What are the business knowledge, social capital, and financial capital needs of new businesses that are most necessary to prevent failure of North Carolina businesses within the first seven years of operation? Based on the answers developed, what intervention strategies would be most likely to address the identified needs in order to increase business success rates during this initial seven-year period?
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1:00-1:45pm Project 1 (click here to learn more): Do new business creations provide near-real-time insight into the statewide economic health of North Carolina or of the state’s individual counties? If so, can this information, either by itself or in association with other data, be used to reveal statewide economic trends or economic trends of specific counties?
1:45-2:30pm Project 2 (described below): What are the business knowledge, social capital, and financial capital needs of new businesses that are most needed to prevent failure of North Carolina businesses within the first seven years of operation? Based on the answers developed, what intervention strategies would be most likely to address the identified needs in order to increase business success rates during this initial seven-year period?
2:30-3:15pm Project 3 (click here to learn more): What can the NC Department of the Secretary of State learn from data collected from failed businesses about possible business survivorship interventions and resources that would be most likely to increase business success rates during the initial seven-year period?
3:15-4:00pm Project 4 (click here to learn more): What additional data should the NC Department of the Secretary of State collect to answer questions about new business creation, new business survival, North Carolina’s economic health, and related issues? How should such data be collected to be most useful to investors, lenders, and policymakers?
The details of the research questions and project opportunities are not set in stone; discussion and refinement are likely.
The NC Department of the Secretary of State (NCSOS) has a wide range of administrative data and is interested in using its administrative data to identify and understand the needs of new businesses and the factors that promote initial business success and prevent failure. Such information may be used by NCSOS, investors, lenders, and policymakers to support, inform, and ultimately implement intervention strategies that have the greatest likelihood of increasing business success rates between years three and seven. Previous analyses of NCSOS data suggest that 25% of new business registrants cease operation by year three. By year seven, the percent of firms that cease operation increases to 50%. As a point of comparison, Bureau of Labor Statistics (BLS) data for North Carolina show firms starting in March 2015 had a 31% failure rate by year three and 52% by year seven (Business Employment Dynamics, 2021). Separately, NCSOS has surveyed multiple cohorts of businesses in operation for three years or less to determine the needs identified by these businesses. NCSOS has not surveyed failed businesses to establish why these businesses are no longer in operation.
NCSOS is interested in learning from already collected data as well as learning what additional data should be collected, and collecting that data in order to answer questions about promoting the survival of businesses through the first seven years of operation.
A form of this research question was crafted in partnership with Carolina Small Business Development Fund.
The NC Department of the Secretary of State and the NC Office of Strategic Partnerships (OSP) hosted a research partnership meeting on Tuesday, October 18, to discuss this project. Meeting recording (part 1; part 2). Click here for the slide deck.
- Phase I would involve developing informed qualitative assessments of dissolved business entities, which would in turn be used to create a data collection tool for qualitatively establishing unmet needs that lead to business failure within the first seven years of operation. NCSOS believes three months would be appropriate for Phase I. Phase II would involve using the data collection tool to produce a quantitative evaluation of the data collected and a description of various strategies that might be used to improve business success rates. NCSOS believes Phase II could be completed in six months. Subsequent phases (outside the scope of this project request) would involve implementing and evaluating such strategies on a pilot basis as might be proposed from the Phase I and II work.
Planned use of results
Results can help NCSOS, investors, lenders, and policymakers improve the identification of factors that put new businesses at risk and provide actionable information to better support new businesses with resources/interventions that may aid in business survivorship across North Carolina.
OSP, agency partners, and research partners work together to determine if a project has costs, what funding may be available, and possibilities for pursuing funding, if needed.
OSP, agency partners, and research partners work together to assess what data would advance a project, whether the data is already collected and available, and/or whether and how to collect and share it. NCSOS data reflects the agency’s status as the processing and registration repository for all North Carolina business entities created pursuant to statute – i.e., corporations and limited liability entities, not non-statutory formations such as sole proprietorships or general partnerships. These data are the most accurate and up-to-date comprehensive directory of active businesses and contact information available. The data do not include statements regarding business valuation, business purpose, or the number of employees, though such information may be available through data held by other agencies or private entities. Other data held by NCSOS reflect trademark applications, the existence (but not the value) of lien filings made pursuant to the Uniform Commercial Code, and federal tax lien filings against real property.
NC Secretary of State's Office