RSM’s global investigation of enterprise births and deaths offers the following lessons for both public and private sector players:

  • The persistence of high unemployment and widespread idle capacity four years into the global recovery illustrates the severity of the 2008-09 recession, the sharpest economic downturn since the Great Depression. RSM’s research demonstrates the critical role of business churn in the redeployment of productive assets from weak to strong companies in the post-recession period. Countries still mired in slow growth can speed their recovery by enacting more policies that stimulate new business formation and facilitate the orderly exit of uncompetitive incumbents: e.g., tax reform and streamlining of bankruptcy/liquidation procedures.
  • RSM’s survey reveals comparatively high levels of business churn in particular industries (e.g. professional services) that combine low barriers to entry and high rates of attrition. Shortage of financing often leads to the demise of otherwise promising startup companies. Entrepreneurs contemplating entry into such industries should be mindful of the singular challenges facing young businesses in the “Valley of Death”, (2-5 year period) especially in relation to cash flow and working capital needs.
  • RSM’s research indicates that startup companies that survive the early years after formation tend to generate an outsized impact on productivity growth and job creation. But the economic benefits of new company formation typically take years to materialise, during which time many young companies are buffeted by powerful financial pressures. Governments can promote the survival of high-potential startups through a greater number of carefully targeted interventions (e.g. small business loans, trade financing, technology commercialisation programmes).