Nothing's Small About Small Businesses
The most recent Memphis Business Journal online survey asked readers how they felt Herenton's fifth term would affect Memphis business. A total of 422 responses were recorded.
Of those, 210 readers, or about 50 percent, checked "business as usual," while 190 votes, or 45 percent, felt the next four years would be "gloom and doom."
Only 22 votes, or 5 percent, felt the next four years would bring "progress and prosperity."
Even though this is not a scientific survey it gives a hint to how Mayor Herenton should focus his next four years in office. Herenton spoke of his legacy and the importance of Small Businesses at a Memphis Regional Chamber breakfast not long ago.
The U.S. Small Business Administration (SBA) has released their updated small business statistics. Here are a few of the highlights. Small Businesses...
- represent 99.7 percent of all employer firms.
- employ about half of all private sector employees.
- pay more than 45 percent of total U.S. private payroll.
- have generated 60 to 80 percent of net new jobs annually over the last decade.
- create more than half of nonfarm private gross domestic product (GDP).
- hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).
- are 52 percent home-based and 2 percent franchises.
The number of new small businesses has grown steadily over the past few years. In 2002 there were about 570,000 new small firms. That number grew to almost 650,000 new businesses in 2006.
Even with our growing dependence on small business in the US economy, the regulatory costs for small businesses continues to grow. The average employer with 20 employees pays about $7, 647 per employee in regulatory costs ($1,304 of this is tax compliance). The average cost per employee for large firms is about $5,282.
Out of that impressive list let’s focus on the 52 percent home-based businesses. Here in my view is the answer to poverty. It is important to understand that the poor do not create poverty; it is created by the choices taken by government and the private sector. As I have said many times, “Poor is a state of mind, but poverty is the inability to state your mind.” If we are to defeat poverty we must work to raise the voices of those who have been marginalized in our society.
If you were to live for a short time in the inner-city you would quickly realize that there are a lot of home-based entrepreneurs. People run various businesses out of their homes: upholstery, hair salons, baby sitting, catering, carpentry, tax returns, and so much more. Most will never expand beyond their homes and always be a one person operation. Imagine the impact it would have on our City’s economy if each of these businesses were able to hire just three people. With 70 percent of all new jobs come from small businesses this is the pond we need to be fishing in.
During my campaign I was asked what could be done to turn our economy around. This is what I said.
If I had a magic wand and could change only one thing in Memphis it would not be crime, or better schools, or even better race relations. I would not focus on any of those issues because they are symptoms of a much bigger problem and that is economics. When the economy is doing better people can find good jobs. Good jobs lead to more stable families. More stable families lead to students doing better in school. Better students lead to less truancy. Less truancy leads to less antisocial behavior. Less antisocial behavior leads to less youth committing crimes. Less crime committed by youth leads to more skilled young adults seeking careers. More skilled job seekers lead to better performing businesses. Better performing businesses improves the economy and the circle starts again. Simplistic maybe, but I’ve yet to be proven wrong.
There are three phases necessary for helping to grow small businesses:
Phase 1 – Focus on improving the skills of entrepreneurs. Here I wish to commend the administration for creating the Renaissance Business Center which is located at 555 Beale. This Center offers training and financial support for those wishing to venture into or have already ventured into the business world. In fact, the Center will host all my nonprofit’s 12-week sessions on “Successful Small Business Training.”
Phase II – Provide financial support for small businesses. The lack of capital sinks many great ideas. That is why we established the SMA Opportunity Bank. This partnership with SMA, Inc., the Women’s Foundation, and First Tennessee Bank provides loans up to $5,000 at a 5% interest rate. The funding focuses on home-base businesses.
Phase III – This is the most challenging. It is my recommendation that the City provides PILOTS (payments in lieu of taxes) support to help small businesses already here by reducing their tax burden, a burden which has been shown to be higher than larger businesses. I would also like to see more Capital Improvement Project (CIP) dollars go to enhancing the safety and aesthetics in the area where these businesses operate. Finally, we need to create what I call “Distressed Area Incentives” for those business owners who operate in inner-city areas. These owners spend a great deal of their limited dollars on security and insurance. They face higher incidences of crime. We could create a package of benefits to offset these extra expenses.
If you are a small business owner or are looking at starting a small business, what do you think?