Not too long ago, a significant number of executives and managers who lost their positions would try their hand at starting a business. But what once approached 10 percent of the people out of work has dropped significantly—and it doesn't say complementary things about the current environment for start-ups.
According to surveys that outplacement consultancy Challenger & Gray has done since 2000, the percentage of executives and managers who have lost full-time employment has dropped steadily over the years, as the graph below shows.
The glory days over the last decade plus were in 2002, right after the dot com bubble popped. It makes sense because many people had become accustomed to large amounts of investor capital being available for even the most outlandish ideas.
It dropped, as you might have expected, when reality began to sink in the following year, and yet the percentage rebounded over 2004 and 2005. That's when the real decline began. Although 2009 showed an upward spike, in general there's a clear downward trend. But to get a real sense of what has been happening lately, look at the quarterly results for the last three years:
It's as though starting the end of 2009, more people began to give up. Remember, though, that a lot of money sources, particularly bank lending, had dried up by that point. All of a sudden, people trying to start a business were at a tremendous disadvantage compared to large corporations. And things haven't changed all that much for small and medium businesses. Here's what Challenger, Gray CEO John Challenger had to say about it in the press release:
While big business definitely began to reap the benefits of the recovery in 2011, conditions were not nearly as fruitful for existing small business, let alone those attempting to get up off the ground. Credit was still very difficult to come by and demand for products and services remained soft. Basically, it was not a very inviting environment for would-be entrepreneurs.
As the firm pointed out, the number of self-employed Americans declined by nearly 2 percent between December 2010 and December 2011, according to U.S. Bureau of Labor Statistics. Expected hiring among SMBs remains weak, which could indicate a difficult environment in which to start a new venture.
Furthermore, according to the Bureau of Labor Statistics, hiring is on the upswing, so it also might be that more people between jobs think holding on might be the better option. As things improve, though, there's a good news silver lining for die-hard entrepreneurs: The fewer people trying to start new ventures, the fewer competitors there are for basic resources such as capital and talent.