Actually, the answer has been before us for a very long time, however the report strengthens and reinforces what we already know. The answer? Small Businesses! The report was based on the study prepared by Dr. James Stapleton of Southeast Missouri State University. He looked at data available from 1992 until 2010 regarding the economies of 252 counties, eight states in the DRA region. It reviewed business start-ups and closings, business expansions and contractions and business migration into and out of a location.
While there is much in this report to discuss, and we will in future articles, the one that stands out for me is the following: Of all net new jobs since 1992, 91 percent came from businesses with fewer than 10 employees. Yes, you read that correctly — 91 percent. That is impressive. And that is NET new jobs. Not that they created jobs which then were offset by losses. Small businesses created more jobs than were lost. We have all heard the talking heads on television stating that small businesses are the economic back bone of our country, and I have been one of those talking heads. Recently a governor in a northeastern state recently admitted that it will take small business successes to pull his state out of the economic malaise. This report supports that notion very well. Below I have included the bullet points in findings:
n The primary dynamics of job flux throughout the 18-year period was establishment openings and closings — 61 percent. During 2002-09 the total number of jobs eliminated by establishment closings exceeded jobs created by new firm openings by more than 555,308, and the average number of jobs per new establishment fell by nearly four.
n Existing establishment expansions and contractions accounted for 34 percent of the total job flux, and all of the total net additional jobs – 679,000. Job growth related to establishment expansions declined during 2002-09 when the average number of jobs per expansion fell by over two.
n The Delta region is becoming a region of increasingly local, smaller firms. Establishments with 9 or fewer employees provided nearly 42 percent of all jobs at the beginning of 2010. Since 1992, locally-owned establishments with 9 or fewer employees have created more than 91 percent of net new jobs.
n In the difficult years following the 2001 recession, local establishments in the region created more than 58,000 new jobs. As a result of these findings, the following recommendations were made:
n From 1992-2009 new and existing small businesses with nine or fewer employees created nearly all of the net new jobs in the Delta region. The focus of public and private stakeholder efforts and incentives in the region should be on creating an infrastructure that systematically increases the number of qualified and inspired entrepreneurs, and accelerating new venture startup and expansion of existing small businesses.
n While the annual number of new establishments created increased throughout the period, the average number of jobs created by each establishment, declined. The entrepreneurial infrastructure needed in the region must support the continued growth of startup business creation, especially those that are technology based and have potential to create jobs, and the innovation and expansion of existing small businesses.
n Resources available to support business development should be directed to efforts that support local innovators, entrepreneurs and small business owners. So given the findings and recommendations, what should be our next step? I offer that we need to look within each of our communities, as well as from a regional perspective, to see what efforts are being made to create, support and expand our existing small businesses. Small business entrepreneurship should be a top priority of anyone seeking to grow jobs and improve the economic status within our communities and our region.
I encourage everyone to read the report available at dra.gov and begin to think of ways to encourage and support our small businesses beyond what we are doing now. While support in some areas is stronger than others, we should look for ways to build on whatever level of support exists to improve it in all of our communities.
I will take steps to encourage the reading of this report as well as discuss ways to best leverage this information into small business support. I look forward to digging deeper into the industry specific and state specific information related to the report and to bringing that information to you. The answer to increased jobs and improved economic conditions is before us. We now need to commit to taking the steps necessary to realize the potential.
Chris Wooldridge is district director of the Murray State University Small Business Development Center, a member of the Kentucky SBDC network. The center provides high quality, in depth and hands on planning, consulting and training. Call 270-809-2856 for more information or to schedule an appointment. On the Web: ksbdc.org.