Nearly 700 more small businesses in Georgia kept their operations going instead of permanently closing in 2016, according to data from the Bureau of Labor Statistics.
Terri Denison, the district director at the Georgia Small Business Administration, attributed the businesses’ success to favorable conditions in the state, including the presence of a world-class airport, the port of Savannah and great infrastructure that support small business opportunities.
“Definitely, there is a lot of energy around entrepreneurship in the state,” said Denison, adding that the small business environment is expected to get better with the improving economy.
Right now, the latest data from the Small Business Administration says, 1 million small businesses in the state employ 1.6 million people. And last year, the SBA issued $1.41 billion in loans.
Still, national data shows 50 percent of small businesses close around their fifth year. In Georgia, 7,830 opened in 2016, while 7,140 others failed, data showed.
For those that are struggling to stay afloat, Denison said the SBA offers financial and training resources.
Various factors contribute to business closures, said Drew Tonsmeire, the area director at the University of Georgia Small Business Development Center at Kennesaw State University.
“If you look at what causes a business failure, it depends on who you ask. If you ask the owners or outside sources, you will receive different answers,” said Tonsmeire.
He pointed to cash management as being usually key to whether a business survives or not.
“It doesn’t matter the industry, a cash management plan is the essence of success,” said Tonsmeire.
Christ Wheat, business director at the J.P. Morgan Chase Institute, said newer businesses with more volatile expenses are most vulnerable to failure.
However, he said, “the likelihood of small business exit typically goes down over time,” as business owners gain more understanding of their business environment.
Entrepreneurs who research their industry and developed a plan and budget have a much higher chance for success, Tonsmeire said.
“Ten years ago, we were dealing with survival — right around this time is when the recession happened,” he said. “Right now, its growth, competition and technology.”
“Business owners have to devote time to put their ear to the ground to hear what is happening, what is coming down the road,” he added.
With the changing dynamics of the retail environment, with Amazon as a disrupting factor, small businesses should take advantage of the company’s fulfillment services to expand their market, Tonsmeire said.
“You don’t fight Amazon, you join Amazon,” he said.
Small businesses at a glance
- There are more than 30 million small businesses nationwide.
- Those businesses create two out of every three new jobs in the private sector each year.
- More than half of all Americans work for or own small businesses.
- The Small Business Administration backed more than $1.4 billion in loans to Georgia businesses in 2017
SOURCE: Small Business Administration