Each month EDA Director Jack Geller writes a commentary on topics of interest to community and economic developers across rural Minnesota. Below is a list of all commentaries with the most recent listed first.
America Loves Small Businesses
There's little doubt that America loves small business. Unlike much of the 20th century when the nation was fixated on the adventures of large corporations, over the past 20 years it has all been about entrepreneurs, venture capitalists and the proliferation small business. In fact, since the roaring economy of the 1990s and the incredible growth and success of businesses such as Google, Apple, Oracle, Amazon, Starbucks, Cisco and Biogen, politicians and economic pundits alike are quick to speak on behalf of small businesses. For the premise being what is good for small business is good for America.
We have been told that the majority of jobs created in our economy each year are created by small businesses (which is true); and as a result we are told that anything that may put a damper on the growth of small businesses is a "job killer." Whether it is policies regarding finance, economic development or taxes, you can count on a politician or a trade group representative speaking with confidence about what is best for small businesses. But if you notice, seldom do we hear from the average small business owners themselves. So it was refreshing and informative to see the results of Minnesota-based U.S. Bank Corp's second annual survey of small businesses.
The survey, which was conducted between April and May of 2011 and released in June 2011, surveyed a national sample representing 1,004 business owners across the 25 states where U.S. Bank Corp. does business. But more importantly, they also conducted an over-sample of more than 1,900 small business owners in 11 selected states, including Minnesota. From my view it's an opportunity to hear from small business owners without the filter of a politician or a pundit getting in the way.
So who exactly are these small business owners and how small is small? Well according to the survey demographics, the average business owner surveyed has been in business for approximately 10 years, with annual revenues of under $500,000 and fewer than 10 employees. Almost half of the respondents were located in suburban communities, with a third in urban cities and 21% located in rural areas. More than half (58%) were male; the median age was around 50 years of age and 87 percent were white.
While there is certainly variation in responses across the states, overall this group of small business owners appears cautiously optimistic. Approximately two-thirds (64%) report the financial health of their business as good to excellent and an equal percentage report revenues either in line or higher than they were last year. And in Minnesota small business owners report being even more optimistic. While 41 percent of all respondents report their state's economic conditions as weaker than the overall U.S. economy, only 6 percent of Minnesota small business owners view our state's economy as weaker than the U.S. economy overall.
However, a disappointing 70% of respondents also reported that they do not anticipate increasing their number of employees over the next 12 months. And when asked what is the most significant challenge facing their business, the most common answer (27%) was the economic uncertainty facing the country and their state. Not surprisingly, given the political tug of war that has occurred in Saint Paul since the beginning of our legislative session, a much larger 38 percent of Minnesota's small business owners reported economic uncertainty as the most significant challenge facing their business today. But what exactly does economic uncertainty mean?
Well accordingly to the results of the U.S. Bank Corp. survey, 16% reported poor sales as their most significant challenge; 12% reported Federal regulations and 9% reported competition in the marketplace as the most significant challenge to their business. Of course, such responses will certainly vary based upon the industry involved. For example, bricks and mortar retailers and travel agencies may see the competitive pressures from Internet commerce as the most challenging, while those in health care, insurance or financial services might view the changing regulatory environment as the most challenging. That's just the nature of small business. But what about taxes? Haven't politicians, lobbyists and special interest trade group representatives been telling us for years that taxes choke off small businesses and as a result are "job killers?" Well maybe so... but according to the small business owners themselves, only 8 percent reported taxes as the most significant challenge facing their business.
As I started this column, America loves small business and rightfully so. They are a critical element of our national, state and local economy and as a result, helping small businesses thrive and become the job creators they can be should be a priority. At the same time many groups and individuals will try to use small businesses as a premise to advance their own political and economic agenda. Don't be fooled; if you really want to learn more about the needs and concerns of small business owners... go ask them.
Geller is professor & head of the Arts, Humanities & Social Sciences at the University of Minnesota, Crookston. He also serves as the director of the federally-funded EDA Center at UMC. He can be reached at email@example.com