New study records more German business start-ups than failures in 2009
Berlin - Deutsche Welle

New study records more German business start-ups than failures in 2009

Despite universal economic gloom, 2009 was a boom year for the founding of small businesses. According to a new study by the research institute IfM, more small businesses were started last year than were liquidated.

Read it in Deutsche Welle

Pomeranza, a charming little shop in the Prenzlauer Berg district of Berlin, calls itself a “design ranch.” It sells lovingly-designed and useful objects from independent designers around the world, including clocks, bags and household utensils. Oddly, it was opened along with a flurry of other trendy little shops in Prenzlauer Berg in the middle of the financial crisis.

Sabine Bulkeley, who opened the shop along with business partner Janet Tempel, is very proud of its success. “For every product we have a little story – something we really like about it,” she told Deutsche Welle. “That’s part of the atmosphere here. A lot of people come in and say ‘Wow, that’s really nice, how did you find that?’ and ‘What is that?’ and ‘What can you do with this?’ ”

The shop was opened in March, and like many young, would-be business partners, Bulkeley and Tempel faced the drawn-out, complicated process of applying for a bank loan. They did not suspect they were starting a business on the eve of the worst global economic crisis since the Great Depression.

A time for being creative

“We had to do a really good business plan, we gave it to the bank,” says Bulkeley. “It took the bank months. And then finally we got the ‘yes’. Three days later, the crash came. So we were really lucky we got the loan.”

It may have been luck, but the story is not unusual. Pomeranza is one of more than 200,000 small businesses founded in Germany in 2009. This figure comes from a new study by the economic research institute Institut für Mittelstandsforschung (IfM). The study says that over 16,000 more businesses were founded last year than were liquidated – a welcome bonus in a difficult year.

IfM executive director Professor Frank Wallau believes this is part of the natural order. “Business start-ups always work in a kind of anti-cycle to the economic cycle,” he told DW. “We saw that in 2008, when we had the lowest number of start-ups since reunification, but in November 2008 we also had the lowest unemployment we’d had for a long time.”

Insolvencies up, liquidations down

It is a simple enough equation: when many people lose their jobs, they go free-lance or start a business. Experience has shown that a recession is a time when the creative industries, in particular, bloom. But Wallau is quick to warn against the assumption that the German economy is recovering. In fact, the number of business insolvencies rose in 2009.

“A lot of businesses are doing badly, but if things are not going well for me, that doesn’t mean I have to file for insolvency,” the professor says. Businesses that are not doing well often end up liquidating – or selling up their assets.

In contrast to insolvencies, liquidations actually fell last year, and Wallau has a special explanation for this. He believes the key is the fact that large companies are not hiring at the moment. This means that a lot of small business owners are being forced to keep their businesses open, even if they are earning less than expected, because they simply don’t have the option of selling up and getting a job with a large company.

But for now Bulkeley and Tempel, like many other shop-owners in Prenzlauer Berg, are enjoying their freedom as entrepreneurs.

Filed under: Berlin - Deutsche Welle
Tagged with: