New businesses in Missouri and Kansas are failing faster than in other states | KCUR 89.3

Colored balloons, ribbons, unlimited drinks, food and of course music. There was everything in the cutting of the ribbon at Pirate’s second Bone Burgers site in the city on May 12.

On top of all these joyful arrangements, however, there was something that could not be seen in a tangible sense – a dream. The dream is to grow as much as possible, so that a small initiative on Main Street can happen again in another state and one day spread the brand outside the country.

Coming from a small cafe in Brookside, five years later, Zayd Renato Consuegra Sauza, a young Mexican-born entrepreneur, is now setting a goal for the next 10 years.

“I hope we can grow into another state, that’s the first step,” he said. “And if we can get to another state, I hope we can cross the lake. I would like to see a local business that can jump on the European market.

Zaid Renato Consuegra Sauza in front of his newly opened Pirate’s Bone Burgers restaurant on the main street.

“I don’t know how feasible this is, but the goal would be to see if we can cross the border, at least to Canada. I don’t know if we can compete with the bigger companies, because our sales and numbers are still very short, against the franchises. But I would be excited about my goal. “

But traveling from Brookside to Crossroads and now Main Street was not easy for Sauza and his two partners. They had to wait almost 16 months to create this new showcase restaurant after renting the property in January 2021.

“The idea was to make this a car restaurant, which means you came, you parked and we took your order, we brought your order to the car,” Sauza explained. “But here in Kansas City, entering by car is considered the same as crossing by car, and they do not allow crossing the main streets unless you are in a corner park.

“And as you can see, we are not in the corner so that they do not allow us to open as an entrance. So it took probably three to four months to be fully approved and opened as a showcase restaurant. … Three (up to) four months for a restaurant that is not working hurts a lot in your pocket. … On top of that, the construction took much longer. So we had to wait a little over a year without winning. “

Sauza is blessed that Pirate’s Bone can survive the long wait. But other young entrepreneurs are not so happy.

A recent analysis found that at least one of the five startups in Kansas and Missouri failed in the first year, a higher failure rate than the national average.

LendingTree, an online lending market, analyzed data from the US Bureau of Labor Statistics (BLS) and found that the average rate of business closures in the first year across the country was 18.4%. Hawaii tops the list with a 25.4 percent failure rate, followed by the District of Columbia and Kansas. Missouri experienced a 22.9% business decline over the same period.

Despite the increased incidence of early-stage failures in Missouri and Kansas, economist Frank Lenk, director of research services at the Central American Regional Council (MARC), said the Kansas City area is doing a good job of supporting start-ups and raising them to a certain level. point.

According to Lenk, growth at a later stage can be more challenging.

“When they need to expand, they often find that the necessary capital is on shore and they need to move,” Lenk said.

But this does not explain the higher than average failure rate in the first year, as this becomes a problem only after they have successfully grown and now need additional capital.

According to a LendingTree analysis, 58% of Kansas startups closed in the first five years, the second largest in the country after Washington.

Survival in the first year is most important for the business, because the failure rate decreases consistently the longer the business stays open.

BLS data shows that 65.5% of businesses in the United States do not work after 10 years, which is lower than 67.7% in Missouri. For Kansas, the number is 65.3%.

Maria Myers, founder of SourceLink and CEO of UMKC Innovation Center, believes that the closure does not necessarily mean a business failure. She noted that people are closing down businesses for many different reasons.

“Although the biggest reason is the lack of sales, the data also shows other closures without” failure “, such as retirement (which is significantly increasing), selling the company or opening another company. “Health and a return to a more corporate environment are also found in this issue,” Myers said. “So the term should be ‘closures’, not ‘failures’.

However, this was a failure for Chrissy Nukum. Nucum is one of those Missouri entrepreneurs who faced closure five years after starting the business.

The Filipino chef launched a food truck service called KC Pinoy back in 2015. After some initial success, KC Pinoy opened a restaurant in 2018. However, the dream ended within the next two years, in October 2020, about six months after the pandemic from COVID-19.

“We lost everything,” said Nukum, who now works as a chef at another restaurant.

Chrissy Nukum became the chef of another restaurant after the closure of hers, KC Pinoy.

Chrissy Nukum became the chef of another restaurant after the closure of hers, KC Pinoy.

Nukum said it was not just the pandemic that made it impossible for her restaurant to remain open. “Funding, bureaucracy, discrimination and resources” also played a role, Nukum said.

KC Pinoy’s experience reflects others.

CB Insight, a platform for business analysts, found in its study that 38% of bankrupt companies lost money a few years after starting the venture and failed to raise more capital. In addition, one third of the ventures started without analyzing whether or not their product was in demand on the market.

One in five businesses fail due to competition in the industry, according to CB Insight. The same number of companies point out mistakes in business strategy. And 18% of entrepreneurs say regulatory barriers are the main reason for their failure.

In total, about 32.5 million small businesses are currently working in the US LendingTree survey, which found that mining and oil companies are the most vulnerable, noting that only 25% survive in the sector in the long run. In contrast, agricultural firms have the best long-term survival rates, with more than half remaining in business.

In terms of the states offering the best chance of long-term survival of the business, Wisconsin ranked first with 56.2% failure rate. At the other end of the list, 81.7% of companies in Washington closed after 10 years.

In terms of job creation, new businesses are the driving force in the economy.

“We want a new business to start and grow,” Myers said. “Because they are a very important part of the economy.”

Myers cited access to capital, a sufficient supply of skilled workers, technical resources and a community that supports small businesses and entrepreneurs as keys to success.

“First and foremost, municipalities need to make it easier to do business in the region,” Myers said. “That means how easy it is to get a license and permit, an inspection and all these things that the city controls, and how quickly they can go through the process to start a business.”

So no entrepreneur has to face the same long waiting period to start a venture as Zaid Renato Consuegra Sauza did.

This story was originally published by Flatland, a member of KC Media Collective.

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