New Advocacy Fact Sheet Highlights Some Reasons Why Businesses Close

A new fact sheet by Office of Advocacy Research Economist Brian Headd titled, "Why Do Businesses Close," https://www.sba.gov/sites/default/files/Small_Biz_Facts_Why_Do_Businesses_Close_May_2018_0.pdf?utm_medium=email&utm_source=govdelivery using U.S. Census Bureau data, states that over the last 25 years, about 7-9 percent of employer firms close every year and a slightly higher share open.

These figures from Census’s Business Dynamics Statistics have been trending down, illustrating a decline in business turnover. According to the Annual Survey of Entrepreneurs, of the businesses with employees that closed in 2015, the top reasons for closing were low sales, the owner(s) retiring, and the owner(s) selling the business. With the next top reasons being opening another firm and illness/injury, it shows that many owners close for personal or health reasons not just business reasons.

Headd also cited data from the Survey of Business Owners that despite credit being tight; it is having less of an impact on pushing businesses to close. While business credit was a relatively large reason for business closures at the onset of the Great Recession, Headd writes, more recently, it has been a relatively small reason.