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Contact Information: Tanya Klein Public Relations 973-596-3433

Start-Ups Can Thrive, Contribute to US Economy, Says NJIT Biz Professor

Thinking of starting your own business?  Then, go for it, advises small business expert Bruce Kirchhoff, a professor in NJIT’s School of Management.

“Many people believe that it’s difficult to start a small business and even more difficult to see it expand,” says Kirchhoff.  “But two decades of research combing Census Bureau statistics convinced me that more than a quarter of these businesses are significantly more likely to survive, add employees and grow, than decline.  In addition, these businesses will ultimately contribute to the nation’s overall economic health, through their growth in commerce and employment.”

“Small Business Growth: Searching for Stylized Facts,” published by the US  Small Business Administration (SBA) http://www.sba.gov/advo/research/wkpapers.html

makes the case that about 28 percent of businesses with under 100 employees grow annually.  Kirchhoff, who co-authored the report with Brian Headd of SBA’s Office of Advocacy, studied U.S. Census Bureau data from 1992–2002.

The pair tracked the life cycle of single establishment firms at start-up with less than 100 employees. Such firms represent 98 percent of all U.S. start-up businesses. The median size firm employed four people.

“We like to think of ourselves as myth busters,” said Kirchhoff.  “Many people regard small businesses as stagnant, small, rarely changing, neighborhood operations. But in fact, our research shows that more than a quarter of all start-up businesses will grow and add employees,” he noted.  Other major findings included:

Fast-growing companies need not necessarily be in the fastest-growing industries. If you have an idea, give it a try, said Kirchhoff.  For example, take leather-manufacturing. Some people might regard the industry as a has-been. But new firms have started even in this field at about the same rate as other industries.

Growth exists in industries in which rapid growth appears to be dominated by large corporations.  Although in the field of information services, giants such as IBM and Oracle exist, the researchers found growth among start-ups that is equivalent to all other industries.

Start-ups are more likely to grow, than decline.  Most start-ups begin small and stay that way.  However, typically within one year, the research showed that 28 percent of start-ups grew, whereas only 25 percent declined.  About 35 percent of start-ups had no employment change from one year to the next.  About 11 percent of them closed each year; while the rest were either acquired or merged into another firm.

Small start-ups are important job creators. The researchers also found that single establishment start-up firms were integral to the economy since these businesses accounted for about half of the private sector net employment increase.

Kirchhoff http://www.njit.edu/publicinfo/newsroom/kirchoff_bio.php, an expert on small businesses and entrepreneurs, is a distinguished professor of entrepreneurship at NJIT’s School of Management.

NJIT, New Jersey's science and technology university, enrolls approximately 10,000 students pursuing bachelor's, master's and doctoral degrees in 120 programs. The university consists of six colleges: Newark College of Engineering, College of Architecture and Design, College of Science and Liberal Arts, School of Management, College of Computing Sciences and Albert Dorman Honors College. U.S. News & World Report's 2012 Annual Guide to America's Best Colleges ranked NJIT in the top tier of national research universities. NJIT is internationally recognized for being at the edge in knowledge in architecture, applied mathematics, wireless communications and networking, solar physics, advanced engineered particulate materials, nanotechnology, neural engineering and e-learning. Many courses and certificate programs, as well as graduate degrees, are available online through the Division of Continuing Professional Education.