Wednesday, April 25, 2012

Up or Out: Survival of Young Businesses

Each year, new businesses create a substantial number of jobs. Some of these startups fail in the first few years, which ends any jobs they created. Businesses that survive tend to grow quickly in their early years.Therefore young businesses appear to exhibit an "up or out" growth pattern.

This "up or out" dynamic can be seen in survival rates for the cohort of Oregon establishments born between March 1999 and March 2000. One year after they opened, 77.2 percent of these establishments were still in business, meaning that nearly one quarter of them failed in the first year. Another 11.5 percent closed the next year, and 6.5 percent the year after that. Establishment failures are a normal occurrence in any year, but they are much more common in a cohort's first few years.
Employment patterns also reflect an "up or out" dynamic. For the 2000 cohort, the average size of surviving establishments is increasing over time. Although some jobs are lost due to establishment failures, these losses are offset by employment growth at surviving establishments. Businesses in this cohort opened with an average of about 6 employees. By March 2006, surviving establishments had doubled this to an average of about 12 employees.

You can find more information on young businesses in Oregon, including details on how they fare during recessions, by reading the full article written by Research Analyst Phoebe Colman.

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