Editor’s note: This article was first published in October 2010, as a news piece set in Spain’s economic crisis. The 9.6% year-on-year rise in business creation, unemployment and the end of jobless benefits all refer to 2010.
According to official figures, business creation has grown by 9.6% compared with 2009. That would be excellent news, were it not for the fact that more companies are closing than opening, and most of the new ones won’t last even a year and a half, for several reasons that we set out below.
On the one hand, it is good news in the sense that people are becoming aware of the need to become entrepreneurs. On the other hand, entrepreneurship is turning into exactly that: a necessity, given the lack of jobs and the expiry of unemployment benefits.
This means that people with no business knowledge have to look desperately for income in any way they can. Unable to find a job, the only option left is to start a business, and they throw themselves into it practically blind.
The new entrepreneur, out of desperation, decides to launch the business without doing any market research or drawing up a proper business plan, so many of these businesses are doomed to fail even before they are created.
On top of that, the lack of government support and the lack of financing from banks force entrepreneurs to turn to “cheap businesses” that don’t require much start-up capital.
The type of business that has grown the most is the autónomo (Spain’s self-employed status), so many of these workers (more than companies) find themselves drowning within six months, because of the tax regime that comes with this legal form combined with a lack of profits caused by poorly forecasting the business’s future sales.
That is why, even amid the desperate calls to start a business, we strongly urge you to take a week or two to do the proper research and draw up a business project, so you know whether it is viable. We recommend reading these related articles.
Further reading
- Why new businesses fail
- How to start a business with no money
- How to find business ideas
- How to run a small business in times of crisis
- The advantages of starting a business in a crisis
Featured image: Humphrey Bolton, CC BY-SA 2.0, via Wikimedia Commons.
