Failure is less of an option

April 8, 2011, 11:39 PM UTC

Moving in the right direction

So says Dun & Bradstreet’s latest look at U.S. business trends.

The firm’s 2010 report says business failures tumbled 13% from a year ago. That’s a welcome bit of good news after three straight annual increases.

But as has been the case everywhere except in the financial markets, the good news is emerging only slowly. D&B says more than 87,000 businesses failed last year (see chart, right) — which is more than failed in 2006 and 2007 combined.

Absent another economic shock, D&B expects to see that number decline further in 2011. The firm says business failures — which include but aren’t limited to bankruptcy filings — rise during recessions and fall as growth gains steam.

Of course, the signs in the U.S. economy are mixed, if generally on the favorable side. Unemployment has started falling and there are signs businesses are more apt to hire. On the other hand, the construction industry — a major driver of the boom of the past decade — keeps getting worse.

Still, most signs point toward a slow recovery continuing. Payment trends offer another clue: The share of bills late by more than three months dropped below 5% in the fourth quarter for the first time since 2007, the firm said, and if that number keeps falling it will mean further progress on the failure front.

“We’re starting to see businesses play the customer acquisition game again,” said Byron Vielehr, president of Dun & Bradstreet’s global risk and analytics practice. “The question everyone is asking is how do we get smart growth.”

After a long period of dumb growth and then a big contraction, it’s unfortunately not the easiest question to answer.

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