Business Opportunities

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.

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%).

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.)