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Business Opportunities - Business Failures And Terminations

table bankruptcies annual revenue

Business Bankruptcies

Bankruptcy is one measure of business failure. During the years 1990 through 2003, the United States experienced an overall decline in both business bankruptcies and in the number of business start-ups. According to statistics from the Small Business Administration (SBA), between 1980 and 2004 the highest number of business bankruptcies occurred in 1987, when approximately 81,463 businesses filed for bankruptcy. (See TABLE 9.3 Number of businesses by annual revenue, 2003 Patrick O'Rourke, "Number of Businesses by Annual Revenue," in Useful Business Statistics, Bizstats.com, 2003, http://www.bizstats.com/bizsizes98.htm (accessed January 7, 2006)Table 9.1.) By comparison, according to records published by the U.S. Bankruptcy Court (http://www.uscourts.gov/judicialfactsfigures/table5.02.pdf), the lowest rate occurred in 2004, with 34,817 businesses filing for bankruptcy.

TABLE 9.3
Number of businesses by annual revenue, 2003
Type of business entity and annual revenue Number of entities (in thousands) %
SOURCE: Patrick O'Rourke, "Number of Businesses by Annual Revenue," in Useful Business Statistics, Bizstats.com, 2003, http://www.bizstats.com/bizsizes98.htm (accessed January 7, 2006)
All business entities 24,113.0 100.0%
Annual revenue less than $25,000 13,973.0 57.9%
$25,000 to $100,000 4,765.0 19.8%
$100,000 to $500,000 3,491.7 14.5%
$500,000 to $1 million 804.8 3.3%
$1,000,000 or more 1,078.4 4.5%
All corporations 4,848.9 100.0%
Annual revenue less than $25,000 1,168.1 24.1%
$25,000 to $50,000 289.0 6.0%
$50,000 to $100,000 459.9 9.5%
$100,000 to $250,000 839.7 17.3%
$250,000 to $500,000 645.5 13.3%
$500,000 to $1,000,000 553.1 11.4%
$1,000,000 or more 893.5 18.4%
All partnerships & LLCs 1,855.3 100.0%
Annual revenue less than $25,000 1,037.6 55.9%
$25,000 to $50,000 157.3 8.5%
$50,000 to $100,000 156.8 8.5%
$100,000 to $250,000 206.4 11.1%
$250,000 to $500,000 113.8 6.1%
$500,000 to $1,000,000 76.6 4.1%
$1,000,000 or more 106.8 5.8%
All sole proprietorships 17,408.8 100.0%
Annual revenue less than $25,000 11,767.3 67.6%
$25,000 to $50,000 2,111.9 12.1%
$50,000 to $100,000 1,590.1 9.1%
$100,000 to $200,000 1,019.7 5.9%
$200,000 to $500,000 666.6 3.8%
$500,000 to $1,000,000 175.1 1.0%
$1,000,000 or more 78.1 0.4%

Nearly three-quarters of discontinued businesses fail due to lack of funding or sales. When surveyed as part of the 1992 Economic Census, 71.7% of owners of failed businesses reported that they discontinued business due to inadequate cash flow or low sales. Another 8.2% thought they were unsuccessful due to lack of access to business loans or credit.

Table 9.4 offers a state-by-state analysis of business bankruptcies in selected years between 1990 and 2003. Thirty-six states experienced a decrease in the number of bankruptcies from 2002 to 2003; notables included Alabama (−24.7%), Delaware (−22.2%), Florida (−14.9%), Illinois (−20.1%), Kentucky (−26.5%), Louisiana (−25.7%), Maryland (−40.1%), Minnesota (−20.2%), Montana (−18.3%), Nevada (−30.5%), New Hampshire (−16%), New York (−23.1%), Rhode Island (−26.2%), South Carolina (−20.2%), Tennessee (−18.8%), Vermont TABLE 9.4 Business bankruptcies by state, selected years 1990–2003 "Table 9. Business Bankruptcies by State, 1990–2003 (Selected Years)," in Small Business Economic Indicators for 2003, U.S. Small Business Administration, Office of Advocacy, August 2004, http://www.sba.gov/advo/stats/sbei03.pdf (accessed January 8, 2006)(−14.3%), West Virginia (−18.8%), and Wisconsin (−15.7%).

TABLE 9.4
Business bankruptcies by state, selected years 1990–2003
State 1990 1995 2000 2001 2002 2003 Annual percent change Rank
Note: U.S. totals include Puerto Rico, Guam, Virgin Islands and Northern Mariana Islands. A business bankruptcy is the legal recognition that a company is insolvent (i.e., not able to satisfy creditors or discharge liabilities); must restructure or completely liquidate under Chapter 7, 11, 12, or 13 of the federal bankruptcy laws.
SOURCE: "Table 9. Business Bankruptcies by State, 1990–2003 (Selected Years)," in Small Business Economic Indicators for 2003, U.S. Small Business Administration, Office of Advocacy, August 2004, http://www.sba.gov/advo/stats/sbei03.pdf (accessed January 8, 2006)
    U.S. total 64,853 51,959 35,472 40,099 38,540 35,037
    Yearly change (%)   (5.8) 13.0   (3.9)   (9.1)
Alabama 1,356 796    445 428    381    287 (24.7) 46
Alaska 164 159    118 104    120    121   0.8 14
Arizona 2,377 1,045    765 753    756    701  (7.3) 23
Arkansas 467 422    261 290    282    429  52.1 2
California 7,391 12,097  4,595 5,238  5,141  4,501 (12.4) 30
Colorado 1,088 610    373 467    590    552  (6.4) 22
Connecticut 445 205    139 156    181    187   3.3 13
Delaware 114 277  2,320 1,374    649    505 (22.2) 44
District of Columbia 129 100     58 49     52     55   5.8 8
Florida 2,842 1,949  1,447 1,896  1,803  1,534 (14.9) 35
Georgia 2,366 496  1,012 1,162  1,359  1,585  16.6 5
Hawaii 74 159     63 68     53     72  35.8 3
Idaho 365 391    269 303    260    225 (13.5) 31
Illinois 2,041 1,624  1,270 1,547  1,240    991 (20.1) 41
Indiana 1,090 842    398 604    661    640  (3.2) 18
Iowa 893 556    214 289    354    323  (8.8) 28
Kansas 560 419    169 220    238    303  27.3 4
Kentucky 1,324 473    355 474    445    327 (26.5) 49
Louisiana 1,338 562    619 716    672    499 (25.7) 47
Maine 318 274    162 151    101    105   4.0 12
Maryland 1,356 1,493    677 758    873    523 (40.1) 51
Massachusetts 1,838 1,116    393 427    380    396   4.2 11
Michigan 1,633 1,072    577 688    802    684 (14.7) 34
Minnesota 1,771 1,901  1,492 1,887  1,729  1,379 (20.2) 43
Mississippi 288 283    203 289    309    282  (8.7) 27
Missouri 1,319 521    369 505    394    378  (4.1) 19
Montana 223 171    141 149    120     98 (18.3) 38
Nebraska 425 212    115 144    152    238  56.6 1
Nevada 354 390    332 419    462    321 (30.5) 50
New Hampshire 490 92    302 334    212    178 (16.0) 37
New Jersey 1,120 1,195    660 730    689    734   6.5 7
New Mexico 348 322    513 620    693    774  11.7 6
New York 2,606 3,374  1,960 2,432  2,585  1,987 (23.1) 45
North Carolina 1,280 726    445 613    576    528  (8.3) 26
North Dakota 209 118     92 115    116    105  (9.5) 29
Ohio 1,778 1,052  1,471 1,794  1,538  1,426  (7.3) 24
Oklahoma 1,716 946    876 941    607    612   0.8 15
Oregon 1,061 781  1,453 1,389  1,606  1,591  (0.9) 16
Pennsylvania 1,751 1,770  1,455 1,541  1,263  1,193  (5.5) 20
Rhode Island 327 162     74 64     65     48 (26.2) 48
South Carolina 404 337    138 147    178    142 (20.2) 42
South Dakota 388 172    133 164    119    110  (7.6) 25
Tennessee 1,274 949    641 886    735    597 (18.8) 40
Texas 5,318 3,410  2,592 3,155  2,994  3,153   5.3 10
Utah 895 242    451 475    602    519 (13.8) 32
Vermont 179 167     71 97     91     78 (14.3) 33
Virginia 2,958 1,261    815 924    969    956  (1.3) 17
Washington 1,978 1,335    717 642    698    737   5.6 9
West Virginia 381 314    277 322    357    290 (18.8) 39
Wisconsin 1,366 1,067    685 734    856    722 (15.7) 36
Wyoming 136 109     47 45     47     44  (6.4) 21
Puerto Rico    209 333    351    254 (27.6)

Of the states that experienced an increase in bankruptcies from 2002 to 2003, Nebraska saw the highest jump, 56.6%, with Arkansas experiencing an increase of 52.1%, Hawaii an increase of 35.8%, and Kansas a 27.3% increase. (See Table 9.4.)

Business Closures

Business owners may also choose to terminate their businesses without declaring bankruptcy, and it should be noted that business owners may decide to terminate a business for a variety of reasons, including success that leads to a sale of the business, retirement, or merely the decision to pursue another line of work. Since 1990, the highest number of employer terminations, meaning business closings that were not due to bankruptcy, occurred in 2002 (569,000); about 554,800 terminations occurred in 2003. Table 9.5 offers a state-by-state analysis of employer firm terminations for the same years. Minnesota had the greatest increase from 2002 to 2003, experiencing 39.5% more business closures, following an 89.8% increase between 2001 and 2002. Other significant increases occurred in Arkansas (54%), Colorado (28.2%), Illinois (28.1%), and Kansas (22%).

New Mexico, on the other hand, had a 27.4% decrease in employer terminations between 2002 and 2003. Other notable states included Vermont (−26.2%), Delaware (−19.1%), Georgia (−17.7%), Rhode Island (−17.6%), Louisiana (−15.6%), New Hampshire (−15.1%), and Washington (−13.3%). (See Table 9.5.)

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