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Wednesday
Mar052014

Business Closings Now Outnumber Business Startups for the First Time Ever

According to Jim Clifton, the Chairman and CEO of Gallup, Inc., the national pollster, more businesses now close than are open. A lot more. What does that mean for you and your business? There are five points you should consider.

Until now, 100,000 more new businesses were created each year than were closed. For the first time since the US Census bureau began measuring business formations and closings, the figures have flipped. 70,000 more businesses are now closing than are being started. You should read more from Jim Clifton.

Deaths of Businesses Now Outnumber Births

What should a business do? There are a number of points that can be taken from Mr. Clifton’s report.

1. The high number of business closings could include your customers. You may want to give some thought to your credit policies and how you manage your accounts receivable.

2. One or more of your vendors could go out of business. What would you do? Is there some other supplier you can turn to if a key vendor goes out of business? You may want to think through what you would do if this were to happen and what steps you can take now to avoid any problems.

3. Protect your business. What threats and weaknesses could put your business at risk? This is one half of a standard SWOT analysis.

4. With every crisis comes opportunities. What opportunities might be presented for your organization if a competitor, customer or vendor goes out of business?

5. What new products or services can you offer? As an existing business, you have advantages a startup does not. With fewer startups, what new products or services are not being offered? How can you leverage your advantages to “start up” new offerings?

Clearly, Mr. Clifton is talking about macroeconomic issues and public policies that make it more difficult to start businesses today. By exploring this from the perspective of your firm at the micro level, however, you can identify dangers to avoid and opportunities to pursue.

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