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This report, which contains the results of a scientific national phone survey of small business owners (2 to 99 employees) conducted in March 2013, is designed to inform policy discussions about retirement security and serve as a basis for evaluating proposals that address the needs and concerns of small business owners.
The Maine Center for Economic Policy (MECEP) was retained by the Portland Independent Business and Community Alliance to collect and analyze data related to the economic impact of businesses in Portland, Maine. The primary purpose of the study was to quantify the impact of locally owned businesses compared to national chains on the local economy. MECEP's analysis found that in general every $100 spent at locally owned businesses generates an additional $58 in local impact. By comparison, $100 spent at a representative national chain store generates $33 in local impact. Stated differently, MECEP found that money spent at local businesses generates as much as a 76% greater return to the local economy than money spent at national chains. These findings are consistent with similar studies conducted in other states and can vary by business type.
Local leaders recognize and often publicly tout the importance of a strong, growing entrepreneurial and small business community. Yet, when it comes to supporting entrepreneurs in practice, many local leaders are unsure how they can make a real impact. Experts suggest that one essential element for entrepreneurial growth is the presence of an "eco system" or "culture." Given the various dimensions and actors that can create eco systems - including universities, large and small businesses and their leadership, entrepreneurial support programs, workforce skills, financing, and probably a bit of luck - do local governments really have a role to play? Research by the National League of Cities' Center for Research and Innovation suggests that they do.
Small businesses are the lifeblood of the economy in the United States. Based on data from the U.S. Census Bureau, the Office of Advocacy at the U.S. Small Business Administration documented that small businesses accounted for over 92% of the net new jobs creation between 1989 and 2003. The smallest among the small businesses (those employing fewer than 20 employees) accounted for 85% of the net new job creation over the same period. In essence, the vast majority of the new jobs created in the economy come from the very small businesses. Of the total 21.8 million jobs created between 1989 and 2003, small businesses under 20 employees created 18.6 million jobs, small businesses with between 20 and 500 employees created 1.5 million jobs, and large businesses and companies (with over 500 employees) created only 1.7 million jobs. Similarly, while small businesses created net new jobs in 12 of those 14 years, large businesses eliminated more jobs than they created in 5 of those 14 years.
An analysis of more than 4,200 economic development incentive awards in 14 states finds that large companies received dominant shares, ranging between 80 and 96 percent of their dollar values. The deals, worth more than $3.2 billion, were granted in recent years by programs that, on their faces, are equally accessible to small and large companies. Yet big businesses overall were awarded 90 percent of the dollars from the programs analyzed, indicating a profound bias against small businesses.
Economic development is the process of building strong, adaptive economies. Strategies driven by local assets and realities, a diverse industry base and a commitment to equality of opportunity and sustainable practices have emerged as those that will ensure a strong foundation for long-term stability and growth. Even within the parameters of these principles, what constitutes success in economic development and the specific strategies to accomplish it will look different from place to place. Despite these differences, leadership is consistently identified as a critical factor in effective economic development. Dedicated leadership is needed to raise awareness, help develop and communicate a common vision, and motivate stakeholders into action.
Businesses owned by people of color create jobs and build wealth in communities of color. Yet despite rapid growth of entrepreneurship among people of color - and women of color in particular - these businesses face significant barriers to growth and success. Government spending on construction, goods, and services is a potential opportunity to advance economic inclusion, but municipalities often under-contract with businesses owned by people of color.
The United States has an enviable entrepreneurial culture and a track record of building new companies. Yet new and small business owners often face particular challenges, including lack of access to capital, insufficient business networks for peer support, investment, and business opportunities, and the absence of the full range of essential skills necessary to lead a business to survive and grow. Women and minority entrepreneurs often face even greater obstacles. While business formation is, of course, primarily a matter for the private sector, public policy can and should encourage increased rates of entrepreneurship, and the capital, networks, and skills essential for success, especially among women and minorities. In particular, this discussion paper calls for an expanded State Small Business Credit Initiative and an enlarged and permanent New Markets Tax Credit to encourage private sector investment in new and small businesses. These capital initiatives should be complemented with new federal support for local business networks, and for local skills acquisition initiatives, to make it more likely that small businesses will form, survive, and grow. For the United States to continue to grow, to innovate, and even more importantly to generate jobs, we need to expand our rate of business formation and improve the prospects for survival and growth of young and small businesses. Increasing the rate of minority and female entrepreneurship may help to reduce the race and gender wealth gaps, to reduce income and wealth inequality, and to increase social mobility. With the United States becoming more heterogeneous, increasing business formation by minority and female entrepreneurs is critical to improving the rate of entrepreneurship overall. Thus, if we are to grow as a country, create jobs, and make progress on correcting income and wealth inequality, we need to help minority and female entrepreneurs succeed.
A checklist document for obtaining licenses and permits for small business owners.
Minority-owned businesses play an increasingly important role in the U.S. economy. The nearly one million (996,248) minority-owned businesses with paid employees contribute $1.2 trillion in revenue and eight million jobs to the economy. Minority-owned businesses are especially important to inner cities—economically distressed urban neighborhoods characterized by high poverty and high unemployment rates— and minority wealth building. Building wealth for people of color in inner cities requires not only maximizing employment, but also supporting the development of more entrepreneurs in these neighborhoods and helping them grow their businesses. Entrepreneurship is a wealth building strategy and pathway out of poverty (Bradford, 2003; Gentry and Hubbard, 2004; Quadrini, 2000; Sutter, Bruton, and Chen, 2018). Supporting entrepreneurs of color in inner cities will build wealth and decrease unemployment and poverty in urban areas that need it most.