When thinking of economic vibrancy, one of the first things that may come to mind for many are jobs, jobs, jobs. Which is why over the next few weeks we will be exploring the topic in 3 main ways: job creation, job preparation, and job access. To start off, we want to focus specifically on strategies that support small businesses, given their potential to play a significant role in job creation.
What defines a small business?
The U.S. government’s definition of small business varies by industry. Typically they use the number of employees and/or average annual receipts as measurement criteria. For most industries, they characterize small businesses as those with less than 500 and, in some cases, 100 employees.
How many jobs do small businesses create?
Since the 1970’s there has been a bit of a debate on the impact small businesses have on job creation in the United States. According to the Small Business Administration, small businesses accounted for 64 percent of the net new jobs created between 1993 and 2011 (or 11.8 million of the 18.5 million net new jobs). With this in mind, we turn to specific policies and strategies that can be implemented at the state and local level, aimed at creating, sustaining, and growing small businesses.
Policies & Strategies
Subsidized/ Low-Cost Loans and Grants
Capital access programs provide low-cost capital to attract and expand businesses through means such as direct loans from community development loan funds, which are among the most common programs supported by local governments. Ohio currently has the Minority Business Direct Loan Program which provides fixed, low-interest rate loans to certified minority-owned businesses that are purchasing or improving fixed assets resulting in creating new jobs for Ohioans.
Pro: Allowing businesses to borrow will allow them to hire more workers, which represents a significant component of their total costs. Access to capital is one of the biggest challenges firms face today because of banks have tightened lending in the wake of the financial crisis.
Con: Subsidies and grants for targeted businesses may also have the effect of reducing activity among other local businesses, and potentially leading risk burdens to be transferred to the public sector.
Business Incubators
Business incubators usually provide things like counseling, networking, training, and technical assistance services to small businesses and entrepreneurs. Business incubators usually receive funding from academic institutions, economic development and/or other types of organizations, for-profit companies, and also government entities, which sponsor up to 20% of incubators. Ohio State University funds a business incubator serving Southern Ohio.
Pro: Many incubators are designed in a way that help foster the creation of companies in new industries, such as the CleanTech Incubator in San Jose. To the extent that the incubator is supporting the development of new markets, the jobs created will be net new ones.
Con: Not all start-up companies are the same and can require a lot of different types of resources. To ensure a better success rate for businesses, incubators must admit companies who share their same objectives and require the specific support services provided.
Facilitate Adaptive Reuse of Vacant Buildings
Local governments can establish an Adaptive Reuse Program to help local entrepreneurs turn vacant historic buildings into new businesses. Phoenix, Arizona is probably one of the best examples of a successful program. The program offers development guidance, permit-fee waivers, and a faster timeline for eligible projects.
Understanding Small Business Development
While small businesses individually may seem pretty diverse, research suggests small businesses move through stages of development that reflect more uniformity than one might think. As they grow, entrepreneurs face new challenges and will likely need different resources and relationships to support them. Understanding small business development stages is important for communities and local governments, because it allows them to better understand the challenges facing entrepreneurs and put policies into place that will support them.
Discussion
Are the jobs people are getting in your community matching their education, availability and potential?
http://spanohio.org/images/Small_Business_Benefits_from_SP.pdf
provides a look at the benefits of universal healthcare for small business.
bit.ly/FIXITHC has three excellent videos produced by Richard Master, an Easton, PA CEO and business owner.
If you want to see the economy improve, stop the bleeding of our businesses by the medical industrial complex.