Our Economy Needs Entrepreneurs

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OK.  Here I go again.  I’m going to tick off a few of you with my discussion of small business.. The facts are that our government has no clue that not all “small” business are the same, nor do they understand that lifestyle businesses are not really small businesses. Yet, they produce economic policies assuming the contrary. And, because of that our national economy suffers.

Speaking of facts, let’s consider a few that describe the 27 million “small businesses” in America:

1. 2/3 of all small businesses are going to stay that way.  Because plumbers, handymen, and shopkeepers are looking to provide for their own employment and are not going to hire others to help them grow.  Oh, there could almost be an exception to that statement- when they have temporary excess needs, they may have to hire 1 or 2 part-time workers or, more likely, “contractors” to handle their excess needs.

2. 3/4 of all those starting a business have no desire to grow at all. they are just seeking the ability to have steady employment for themselves.

3. Fact 2 really has underscored this next fact- that less that 1/4 of all businesses in America have any employees.  (One who runs a small, unincorporated business pay self-employment taxes on its net profits- but there are no paid wages.)

4. Less than 10% (closer to 8) of all new firms ever have 20 or more employees after their first decade of being in business. (I am proud to say that our firms have always been in that 8% niche.)

5. Slightly more than 1 in 16 (about 6.3%) of all US companies created all the net jobs in America between 1994 and 2008. Every one of those quadrennials (4 year periods) yielded an increase of almost 11 million jobs. And, those firms at least doubled their sales during those same quadrennials.

6. Most new jobs arise from companies that have been in business for 5 years or less.

7. But, those are not individually producing a large numbers of employees- these firms actually have between 2 and 4 employees. (This total accounts for some 5% of the total of small companies.)

8. Entrepreneurs- the ones who want to start companies that will have multiple employees and will grow their businesses (surprisingly, these folks average 40 y old)- are primarily college educated (95% have a Bachelor’s degree, with 47% having advanced degrees). Most of these entrepreneurs derive from the (shrinking) middle class- 71.5%. And, that means we probably will have fewer small business starts in the US in the future, since the middle class is being decimated. Interestingly, less than 1% of those starting new business derive from the very richest or very poorest amongst us. And, almost 1/2 (42%) are first born children.

You will notice that an entrepreneur is someone who has a business idea and wants to grow the business and hire more employees. Working ‘on the side’ from home, or just insuring you have a steady income does mean you are productive- bu you won’t make a dent in our economy.  And, it’s those latter firms that need government support- because that economic growth is what we seek.

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6 thoughts on “Our Economy Needs Entrepreneurs”

  1. This is fascinating, Roy, if a bit depressing. All three of my grown-up sons are self-employed, not starting new businesses per se (ones that will employ others) but are supporting themselves “by their wits” as my older son has described it, because the job market is so dreary for them. It’s certainly a different world, employment-wise, then it was when we were fresh out of college. I’ve got a professional writer, a graphics designer, and a web designer all supporting themselves from their respective homes, and it’s always possible that they’ll build businesses that will benefit the economy by hiring others. But really, the headaches and hassle coming from Washington in that area are a deterrant to growth.
    Amy recently posted..KALE–what’s the big deal, anyway?

    1. Yes, it is depressing, Amy. That is why I keep writing about it- to try to get those in power to pay attention and help make a difference…Our economy depends upon it.

      Thanks so much for your amplifying comments.

    1. I would hope you are successful businessperson, Alessa. There is nothing wrong with that. One of the folks I learned a lot from going up was a most successful candy store operator (back when that meant one sold candy, magazines, comic books, knickknacks, greeting cards- and food!)

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