Question

The Main Street Entrepreneurship Kauffman Index is an indicator of main street business activity, presenting trends in small business activity and ownership over the past two decades. Their 2015 report stated that “reversing a six-year downward trend, activity in established small businesses increased last year.”   Using the calculus analysis you have just performed and any additional math you may wish to do, is their statement justified? Why or why not?

Answer 1

Yes their statement is justified because the Main Street Entrepreneurship Index is an indicator of main street business activity, presenting trends over the past two decades, focusing on established small businesses (firms older than five years with less than 50 employees) and trends in ownership rates. The Index measures business activity along two distinct and complementary dimensions: the rate of business owners in the economy, which is the percentage of adults owning a business in a given month – and established small business density, the ratio of established small employer businesses to the person population in the economy.

Furthermore the report finds that the recent increases in Main Street business activity as measured by the Index were driven by the increase in established small firm density. While the rate of small business owners in the United States has remained virtually unchanged in the past year (increasing from 5.98 percent in 2014 to 6 percent in 2015), the density of small businesses in the country has risen to an all-time high with 1,006.6 companies per 100,000 people – or 3.16 million businesses, which is higher than pre-recession levels. A major driver of the uptick is the increase in micro-enterprises – businesses operating for more than five years with fewer than 10 employees – which grew by 3.6 percent from the 2014 to 2015 Index, compared to the 1.2 percent growth from all other established small businesses.Despite the increase in activity in 2014, the long-term trends for small business ownership in the United States are not encouraging. Since 1996, the rate of small business owners has declined significantly, from 7.8 percent to 6.0 percent, and the density of small businesses has also plateaued since the mid-2000s.