Small-Busines Bankruptcies Rise: What Drives Business Success—or Failure—in Emerging Markets

According to the article below, business bankruptcies appear to be increasing, which is something worth watching closely going forward. As more businesses are started, closure rates naturally rise as well—most new ventures do not survive their early years, and that is a normal part of the business cycle. There are also well-established economic theories that explain these boom-and-bust patterns in business development. The market constantly changes so small business adapt the best they can through the cycles. A rise and change in trend could indicate other things are going on.

Conference Board Boom and Bust

Business Life Cycle

Illustrative only.
Aron knows that much of his business
success comes from finding
the right start up location. He also
knows that if he keeps learning about
business and adapting while
keeping an eye on unnecessary 
expenses he can match
market need while 
making a strong profit. 

He works with some of the other
businesses on Ludington St. to  enhance
the downtown environment
and community because he has experienced
that his business is part of a network
of other busineses in the area. 

One key area of focus should be retaining businesses beyond their first few years so they can establish viable structures that support sustainable growth. A business may begin with a strong product or idea, but it must eventually develop a repeatable and profitable process that meets market needs. It doesn’t have to be large-scale or mass-produced, but it does need to deliver enough value for customers and generate sufficient returns to remain financially viable.

Rising costs can place pressure on businesses to adapt and make changes to improve efficiency. In some cases, this can be a healthy exercise that leads to better operations and leaner processes. However, when cost increases are rapid or structural—affecting inputs that cannot easily be reduced—bankruptcies become more likely. This is why factors such as inflation, infrastructure, taxes, and tariffs are so important to business survival.

From a theoretical perspective, business clusters can create efficiencies by sharing inputs, talent, and infrastructure, which can lower costs for individual firms. Certain environments naturally attract startups, and when those businesses are supported and connected to export markets—either nationally or internationally—overall wealth can increase. Entrepreneurial hubs often resemble startups themselves, experiencing cycles of experimentation, failure, and eventual stability as they mature. (In theory one might call this Perpetual Sustainable Development which furthers Creative Destruction concepts. If the environment is right it will continue to rejuvenate more cycles. It is just an idea so feel free to discard. This blog is about ideas.)

Government decision-making plays a significant role in shaping these outcomes, particularly through policies that influence costs, regulation, and legal frameworks for business development. When decisions balance economic realities with broader societal needs, they can foster more stable and sustained growth. Markets also exert pressure, requiring businesses and policymakers alike to adapt. Pressures are applied on all levels of governance from local to national creating the business environment and climate. Together, these forces shape the foundational conditions that determine whether a particular location is conducive to starting and sustaining successful businesses. If you find one then consider starting a business there. 

Small Business Bankruptcy Up