Start-up activity among unemployed managers and executives during the first half of 2011 fell to its lowest level in the history of tracking, according to survey results from outplacement consultancy Challenger, Gray & Christmas Inc.
The results reflect the harsh conditions that currently exist for would-be entrepreneurs, whose biggest obstacle may be securing the funds to undertake such an endeavor. Through the first six months of 2011, an average of just 3.3 percent of job seekers decided to start their own business. That was down from the previous record-low of 3.7 percent averaged during the first two quarters of 2010. In the second quarter of 2011, the start-up rate was even lower, with only 2.5 percent of job seekers launching their own firms.
The 2.5 percent of job seekers starting businesses in the second quarter is the lowest level of start-up activity ever recorded by Challenger in survey records going back to 1986. Even in 2001, amid the dot.com collapse that was particular devastating to recent start-ups, entrepreneurship was still pursued, on average, by nearly 8 percent of job seekers every quarter. Over the past six quarters, the average start-up rate is half the 2001 average at 4.2 percent.
“We are slowly coming out of the deepest recession this country has seen in decades. While some large and medium-sized companies are finally beginning to see the effects of an upturn, conditions are still very tough for small businesses and would-be entrepreneurs,” said John A. Challenger, CEO of CG&C. “Lending is still extremely tight and for many of those wanting to start a business, funding the venture with credit cards or through a home equity loan are no longer viable options. Then there is the difficulty of finding customers. Even medium and large companies are having a hard time doing this, as consumers and businesses continue to keep a lid on spending.”