Start-Ups in State Highest Since 1989, Report Shows
Californians created more new businesses in 1996 than in any year since 1989, with the technology and business service industries of Southern California leading the way, a new report shows.
In all, 48,301 new businesses were incorporated in California during the year, up 3.9% from 1995 and the highest total since the state’s recession six years ago, according to data compiled by Santa Ana-based CDB Infotek, a public-records research firm.
Los Angeles County posted a 6% gain while new business incorporations were up 5.9% in both Orange and San Diego counties. Together, the three counties accounted for 61.5% of the state’s total.
And while business start-ups in recent years have been offset by growing numbers of business failures, that doesn’t appear to have been the case in 1996.
Chapter 11 bankruptcy filings by businesses were down 5.3% for the year, said CDB analyst John Karevoll.
Additionally, Dun & Bradstreet recently completed its annual survey of businesses in the U.S. and found that failures were down for the year, even in California.
“These numbers are indicative of an improving economy for the state,” said Barry Bosworth, an economist at Brookings Institute in Washington. “They are showing that business start-ups are increasing at the same time there is employment growth in the state. The general view is that while the West Coast has lagged the rest of the country, it finally has joined the economic recovery that started everywhere else several years ago.”
The rate of new incorporations was highest in the Silicon Valley and San Francisco Bay areas, with Santa Clara County--the state’s computer hardware and memory chip center--turning in an 11.5% increase over 1995 with 3,260 new businesses formed.
In Orange County, where business start-ups have been concentrated in medical technology, software and business services, 5,485 new businesses were incorporated--the highest annual total since 6,033 incorporations were recorded in 1989.
Los Angeles County, bolstered by entertainment and business services as well as high-tech start-ups in the East San Fernando Valley area, saw 20,464 new businesses, the report said.
“All the elements are in place for continued business growth on into 1997. In fact, if current trends stay in place, the number of new California incorporations could pass 50,000 for the first time this decade,” said Rick Rozar, CDB Infotek’s president.
Still, the enthusiasm needs to be tempered by the number and size of business failures, said Bruce Devine, chief economist for the Southern California Assn. of Governments.
“We have a net gain of new businesses, but a lot of those that start up are small and some of those that fail are pretty big employers,” he said.
Many of the new businesses are home-based entrepreneurial operations with just one or two employees, said Barry Allen, founder of Consumer Business Network in Huntington Beach, a for-profit networking and business development operation with chapters in Orange and Los Angeles counties.
“The difference that we see is that in 1996, people who were starting small businesses were a lot more dedicated to really doing business,” Allen said. “They weren’t just people who started a business but expected to make it on savings or severance checks from their former employers.”
Many of those businesses--often started by people who wanted to call themselves self-employed because the alternative was being unemployed--failed because they were put together without much planning, Allen and others say.
“We are just learning to be entrepreneurial in much of Southern California, unlike the Silicon Valley, where it has been a way of life,” said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.
“What we have to do is concentrate on helping the small new businesses grow. Having a lot of start-ups is nice, but what we need are some big business successes.”
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Start Me Up
Business incorporations in Southern California rose 5.3% in 1996 from the previous year, with Los Angeles, Orange and San Diego counties all recording about the same percentage increase. Among the seven counties, only Ventura had a decline in start-ups.
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County 1995 1996 Change Los Angeles 19,292 20,464 6.1% Orange 5,179 5,485 5.9 San Diego 3,535 3,744 5.9 Riverside 1,087 1,105 1.7 San Bernardino 977 984 0.7 Ventura 813 730 -10.2 Imperial 53 54 1.9 Region total 30,936 32,566 5.3
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Source: CDB Infotek
