Rate of New Businesses

In Memo #6 – Build, Buy or Transform, we note the rate of new business formations has fallen from roughly 12.5% of all firms down into a 7.5% to 8.5% range following the Great Recession. New business formations, typically smaller start-up enterprises, are an indication of small business activity. There are likely many drivers for the lower rate including inherent conservatism following the recession, both from an entrepreneur’s as well as a capital provider’s perspective. The question is where does this trend go from here? Consider the following chart. How might the mounting pile of student debt impact small business start-ups in the coming years? What are your thoughts?

Graph1

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