I’m a numbers guy. In fact, I’m just wild about numbers and statistics. Recently some numbers really grabbed my attention. According to a report by the Small Business Administration (SBA), one-third of all new employer establishments in our nation do not survive longer than the first two years, and 56 percent do not make it to their fourth anniversary.
We may comprehend this phenomenon of failure best if we look at the factors that help determine which new businesses will be able to thrive. As noted by the SBA, the major factors include having an ample supply of capital and being large enough to have at least a few employees, along with the education level of owners, and their reasons for starting the business in the first place.
To understand why this failure rate is especially important we should take a moment to consider these numbers: Over the past decade, small businesses created 60 to 80 percent of the new jobs in the United States. In the most recent year with data (2004), small firms accounted for all of the net new jobs. Firms with fewer than 500 employees had a net gain of 1.86 million new jobs. At the same time, large firms with 500 or more employees lost more jobs than they created, for a net loss of 181,122 jobs. Of 115.1 million non-farm private sector workers in 2004, small businesses with fewer than 20 employees employed 21.2 million people. These big numbers have a big impact on our nation’s economy.
TASC, as you know, has a long-standing commitment to supporting small businesses. AgriPlan and BizPlan are specifically designed for mom and pop businesses, and we all know that these types of family-run business are exactly the way many larger companies get their start. The small businesses that sign up for AgriPlan and BizPlan have success rates that are a big improvement over the national averages noted above. In fact, the failure rate for AgriPlan and BizPlan Clients is less than five percent, while about 30 percent of our nation’s small businesses fail. That’s quite a difference!
Ninety percent of our Clients renew each year. Of those who don’t renew, a little more than four percent have cancelled because they no longer qualify for the Plan, mostly because they are out of business. These numbers speak my language… As I wrote above, small businesses which succeed need an ample supply of capital on hand. AgriPlan and BizPlan directly impact this cash crunch, in a very positive way, for thousands of businesses. For example, in the 2007 Plan Year alone, our Clients were able to collectively deduct $295,230,106 from their taxes, for an average deduction of $10,625 per Client. Of that number, $166,426,925 of the deductions came from insurance premiums and $128,803,181 represented medical out-of-pocket expenses. At a 35 percent tax rate that equals an average savings of $3,719 per Client. Collectively, that equals $103,330,537, a tidy sum that is back in the bank accounts of these small business owners, providing them with the capital they need to keep their doors open. How about those numbers?!
(1) www.sba.gov
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