffman Index Reports

According to the 2016 Kauffman Index of Main Street Entrepreneurship, released today by the Ewing Marion Kauffman Foundation,Sharp uptick in small business survival rates, which drove increase in Main Street activity rates exceeded pre-recession levels for the first time. 

Nationally, there was a sharp uptick in the survival rate of businesses in the last year. At the same time, Main Street entrepreneurship activity gained ground in 47 states and 38 of the 40 largest metros.

“The Main Street Entrepreneurship Index provides additional evidence that U.S. small business activity has rebounded from the downturn and continues to gather strength,” said Arnobio Morelix, senior research analyst at the Kauffman Foundation. “More new businesses are making it through their first five years of operation. While this could indicate that a lack of dynamism is allowing less-productive firms to hang on longer, overall the entrepreneurial increases bode well for the established, small businesses that underpin much of our economy.”

The Kauffman Index of Main Street Entrepreneurship relies on three indicators to measure U.S. entrepreneurship across national, state and metro levels:

• The Rate of Business Owners in the economy, calculated as the percentage of adults owning businesses as their main jobs. Although the Rate of Business Owners also captures owners of very large firms, it is overwhelmingly represented by owners of small businesses.
• The Survival Rate of firms, calculated as the percentage of firms that remain in operation throughout their first five years.
• The Established Small Business Density, measured as the ratio of established (five years or older) small (fewer than 50 employees) businesses to the total number of firms.

Combined, these three indicators provide a view of small business activity in the country across national, state and metro-area levels. These businesses make up a large share of U.S. firms. U.S. Census Bureau business statistics show that established small businesses represent almost 68 percent of all employer firms in the country.
The report also provides demographic information, including state and metro business ownership rates for females and both younger and older adults.

The Kauffman Index of Main Street Entrepreneurship captures business activity in all industries and is based on both a nationally representative sample size of roughly 900,000 responses each year and the universe of all employer businesses in the United States, in a dataset that covers approximately five million businesses.

The index provides policymakers, economic development leaders and entrepreneurship ecosystem builders with data-driven insights about entrepreneurial communities, which they can use to accomplish their goals.

National Results

For the first time since the recovery got underway, Main Street entrepreneurship activity is at higher levels than those recorded before the onset of the Great Recession.

This increase was primarily driven by a jump in the business survival rates, which reached a three-decade high of 48.7 percent. This means almost half of new businesses are making it to their fifth year of operation.

Greater longevity for startup businesses marks a major turnaround from the Great Recession, which saw the business survival rate drop to a low of 42.9 percent in 2011. Survival rates have increased every year since then.

The national Rate of Business Owners and the Established Small Business Density remained steady in the 2016 Main Street Index. The Rate of Business Owners was 60 out of 1,000 adults, the same as the previous year. Business Density changed little, logging 676 established small businesses per 1,000 businesses.

However, the results show that U.S. small businesses have gotten smaller over the last 20 years. The smallest of those small businesses – companies with one to four employees – make up 53.1 percent of all established small businesses, up from 49.5 percent in 1996.

To read the full report conducted by the Kauffman Index of Main Street Entrepreneurs click the link below:

Kauffman Index of Main Street Entrepreneurship