New Firms in Wyoming: Survival Figures after One Year

by: Carol Toups

New small businesses seem to be springing up all over Wyoming. These modest trades can supply a portion of the unemployed with jobs, which in turn decreases the unemployment rate. In July 1994, 267 registrations were received from new employers applying for Unemployment Insurance (UI). Wyoming law requires that employers provide UI coverage for employees when the firm's payroll reaches $500 or more in a calendar year or when an organization, business, or substantially all of the assets of an employer is acquired. This article examines the industries and locations of some of these new firms and determines which are most successful after one year.

In first quarter 1993, 507 UI applications for new businesses were received. For the purposes of this article, only firms reporting employees and wages will be included. Business acquisitions will be considered turnovers, rather than new firms. This decreases the number of truly new businesses in first quarter 1993 to 321. The remaining establishments may have been active, but did not report any UI covered employees during that time.

At the end of first quarter 1994, 267 (83.2%) of the 321 firms were still open. Finance, Insurance, & Real Estate (FIRE) had the highest percentage of surviving firms at 89.5 percent, while Transportation, Communications, & Public Utilities (TCPU) had the lowest (74.2%). Services had the highest actual numbers, with 94 out of 115 establishments still in business. Remaining industries ranged from 80.0 to 88.4 percent, indicating all areas have fairly close success rates for new firm survivals after one year. See Graph 3 for more details on one year survivals among the industries.

Surviving firms were examined and placed into three groups according to activity status. "No change" in employment/payroll was seen in 99 (37.0%) establishments. "Increased activity" was observed in 104 (39.0%) firms, while 64 (24.0%) businesses "declined" compared to opening figures. This means about three-fourths of new openings had stable or increased activity, while one-fourth remained open, but business was down compared to one year ago. There were no industries with dominant areas of failure among the firms that closed before the year's end. Services had the highest number of increasing (40) and stable (37) businesses. FIRE, Retail Trade and Services had the highest percentage of firms with increased employment and/or earnings ranging from 58.0 to 43.0 percent.

Stable and growing areas among the surviving businesses included:

The top two industries with declining figures were Manufacturing (57.1%) and Construction (44.0%). Seasonality did not appear to play a role in Construction's decrease.

In first quarter 1994, 496 UI registrations were received with 413 firms considered active accounts. The typical monthly employment for these businesses averages to one worker in January, two in February and three in March, with an average quarterly payroll of $8,319. These figures indicate that the majority of new firms start out as very small operations.

Within the Retail Trade industry, two larger businesses opened (50+ employees), which may slightly raise the averages. Large chains opening a new store (restaurants, discount stores, hotels...) tend to hire an excess number of people upon opening and trim down over time as employee demand is determined. The smaller, locally owned new firms seem to have the reverse procedure; a minimal number of employees are hired and more added when business picks up.

Services, Retail Trade and Construction had the highest average monthly employment growth from first quarter 1993 to first quarter 1994. As shown in Graph 2, these same industries also lead in the number of new businesses in first quarter 1994: Services (169), Retail Trade (61) and Construction (58). The average monthly employment change from first quarter 1993 to first quarter 1994 for all industries was 7,085, while the new firm's average was 878. New firms contributed approximately one- eighth to the average monthly employment growth for this time period.

A brief glance at the new businesses by region shows a fairly even distribution of growth, from 79 (both Northwest and Central) to 95 (Southeast) openings in first quarter 1994. The Northeast region had the smallest number (60) and there were 14 new firms classified as statewide or unknown location. Natrona County had the most new businesses (65) with about half of the increase in the services industry. Laramie and Fremont Counties were in second and third places (55 and 37 firms respectively); both also had highest increases in services. The number of openings per county seems to be correlated with population. The two most populated counties in Wyoming, Laramie and Natrona, had the highest number of new businesses in first quarter 1994. Both have colleges and hospitals which may support business formation within those counties. Among seven counties with populations from 18,000 to 39,000, the number of new firms ranged from 19 to 37. Park County had a higher ratio of openings (30), probably due to tourism from Yellowstone Park. The remaining counties with populations of less than 17,000, had anywhere from one to nine new businesses. The exception in this category was Teton County with 32 new firms, perhaps also due to tourism in Yellowstone Park and the Jackson area. Graph 1 provides business opening figures in first quarter 1994 by county.

If the number of new firms is an indicator, Services appears to be the fastest growing industry in Wyoming. Natrona, Laramie, Teton and Park Counties ranked highest in openings for first quarter 1994. Business openings by region and county can provide useful information, yet the overall development of statewide Wyoming is most significant. When employment increases, unemployment decreases which has a positive effect on unemployment insurance tax rates for all Wyoming employers. Lower tax rates may encourage more people to start their own businesses and out-of-state firms to come to Wyoming.

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