3 Things You Should Know About Small Business: Feb. 14

NEW YORK (MainStreet) -- What's happening in small business today?

1. Valentine's Day and small business. Small Business Trends has a great round-up on Valentine's Day stories related to small business, including a link to our story on how small businesses can take advantage of the holiday.

2. Lowest start-up rate on record. The second half of 2011 had the lowest start-up rate on record as the fragile economy deterred out-of-work executives from starting their own businesses, according to Challenger, Gray & Christmas.

Over the last two quarters of 2011, an average of just 3.2% of jobless managers and executives started their own business, roughly the same as the first two quarters of 2011, when 3.3% of job seekers started firms -- but half the start-up activity pace in the second half of 2010.

The survey is conducted quarterly among approximately 3,000 job seekers at the executive and management level in a variety of industries.

Overall, 2011 was a dismal year for start-ups, the survey says. The start-up rate fell to an all-time low of 2.5% in the second quarter of the year, rising slightly to 3.7% in the third quarter, only to fall again to 2.7% in the final quarter.

"While big business definitely began to reap the benefits of the recovery in 2011, conditions were not nearly as fruitful for existing small business, let alone those attempting to get up off the ground. Credit was still very difficult to come by and demand for products and services remained soft. Basically, it was not a very inviting environment for would-be entrepreneurs," CEO John A. Challenger says.

"We are at a point in the recovery where employers are beginning to hire again, but the economy remains relatively fragile," he adds. "In this environment, we tend to see a drop in start-up activity as job seekers are more comfortable with the relative stability of traditional employment as opposed to the uncertainty of entrepreneurship. As the economy continues to gain strength, start-up activity may begin to grow again, as conditions for such ventures become more inviting."

3. January small-business optimism flat. Small businesses were a pinch more optimistic in January than in December. Optimism rose just one-tenth of a point. to 93.9, according to the National Federation of Independent Business' Small-Business Optimism Index.

On the one hand, the increase marks five consecutive months of improvement, but the index is below the year-earlier reading of 94.1, the NFIB says.

"The most positive statement that can be made about January's reading is that the Index did not go down; a change of 0.1 points is essentially no change and it is hardly indicative of a surge in economic activity," says NFIB Chief Economist Bill Dunkelberg. "Nothing happened last month that would significantly improve the small-business outlook; Washington is at a stalemate."

January's survey indicates the economy will continue along at a slow and weak pace, the NFIB says.

Other highlights from the survey include:

• January marks the 56th consecutive month during which small businesses reported inventory reductions have outnumbered inventory increases. "Overall, it appears that small-business owners have reduced inventories to acceptable levels given the outlook for sales growth. Without improved sales, there is little motivation to order new inventory stocks," according to the release. "This drop is notable because December's reading was the best in 18 months."
• Small-business owners are also raising prices. Eighteen percent of the NFIB owners reported raising their average selling prices in the past three months (up 1 percentage point), and 17% reported price reductions (down 1 percentage point), mainly in wholesale and retail sectors vs. the seasonal effect of businesses in construction and agriculture, which were cutting prices. More importantly, 23% of owners plan to raise average prices in the next few months, while only 3% plan reductions, according to the index. "With some evidence that spending has picked up, some of these price hikes might stick," the NFIB says.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: [e-mail].

To follow Laurie Kulikowski on Twitter, go to: http://twitter.com/#!/LKulikowski

RELATED STORIES:

>>Businesses are in Love with Valentine's Day

>>What It Means to be a B Corp.

>>Winning the Card Game: Month 1

Follow TheStreet on Twitter and become a fan on Facebook.

>To order reprints of this article, click here: Reprints