9 ms·

40% of California's small businesses died in the last two years

214 points by jger15 5y ago

scotuswroteus 5y ago
maybe they should lower the $800 annual tax of starting an LLC here, and chill out on threatening that a Wyoming LLC will get you in deep trouble
russdpale 5y ago
Not surprising, I see so many downtown areas still closed in the SJ area. It's tough to open a business when the people in the area don't have the money to buy your products. When 2/3rd's of the nation are paycheck to paycheck, even in an affluent area like SJ, if your business is not providing something extremely essential, then you are effectively marketing to just 1/3rd of the population with money. This tautology that has been spread through out our society that "rich people create jobs" is absurd, demand creates jobs, and decent paychecks create demand. So when paychecks have been stagnant for 40 years, what do people expect is going to happen?
- xxpor 5y ago
  Except this is the opposite of the actual problem. There's plenty of cash floating around right now: it's why inflation is high. We're finally hitting real supply limits. It's the hottest job market in most people's lifetimes. The fact of the matter is most small businesses are crap businesses. They also abuse their workers in ways big business can't get away with, both illegally and legally. If you work for an employer with <30 employees and they don't provide health insurance, why would you stick around right now?
  - dijonman2 5y ago
    Isn’t most of this due to lockdowns and shifting spending to online?
    - formerkrogeremp 5y ago
      It's not that simple, and it never is that simple. Demand destruction in an economy predicated on consumer sentiment and ability to, well, consume ends poorly for us all. I don't see current trends, if they continue, going well for anyone.
      - farinaceous 5y ago
        "The child says: 'Mom won the piece of cake in the cake-lottery, she took a part for herself and made smaller pieces of it, given to me and my silblings.' +++ Commercial: 'We are the leading transport and deal plattform for cake, and the most liked farmer of your region are inviting you to the cake-lottery...' +++ " P-: Yes, there was a comic about... hu (-;
  - russdpale 5y ago
    It's exactly what the problem is. Jobs may be growing because so many were cut due to covid, that doesn't mean it's a healthy economy, because it's not by any stretch. Most created wealth is going to the top 10% of employees.
  - deleted 5y ago
    [deleted]
  - lifeplusplus 5y ago
    I thought this inflation was supply driven??
  - perfecthjrjth 5y ago
    You also need to look at income distribution. It is true that 'plenty of cash is floating around'; however, the distribution of this floating cash matters. Yes, Starbucks baristas, some clerk at a transportation company, etc are making $24 per hour in the bay area; but most of it goes to rent (inflated rent), food (inflated food prices), etc. The people with most money floating around are buying four or five investment properties in Texas or a second home in the bay area or third home in Manteca. Someone has to pay rents for these, and the increased home prices (as a consequence, increased rents) impact how much one has to pay for a meal at some restaurant in the downtown SJ.
  - eigenrick 5y ago
    > The fact of the matter is most small businesses are crap businesses. > They also abuse their workers in ways big business can't get away with, both illegally and legally. Really? You know this to be a fact? It appears that the only thing you know about small business comes from what you read on /r/antiwork The fact of the matter is that 47% of Americans are employed by small businesses. That percentage keeps dropping, not because the owners are assholes, but because mega corporations keep getting larger and more monopolistic. Most small businesses run on razor thin margins because they don't have the economies of scale that the larger corps enjoy. My friend owns a cidery. The cost of his raw materials (juice concentrate and sugar) have gone up over 300% in the last 18 months, thanks to supply chain issues and worker shortages due to Covid. The prices are due to get even worse this year. His total burdened cost for a case of goods has gone up 170%. But he can't just mark his stuff up 170% now can he? He has to settle for a 10% bump in price and hope his distributors don't freak out. BTW, he has 8 employees and pays health insurance. Afaik, he didn't suffer any employee churn during Covid, cause he's not an asshole. In most sectors except for maybe fast food, small businesses have suffered not from employee churn, but from the Covid policies over the last two years combined with ridiculous price increases.
    - Tinyyy 5y ago
      That sounds like a crappy business that can benefit from economies of scale.
      - eigenrick 5y ago
        Absolutely. All he needs to do is dig up the 100 million dollars he has buried around his yard so that he can scale to the point that taking a 300% hit on materials doesn't affect him. Or maybe he should spend some of his billions to buy up all of the apple orchards in the region so he can better control his supply chain (and, coincidentally, that of his competitors) Scaling has its limits, unfortunately)
        redwall_hp 5y ago
        Yeah: https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/ https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... The bottom 50% of the US has 2.6% of the wealth. The 50-90% bracket has 27.6%.
  - stosto88 5y ago
  - ryandrake 5y ago
    People don’t like to hear this but a lot of small businesses (especially restaurants) are barely profitable and basically dead men walking. They can barely make payroll and can’t weather even a month of closure, let alone a pandemic. They are “shitty” businesses not because their owners are shitty or that they are doing shitty things, but simply because they just don’t make enough money consistently to be viable. Warren Buffet said “Only when the tide goes out do you discover who's been swimming naked.” Well, the tide went out in 2020 and we saw which companies were not solvent enough to survive even brief closures. They aren’t bad people but their companies unfortunately were only economically viable in a sustained bull market.
    - obviouslynotme 5y ago
      There's a difference between a bear market and having your business shut down by the government.
      - aaaaaaaaata 5y ago
        That's a worthy topic too, but no, the result of the temporary closure is the same — closed is closed, regardless of the reasoning.
    - refurb 5y ago
      This is the biggest issue - many small businesses are small margin businesses. Force a shutdown for a month or two and you've wiped out profit for an entire year. Not surprising in the least that after two years of uncertainty, business owners just hung up their hat and decided to do something else.
      - quags 5y ago
        That does ignore the PPP loads available to many small businesses. There was a forced shutdown, you could get funding during some of that shutdown with this and used correctly it did not need to be paid back. We can look back and say what should have been done, if restrictions went on too long but there wasn't a crystal ball - and there certainly were deaths happening due to covid. Business's with razor thin margins that couldn't operate during shutdowns certainly couldn't stay around once PPP went out. As far as cali and any of its excessive fees for business, that is a different story.
- lifeplusplus 5y ago
  For $7 I used to get 15 good apples now only 5.. feels like a bad joke
- anamax 5y ago
  > Not surprising, I see so many downtown areas still closed in the SJ area. It depends. The Mexican restaurants did really well. (They went to outside seating in tents that was much larger than what they had before and are packed.) The Asian restaurants, not so much. It might be a downtown thing more than an Asian/Mexican thing. San Jose has spent hundreds of millions of dollars over the decades trying to create a downtown that is barely self-sustaining during the best of times. It was limping (which is about as good as it gets) before Covid and then, wham. I suspect that downtown SJ redevelopment actually a pay-off to developers.
  - happycube 5y ago
    Yeah, I lived there in the 90's and visited occasionally after and it was struggling then - they opened up a big outdoor mall with a large movie theater... that failed. It was much easier to build a fake downtown a few miles out (Santana Row) than gentrify^Wdevelop the real one into something successful. And in the noughts it had a Borders while pretty much all that was left of the mall was office space and a Waldenbooks, IIRC...
    - anamax 5y ago
      San Jose's malls are far more successful than its downtown. (San Jose has a range of malls, from high-end to strip malls with actual strippers.) I don't know whether it's the business selection (a many of the customers will be San Jose state students), the crappy parking (which means that much of the rest of the customers are the relatively few not-students who live downtown and the lunch crowd, which are relatively few because there aren't that many jobs downtown), or what, but downtown SJ is never going to be what the redevelopment district has 100s of millions to try to make. However, I am confident that they'll spend even more in the decades to come.
      - Apocryphon 5y ago
        For whatever reason, it's one of the things that makes San Jose far more common to Los Angeles and general SoCal urban topography, compared to San Francisco.
olliej 5y ago
Small businesses tend to fail in the first two years regardless of circumstance. So let's look at the actual report to get some idea of whether CA's pandemic response played an outsized part: https://eig.org/news/more-physical-places-of-businesses-open-now-than-pre-pandemic-led-by-sun-belt-metros https://eig.org/news/more-physical-places-of-businesses-open... In that we see that there are more businesses in CA now than before the pandemic. We see Boise getting a huge influx in workers as people can more easily work remotely now.
gpsx 5y ago
I interpret the heading of the graph (not Marc Andreessen's tweet) to say there were 40% fewer small businesses opened on June 2, 2021 compared to Jan 2020. I assume that now we are exiting the pandemic the number is much higher than June 2021.
jonas21 5y ago
That chart is as of June 2, 2021. California didn't lift its COVID restrictions until June 15, 2021. The numbers started increasing soon after. Here is the current version of the same chart: https://tracktherecovery.org/?zy41m https://tracktherecovery.org/?zy41m > In California, as of January 16 2022, the number of small businesses open increased by 1.1% compared to January 2020.
- estro0182 5y ago
  It looks like you’re looking at a different chart, which is weird because they look like they’re from the same source. The tweeted pic of the chart shows -40% but the chart you linked never shows a value that low for the date mentioned.
  - jonas21 5y ago
    They changed their methodology in March (the tweeted screenshot was taken before then). If you hover over the little triangle next to the title, it says: "We improved the data quality of the Small Business Revenue & Openings series using panel data: our previously posted data relied on a repeated cross-section." And there's a link to this document: https://github.com/OpportunityInsights/EconomicTracker/blob/main/docs/oi_tracker_data_revisions.md https://github.com/OpportunityInsights/EconomicTracker/blob/...
tareqak 5y ago
I get the Twitter "hmm... this page does not exist" error as of 5:35 PM PDT.
bobulous 5y ago
Looks like he deleted the tweet. Might not be the best idea to repost screenshots from right wing political accounts.
- bentobean 5y ago
  Was the information accurate or was it not?
  - deleted 5y ago
    [deleted]
JoeAltmaier 5y ago
The normal rate for small business failure is 20% in the first year. Does 40% in two years seem out of line? Without some normal value, '40% died' is just clickbait.
- obviouslynotme 5y ago
  It's higher than that depending on the industry, but you are assuming that 100% of small businesses started right as the lockdowns hit. Most small businesses that make it past the first couple years last a long time.
  - JoeAltmaier 5y ago
    {citation}
more_corn 5y ago
I closed mine down in December. Got sick of arguing with the Sf assessors office over some shit they made up. They’re not available on the phone (my accountant tried to call half a dozen times), didn’t respond to 5 letters, Oh and they hit me with 10,000% fines/fees while I attempted to contest the made up thing. It was literally easier to shut down and start over someplace else.
londons_explore 5y ago
Are these actually real businesses closing, or are they people opening and closing small 'on paper' businesses for tax purposes? There are lots of tax breaks and incentives to open a business... And when it's a few years old and those are gone, it makes sense to wind up the business and do the same again.
- _dujt 5y ago
  There’s a corollary to Betteridge's law of headlines that states “A headline is Clickbait if it contains the word California”.
MrWiffles 5y ago
I just tried to look at the tweet to see where this data's coming from, but "[...] quoth the server: '404'". But really, forty percent!? For a statistical study that's an unusually convenient/round number, and for a state with the population of California, the chances of that statistic being accurate for any measurement methodology are astronomically small. Sure the dude could've been rounding it, which is totally fine of course, but I also question the validity of that statement because that's nearly half the entire small business segment for the most populous state in the nation! And that just doesn't sound right, fundamentally. It's possible, sure, but c'mon, really? Near half?! I don't buy it, not without data from well-respected sources to back it up. So I go to click the link, only to find it no longer exists. Which further casts doubt on this statement. (18 hours after tweet linked on HN is when I checked Twitter; or in my world, "just now".)
- mpalczewski 5y ago
  One can't even judge if 40% is unusual. Most businesses fail. It could a healthy sign that a bunch of businesses were started. It could be a normal amount, or it could be really terrible. Without more context, it isn't really informative.
- cyanydeez 5y ago
  Probably more a sad state of professional contractoritis as small business
- Terretta 5y ago
  40% in 2 years is 20% a year. Considering the definition of small businesses, that’s relatively unsurprising. You’d actually imagine more than 1 in 5 giving up in a year. In any case, 20% a year for first two years, compare SBA data from 2018: > “According to the Small Business Administration (SBA) Office of Advocacy’s 2018 Frequently Asked Questions, roughly 80% of small businesses survive the first year.“ So, right on track?
  - dragonwriter 5y ago
    > 40% in 2 years is 20% a year. 40% failing over 2 years is 22-23% failing per year—√(0.6) = 0.7745966...—but close enough.
vishnugupta 5y ago
Tweet deleted
HWR_14 5y ago
How does this relate to any other to year period. AFAIK, most small businesses fail in 2 years. So is this number abnormally high or abnormally low or average? don't see any context. (Of course, the tweet seems to be down. Maybe context existed at one point?)
- Johnny555 5y ago
  I was wondering that too. I found this article: https://advisorsmith.com/data/small-business-failure-rate/ https://advisorsmith.com/data/small-business-failure-rate/ AdvisorSmith found that 22% of small businesses fail within the first year, 32% fail within the first two years, and 40% fail within the first three years of business. Half (50%) of small businesses fail within the first five years, and two-thirds (66%) fail within ten years.
  - EVa5I7bHFq9mnYK 5y ago
    What's the definition of "fail"? For example, I had a business that closed because profit dried up, but overall it earned pretty good coin for me, while it worked. I wouldn't say it was a "fail".
    - joenathanone 5y ago
      The whole profit drying up is the failure that is being referred to.
      - EVa5I7bHFq9mnYK 5y ago
        According to that definition every person is a failure, because everyone eventually dies.
        Johnny555 5y ago
        Then it's a good thing that a successful person is not defined only by their work output.
randyrand 5y ago
And yet they still have a $800/year LLC fee, the highest of any state.
TYPE_FASTER 5y ago
2/3 of small businesses last two years, 1/2 make it to five years. This has not changed much over the last 20+ years. See the link below. https://www.sba.gov/sites/default/files/Business-Survival.pdf https://www.sba.gov/sites/default/files/Business-Survival.pd...
mrtweetyhack 5y ago
givemeethekeys 5y ago
Many restaurants, bars and coffee shops did not survive the pandemic. In some cases, the owners were already quite old and were trying to sell but when business went downhill during the pandemic, they simply walked away since they didn't own the property.
retrocryptid 5y ago
isn't the normal (non pandemic) number something like 60%?

214 points by jger15 5y ago

maybe they should lower the $800 annual tax of starting an LLC here, and chill out on threatening that a Wyoming LLC will get you in deep trouble

russdpale 5y ago

Not surprising, I see so many downtown areas still closed in the SJ area. It's tough to open a business when the people in the area don't have the money to buy your products. When 2/3rd's of the nation are paycheck to paycheck, even in an affluent area like SJ, if your business is not providing something extremely essential, then you are effectively marketing to just 1/3rd of the population with money. This tautology that has been spread through out our society that "rich people create jobs" is absurd, demand creates jobs, and decent paychecks create demand. So when paychecks have been stagnant for 40 years, what do people expect is going to happen?

xxpor 5y ago
Except this is the opposite of the actual problem. There's plenty of cash floating around right now: it's why inflation is high. We're finally hitting real supply limits. It's the hottest job market in most people's lifetimes. The fact of the matter is most small businesses are crap businesses. They also abuse their workers in ways big business can't get away with, both illegally and legally. If you work for an employer with <30 employees and they don't provide health insurance, why would you stick around right now?
- dijonman2 5y ago
  Isn’t most of this due to lockdowns and shifting spending to online?
  - formerkrogeremp 5y ago
    It's not that simple, and it never is that simple. Demand destruction in an economy predicated on consumer sentiment and ability to, well, consume ends poorly for us all. I don't see current trends, if they continue, going well for anyone.
    - farinaceous 5y ago
      "The child says: 'Mom won the piece of cake in the cake-lottery, she took a part for herself and made smaller pieces of it, given to me and my silblings.' +++ Commercial: 'We are the leading transport and deal plattform for cake, and the most liked farmer of your region are inviting you to the cake-lottery...' +++ " P-: Yes, there was a comic about... hu (-;
- russdpale 5y ago
  It's exactly what the problem is. Jobs may be growing because so many were cut due to covid, that doesn't mean it's a healthy economy, because it's not by any stretch. Most created wealth is going to the top 10% of employees.
- deleted 5y ago
  [deleted]
- lifeplusplus 5y ago
  I thought this inflation was supply driven??
- perfecthjrjth 5y ago
  You also need to look at income distribution. It is true that 'plenty of cash is floating around'; however, the distribution of this floating cash matters. Yes, Starbucks baristas, some clerk at a transportation company, etc are making $24 per hour in the bay area; but most of it goes to rent (inflated rent), food (inflated food prices), etc. The people with most money floating around are buying four or five investment properties in Texas or a second home in the bay area or third home in Manteca. Someone has to pay rents for these, and the increased home prices (as a consequence, increased rents) impact how much one has to pay for a meal at some restaurant in the downtown SJ.
- eigenrick 5y ago
  > The fact of the matter is most small businesses are crap businesses. > They also abuse their workers in ways big business can't get away with, both illegally and legally. Really? You know this to be a fact? It appears that the only thing you know about small business comes from what you read on /r/antiwork The fact of the matter is that 47% of Americans are employed by small businesses. That percentage keeps dropping, not because the owners are assholes, but because mega corporations keep getting larger and more monopolistic. Most small businesses run on razor thin margins because they don't have the economies of scale that the larger corps enjoy. My friend owns a cidery. The cost of his raw materials (juice concentrate and sugar) have gone up over 300% in the last 18 months, thanks to supply chain issues and worker shortages due to Covid. The prices are due to get even worse this year. His total burdened cost for a case of goods has gone up 170%. But he can't just mark his stuff up 170% now can he? He has to settle for a 10% bump in price and hope his distributors don't freak out. BTW, he has 8 employees and pays health insurance. Afaik, he didn't suffer any employee churn during Covid, cause he's not an asshole. In most sectors except for maybe fast food, small businesses have suffered not from employee churn, but from the Covid policies over the last two years combined with ridiculous price increases.
  - Tinyyy 5y ago
    That sounds like a crappy business that can benefit from economies of scale.
    - eigenrick 5y ago
      Absolutely. All he needs to do is dig up the 100 million dollars he has buried around his yard so that he can scale to the point that taking a 300% hit on materials doesn't affect him. Or maybe he should spend some of his billions to buy up all of the apple orchards in the region so he can better control his supply chain (and, coincidentally, that of his competitors) Scaling has its limits, unfortunately)
      - redwall_hp 5y ago
        Yeah: https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/ https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... The bottom 50% of the US has 2.6% of the wealth. The 50-90% bracket has 27.6%.
- stosto88 5y ago
- ryandrake 5y ago
  People don’t like to hear this but a lot of small businesses (especially restaurants) are barely profitable and basically dead men walking. They can barely make payroll and can’t weather even a month of closure, let alone a pandemic. They are “shitty” businesses not because their owners are shitty or that they are doing shitty things, but simply because they just don’t make enough money consistently to be viable. Warren Buffet said “Only when the tide goes out do you discover who's been swimming naked.” Well, the tide went out in 2020 and we saw which companies were not solvent enough to survive even brief closures. They aren’t bad people but their companies unfortunately were only economically viable in a sustained bull market.
  - obviouslynotme 5y ago
    There's a difference between a bear market and having your business shut down by the government.
    - aaaaaaaaata 5y ago
      That's a worthy topic too, but no, the result of the temporary closure is the same — closed is closed, regardless of the reasoning.
  - refurb 5y ago
    This is the biggest issue - many small businesses are small margin businesses. Force a shutdown for a month or two and you've wiped out profit for an entire year. Not surprising in the least that after two years of uncertainty, business owners just hung up their hat and decided to do something else.
    - quags 5y ago
      That does ignore the PPP loads available to many small businesses. There was a forced shutdown, you could get funding during some of that shutdown with this and used correctly it did not need to be paid back. We can look back and say what should have been done, if restrictions went on too long but there wasn't a crystal ball - and there certainly were deaths happening due to covid. Business's with razor thin margins that couldn't operate during shutdowns certainly couldn't stay around once PPP went out. As far as cali and any of its excessive fees for business, that is a different story.
lifeplusplus 5y ago
For $7 I used to get 15 good apples now only 5.. feels like a bad joke
anamax 5y ago
> Not surprising, I see so many downtown areas still closed in the SJ area. It depends. The Mexican restaurants did really well. (They went to outside seating in tents that was much larger than what they had before and are packed.) The Asian restaurants, not so much. It might be a downtown thing more than an Asian/Mexican thing. San Jose has spent hundreds of millions of dollars over the decades trying to create a downtown that is barely self-sustaining during the best of times. It was limping (which is about as good as it gets) before Covid and then, wham. I suspect that downtown SJ redevelopment actually a pay-off to developers.
- happycube 5y ago
  Yeah, I lived there in the 90's and visited occasionally after and it was struggling then - they opened up a big outdoor mall with a large movie theater... that failed. It was much easier to build a fake downtown a few miles out (Santana Row) than gentrify^Wdevelop the real one into something successful. And in the noughts it had a Borders while pretty much all that was left of the mall was office space and a Waldenbooks, IIRC...
  - anamax 5y ago
    San Jose's malls are far more successful than its downtown. (San Jose has a range of malls, from high-end to strip malls with actual strippers.) I don't know whether it's the business selection (a many of the customers will be San Jose state students), the crappy parking (which means that much of the rest of the customers are the relatively few not-students who live downtown and the lunch crowd, which are relatively few because there aren't that many jobs downtown), or what, but downtown SJ is never going to be what the redevelopment district has 100s of millions to try to make. However, I am confident that they'll spend even more in the decades to come.
    - Apocryphon 5y ago
      For whatever reason, it's one of the things that makes San Jose far more common to Los Angeles and general SoCal urban topography, compared to San Francisco.

olliej 5y ago

Small businesses tend to fail in the first two years regardless of circumstance. So let's look at the actual report to get some idea of whether CA's pandemic response played an outsized part: https://eig.org/news/more-physical-places-of-businesses-open-now-than-pre-pandemic-led-by-sun-belt-metros https://eig.org/news/more-physical-places-of-businesses-open... In that we see that there are more businesses in CA now than before the pandemic. We see Boise getting a huge influx in workers as people can more easily work remotely now.

gpsx 5y ago

I interpret the heading of the graph (not Marc Andreessen's tweet) to say there were 40% fewer small businesses opened on June 2, 2021 compared to Jan 2020. I assume that now we are exiting the pandemic the number is much higher than June 2021.

jonas21 5y ago

That chart is as of June 2, 2021. California didn't lift its COVID restrictions until June 15, 2021. The numbers started increasing soon after. Here is the current version of the same chart: https://tracktherecovery.org/?zy41m https://tracktherecovery.org/?zy41m > In California, as of January 16 2022, the number of small businesses open increased by 1.1% compared to January 2020.

estro0182 5y ago
It looks like you’re looking at a different chart, which is weird because they look like they’re from the same source. The tweeted pic of the chart shows -40% but the chart you linked never shows a value that low for the date mentioned.
- jonas21 5y ago
  They changed their methodology in March (the tweeted screenshot was taken before then). If you hover over the little triangle next to the title, it says: "We improved the data quality of the Small Business Revenue & Openings series using panel data: our previously posted data relied on a repeated cross-section." And there's a link to this document: https://github.com/OpportunityInsights/EconomicTracker/blob/main/docs/oi_tracker_data_revisions.md https://github.com/OpportunityInsights/EconomicTracker/blob/...

tareqak 5y ago

I get the Twitter "hmm... this page does not exist" error as of 5:35 PM PDT.

bobulous 5y ago

Looks like he deleted the tweet. Might not be the best idea to repost screenshots from right wing political accounts.

bentobean 5y ago
Was the information accurate or was it not?
- deleted 5y ago
  [deleted]

JoeAltmaier 5y ago

The normal rate for small business failure is 20% in the first year. Does 40% in two years seem out of line? Without some normal value, '40% died' is just clickbait.

obviouslynotme 5y ago
It's higher than that depending on the industry, but you are assuming that 100% of small businesses started right as the lockdowns hit. Most small businesses that make it past the first couple years last a long time.
- JoeAltmaier 5y ago
  {citation}

more_corn 5y ago

I closed mine down in December. Got sick of arguing with the Sf assessors office over some shit they made up. They’re not available on the phone (my accountant tried to call half a dozen times), didn’t respond to 5 letters, Oh and they hit me with 10,000% fines/fees while I attempted to contest the made up thing. It was literally easier to shut down and start over someplace else.

londons_explore 5y ago

Are these actually real businesses closing, or are they people opening and closing small 'on paper' businesses for tax purposes? There are lots of tax breaks and incentives to open a business... And when it's a few years old and those are gone, it makes sense to wind up the business and do the same again.

_dujt 5y ago
There’s a corollary to Betteridge's law of headlines that states “A headline is Clickbait if it contains the word California”.

MrWiffles 5y ago

I just tried to look at the tweet to see where this data's coming from, but "[...] quoth the server: '404'". But really, forty percent!? For a statistical study that's an unusually convenient/round number, and for a state with the population of California, the chances of that statistic being accurate for any measurement methodology are astronomically small. Sure the dude could've been rounding it, which is totally fine of course, but I also question the validity of that statement because that's nearly half the entire small business segment for the most populous state in the nation! And that just doesn't sound right, fundamentally. It's possible, sure, but c'mon, really? Near half?! I don't buy it, not without data from well-respected sources to back it up. So I go to click the link, only to find it no longer exists. Which further casts doubt on this statement. (18 hours after tweet linked on HN is when I checked Twitter; or in my world, "just now".)

mpalczewski 5y ago
One can't even judge if 40% is unusual. Most businesses fail. It could a healthy sign that a bunch of businesses were started. It could be a normal amount, or it could be really terrible. Without more context, it isn't really informative.
cyanydeez 5y ago
Probably more a sad state of professional contractoritis as small business
Terretta 5y ago
40% in 2 years is 20% a year. Considering the definition of small businesses, that’s relatively unsurprising. You’d actually imagine more than 1 in 5 giving up in a year. In any case, 20% a year for first two years, compare SBA data from 2018: > “According to the Small Business Administration (SBA) Office of Advocacy’s 2018 Frequently Asked Questions, roughly 80% of small businesses survive the first year.“ So, right on track?
- dragonwriter 5y ago
  > 40% in 2 years is 20% a year. 40% failing over 2 years is 22-23% failing per year—√(0.6) = 0.7745966...—but close enough.

vishnugupta 5y ago

Tweet deleted

HWR_14 5y ago

How does this relate to any other to year period. AFAIK, most small businesses fail in 2 years. So is this number abnormally high or abnormally low or average? don't see any context. (Of course, the tweet seems to be down. Maybe context existed at one point?)

Johnny555 5y ago
I was wondering that too. I found this article: https://advisorsmith.com/data/small-business-failure-rate/ https://advisorsmith.com/data/small-business-failure-rate/ AdvisorSmith found that 22% of small businesses fail within the first year, 32% fail within the first two years, and 40% fail within the first three years of business. Half (50%) of small businesses fail within the first five years, and two-thirds (66%) fail within ten years.
- EVa5I7bHFq9mnYK 5y ago
  What's the definition of "fail"? For example, I had a business that closed because profit dried up, but overall it earned pretty good coin for me, while it worked. I wouldn't say it was a "fail".
  - joenathanone 5y ago
    The whole profit drying up is the failure that is being referred to.
    - EVa5I7bHFq9mnYK 5y ago
      According to that definition every person is a failure, because everyone eventually dies.
      - Johnny555 5y ago
        Then it's a good thing that a successful person is not defined only by their work output.

randyrand 5y ago

And yet they still have a $800/year LLC fee, the highest of any state.

TYPE_FASTER 5y ago

2/3 of small businesses last two years, 1/2 make it to five years. This has not changed much over the last 20+ years. See the link below. https://www.sba.gov/sites/default/files/Business-Survival.pdf https://www.sba.gov/sites/default/files/Business-Survival.pd...

mrtweetyhack 5y ago

givemeethekeys 5y ago

Many restaurants, bars and coffee shops did not survive the pandemic. In some cases, the owners were already quite old and were trying to sell but when business went downhill during the pandemic, they simply walked away since they didn't own the property.

retrocryptid 5y ago

isn't the normal (non pandemic) number something like 60%?