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Fewer People Are Starting Their Own Businesses

Jul 19, 2016

Bad news for aspiring entrepreneurs: Now might not be the best time to launch your own business.

Total entrepreneurial activity in the U.S.—measured by the number of people starting and operating new businesses—fell to 12% in 2015, from 14% in 2014, according to a report released Tuesday by Babson College. The drop reverses upward growth in small business activity during the previous four years.

The findings could indicate that employees are satisfied with their jobs and unwilling to strike out on their own. But the research could also show a lack of confidence in the small business environment in the wake of the recession, Babson professor Donna Kelley told CNBC. The Small Business Optimism Index, a metric from the National Federation of Independent Business, has remained below its 42-year average since the recession.

"If the general environment is saying that there are few opportunities and the entrepreneurship rate goes down, that all suggests less optimism about entrepreneurship right now," Kelley said.

According to the report, entrepreneurship has the highest participation rates among people age 35 to 44, who represent 17% of those who started a small business in 2015. Men, at 15%, and women, at 9%, both saw their entrepreneurship rates decline by 2% in 2015. Overall, the rate of men's entrepreneurship outstrips that of women by a factor of 1.5, a phenomenon that has remained constant since 2001.

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The findings from the Babson report are not "necessarily surprising," Molly Day, vice president of public affairs for the nonpartisan advocacy group the National Small Business Association, told CNBC. She cited the challenges of overcoming regulatory hurdles, as well the cost of providing health care to employees, as potential obstacles to would-be small business owners. Small-business loans have also become more difficult to come by; traditional banks have pulled back on small-business loans since the financial crisis.

Challenges notwithstanding, the 2015 Kauffman Index, another measure of entrepreneurial activity, shows that 310 out of every 100,000 adults started new businesses each month, which translates to more than half a million new business owners every month. If you're one of them—or aspire to be—get some useful advice from MONEY's Small Business Startup Guide, or read these inspiring stories of entrepreneurial success.

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