New-business formation lags in county, state

Startups appear to decline from 2010 to 2011

Entrepreneurial spirit will save the day. American ingenuity will create new companies and jobs and a better economy.

It’s common morale-boosting rhetoric that often peppers public officials’ speeches as the nation seeks to recover from its cyclical economic downturns.

But recovering from recessions doesn’t always mean job creation. More often, it means fewer job losses than before.

That’s what a recent report from the Colorado-based Business and Economic Research firm (CBER) found this month.

“During the past decade, gross job gains trended downward, and gross job losses increased during recessions and decreased during recoveries,” said researcher Gary Horvath.

And “despite Colorado’s entrepreneurial spirit,” Horvath said startup patterns in the state do not outshine trends nationwide. Instead, they mimic national figures.

In some aspects, the numbers even fall short for Colorado. For instance, the average number of jobs created by new startups in Colorado is less than the national average, Horvath said.

Early figures for 2011 locally show a possible slight downtrend in startups compared to 2010. But final data are still rolling in, and the numbers could yet increase, bringing the figures to comparable levels, said Joe Keck, director of the Small Business Development Center of Southwest Colorado at Fort Lewis College.

About 30 new businesses opened in 2010, while early numbers show at least 21 started last year, Keck said.

But in an area like Durango, where enormous employers and mass layoffs are few, startups and job growth in small businesses can mean much more to recovering from a recession than in some other places in the nation, local officials said.

The health and ability for new companies to take off and thrive are a critical component to the local economy, with small business accounting for 98 percent of all the region’s businesses, Keck said.

“Small businesses are the lifeblood of our economy,” he said.

In the last decade, job losses around Colorado grew during recessions and fell during recoveries. The 1990s, meanwhile, were a period of innovation and growth that led to a significant “job churn,” Horvath’s latest report said.

But since 2006, the number of startup firms in the state and nation has declined. And the average number of jobs created by new companies in Colorado and the United States has steadily fallen since 1999, according to the February CBER report, “Where Have All The Startups Gone?”

As new companies open and then go out of business, or open and grow, the report calculates the net change in total jobs among new startups and firms less than 1year old was positive for the nation in only five of the last 17 years.

Companies that survive are generally growing over time, however, the report said.

In 1994, the average Colorado startup firm had 6.1 employees and there were more than 12,000 of them. Last year, 22.3 percent of those firms were still in business and each had an average 18.3 workers.

The firms had nearly 73,000 employees among them in 1994. In 2011, less than 3,000 of the companies were still in business, but together they employed nearly 49,000 workers, the report said.

Generally, nearly half of all startups fail within the first four years of operation, Keck said.

Many small businesses locally are staying alive through acquisitions and mergers with one another, though, Keck said. A low number of “big box” retailers in the area also helps, as those businesses can limit opportunities for startups unless they’re working in specific niche markets, Keck said.

The region’s hard work to support its “entrepreneurial ecosystem” through advisor programs, professional networks and advanced business-training opportunities also are working to combat declining startup and survival trends, Keck said.

Local economic-development professionals understand the need to foster a positive and supportive environment for new businesses and are constantly working to ensure resources are available to people navigating those waters, Keck said.

“Startups are very critical to growing our economy,” he said.