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Tue September 24, 2013
Small Businesses: Big Concerns And High Hopes
Originally published on Wed October 16, 2013 4:37 pm
Safe to say, Americans love small business. Or at least the Idea of Small Business.
President Obama once told owners: "What you share is an entrepreneurial spirit, a tireless work ethic and a simple hope for something better that lies at the heart of the American ideal. Businesses like yours are the engines of job growth in America."
At the 2012 Republican convention, presidential nominee Mitt Romney pledged his devotion: "We will champion small businesses, America's engine of job growth."
But while small-business owners get plenty of praise, many struggle to feel the love from customers. The neighborhood hardware store, the cozy diner, the independent bookstore — they have seen customers leave in droves for Lowe's, Starbucks and Amazon.com.
We may love small-business owners, but we crave Big Macs.
And during the Great Recession, life got even tougher for entrepreneurs. The number of new businesses created annually plunged from 560,000 in 2006 to 390,000 in 2010. Job creation at new firms tumbled by 32 percent during that dismal period.
Startups were hurt, not only by big-box competition but by tighter bank lending standards and plunges in home equity — a source of seed money for entrepreneurs.
So are small businesses dying despite our professed love for them?
No. The latest data show a rebound. Beginning in 2011, the country recorded the first annual gain in businesses in five years, and the largest percentage increase in nearly a decade, according to the Kauffman Foundation, which studies small business.
The study said job creation at new firms rose by more than 4 percent in 2011, finally reversing four straight years of losses.
So entrepreneurship is making a bit of a comeback, but the great majority of new businesses don't fit our romantic stereotypes of the beloved local establishment with dozens of loyal employees.
In reality, small firms overwhelmingly are made up of individuals working alone — they are freelance writers, lawn mowers, consultants and housecleaners. The U.S. Census Bureau says 3 out of 4 firms have no payroll, and collectively, they account for only 3.4 percent of all business receipts.
But while most of the nation's roughly 28 million firms have no workers, about 6 million do hire, fire and pay people. Of those, roughly 5 million really are small, with nine or fewer workers.
That leaves those approximately 1 million firms that hire at least 10 people, but not more than the 500 — keeping them within the Small Business Administration's usual definition of "small." Many are headed by hardy entrepreneurs, willing to take the leap by moving into storefronts, leasing office space and launching businesses with big plans to grow and hire.
NPR will take a closer look at small businesses and will explore topics such as:
- What is a small business? It depends whom you ask: The Small Business Administration, the Internal Revenue Service, the National Federation of Independent Business and others use different measures.
- Is small business really the engine of the U.S. economy?
- What are the headwinds facing entrepreneurs?
- Technology is making it easier to launch a small business: Applications in the cloud, the low cost of shipping and legal tools have all streamlined the process.
- Thanks to tech innovations, it's easier to become a small manufacturer.
- Why do many consumers choose big-box stores instead of local businesses?
- Is operating a franchise different from starting a small business?
- How will the Affordable Care Act affect small businesses?