The Climate of Small Business, 2009 by Bobbie Kite

The Small Business Administration, SBA, writes a letter to the President each year on the state of the small business economy in the US. Here are some highlights from the 2009 report along with some of my thoughts.

The major concerns of small business owners are access to credit, poor sales and inflation. Small business is responsible for 60% to 80% of new job creation and supplies around half of the GDP, in the US. Due to this economic downturn, the GDP has dropped over ten percent in the last year and 60% of the 3.1 million jobs lost last year were from small businesses.

The recession began in December of 2007. When the housing bubble popped and it was discovered that the risks taken on many investments were not fully appreciated, steps were taken to correct this problem. This process lifted the veil of American financial instability.

Most of the jobs lost were in the construction and manufacturing industries. Small businesses that were incorporated stayed steady with employment throughout the year. The owners of these incorporated business needed credit to get through the rough patches of 2008 and the stimulus packages helped fund guaranteed loans of the SBA. In 2009, the SBA received an additional $730 million from the American Recovery and Reinvestment Act.

Recession causes reform. The businesses that have and will continue to make it through these hard times believe they are better because of it. Conventional wisdom says that when unemployment raises so does the rate of entrepreneurship. People don’t have jobs, so they will create them. The report found no real direct correlation between people with no jobs becoming entrepreneurs. What the research revealed instead was that smaller firms, called gazelle firms, with less than 20 employees was were where this net growth of jobs is to be seen. This has been proven true through the last two major recessions. While there is no proven direct correlation between unemployment and entrepreneurship, there is a connection between small business growth and the recovery of the economy.

So, who are the currently self-employed and “gazelles”? While white, older, married males constitute the majority, Hispanic entrepreneurs have doubled since 2000 and have grown to over 10% of the total. Immigrant entrepreneurs share 12%.

So how do we fix this? I say “we,” because the problem is ours. Entrepreneurs hold the key to turning this trend in a positive direction. Texas had nearly 400,000 small employers in 2006, employing near 50% of the private sector of the state.

As we progress through the recession, the businesses that survive will incorporate reform everywhere they can. The immigrant and Hispanic owned businesses will continue to hold steady. Educated baby boomers and innovative new entrepreneurs will fill the hole left by the decline of the construction and manufacturing industries.

The success of small business is paramount to reviving the struggling economy. Out of every 100 people, 7 are trying to start a business at any given time. Much of the money given to the SBA for guaranteed funding is our tax dollars. It is available for us. Those who still have the finances and means available, have the opportunity to succeed.

Give yourself the best chance to succeed with Package 001-Starting a Business. Be apart of the solution and help save the American economy.

Please feel free to email me for more information or references for this article.
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