Speech at the Statesboro and Bulloch Chamber Small Business Awards, April 22nd 2010.
See Statesboro Herald article
Thank you for inviting me to speak at the Chamber Small Business Awards and for the very generous introduction. I promise to be brief, as I know everybody is interested in the outcome of the awards.
As many of you know I run the Center for Entrepreneurial Learning and Leadership at Georgia Southern. We are trying to develop programs that enhance the University’s efforts in entrepreneurship education both with our students and the local community.
Given today’s event I have decided to focus my short talk on the importance of Small Businesses: to the economy and to our community. I intend to ask and answer several questions. First, why are small businesses important? Second, what can we do to promote and develop them? And finally – to what extent are current government efforts helping or hindering the development of small businesses.
Let’s take the first question – why are small businesses important? I think the best way to highlight this is the Small Business Administration’s top ten reasons to love American Small Businesses:
1) Small businesses make up more than 99.7% of all employers.
2) Small businesses create more than 50 percent of the nonfarm private gross domestic product (GDP).
3) Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms.
4) The 22.9 million small businesses in the United States are located in virtually every neighborhood.
5) Small businesses employ about 50 percent of all private sector workers.
6) Home-based businesses account for 53 percent of all small businesses.
7) Small businesses make up 97 percent of exporters and produce 29 percent of all export value.
8) Small businesses with employees start-up at a rate of over 500,000 per year.
9) Four years after start-up, half of all small businesses with employees remain open.
10) The latest figures show that small businesses create 75 percent of the net new jobs in our economy.
Turning to the last point – it is interesting to note that the Kauffman Foundation research takes this further and shows that between 1980 and 2005 virtually all net new jobs created in the U.S. were created by firms that were 5 years old or less. In other words – entrepreneurship and small businesses ARE THE ONLY REAL ENGINE OF NEW JOBS IN THE US ECONOMY.
Okay, so we can see that small businesses are important for our economy. But surely their importance goes beyond this. Small businesses ARE the local community – they are our brothers, sisters, fathers, mothers, uncles. They employ our friends, sons and daughters. They generate their money locally and they spend it locally. They contribute services that are needed in our rural communities. They donate time and resources to churches, schools and community groups.
Sometimes when one considers the importance of small businesses we concentrate on the economy, but we need to remember… And perhaps we forget this… small businesses are important for our society and our community – they have a SOCIAL VALUE that GOES WAY BEYOND their ECONOMIC VALUE; can we always say that of other larger businesses?
Let’s turn to the second and third questions? What can we do to promote and develop small businesses? AND do current government initiatives do enough? Let’s be honest. Most of our small businesses are still hurting. Yes – the economy has perhaps turned the corner. BUT the evidence suggests that small business sales are still down, profits are down, credit is tight and small businesses are closing in surprisingly high numbers; just look at downtown Statesboro for the evidence. I like the quote from Robert Frost which describes the current attitude of many banks to our small businesses: “A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” It has been raining and that umbrella has definitely been removed. We need to get credit flowing again for small businesses and especially we need to do a better job of supporting new entrepreneurial businesses. You can’t say this often enough – good-paying jobs don’t come from bailouts they come from start-ups – AND where do start ups come from? Yes, they come from smart, creative, inspired risk-takers.
For a moment let’s consider the current stimulus funding for small businesses? $30 billion aimed at small employers sounds great doesn’t it? I guess it is better than nothing. BUT consider a few facts. With 27 million businesses that’s equivalent to $1,100 per company; that’s less than cash for clunkers or the home owner’s tax credit. It is dwarfed by the $50 billion given to General Motors and the $185 billion given to AIG. According to the Congressional Budget Office – large businesses have received $10 trillion of stimulus funds. Given that large businesses haven’t created any net new jobs the decade prior to this Recession would our economy fair better if we invested more of this money into entrepreneurship and small business? Surely we should be seeking to invest these funds in THE JOB Generation machine that we know actually works?
Let’s start with a few obvious ideas. We need more prototype development funds and seed capital grants; so entrepreneurs can get ideas from the lab to working prototypes. We need regional venture capital companies making for-profit investments in entrepreneurial businesses that stay in our region. We need to waive student loans for student entrepreneurs; so student debt is no longer a barrier to entrepreneurship. We need to streamline and reform patent processes and reduce unnecessary red tape. AND… while we’re at it what about lower or no corporation tax for start-ups during their first three years when they most need extra funds to invest in development or growth.
I’d like to close by thinking about what this might mean for us locally. Economic development, in a local sense, tends to focus on the next big business that we can get to locate here or on setting up infrastructure to attract such new industry. BUT really this is like providing stimulus funds to those big businesses – it misses the point. We need to look to ourselves. [PAUSE] Real job generation in Statesboro and our local counties is going to come from small businesses growing and from entrepreneurial efforts located here. The 500 pound gorilla in the room is of course Georgia Southern University and the 100 pound gorilla is Ogeechee Tech. Imagine what one successful technology focused business employing 100 knowledge intensive workers could do for Statesboro. AND then consider that at the moment at least 7% of our students are trying to start businesses – that’s potentially around 100 businesses a year. If we can keep these businesses here, get them focused on new technologies and help them grow. While we’re at it can we not do more to help local inventors, entrepreneurs and small businesses tap into the resources of the University so that they can grow and access new technology and knowledge. In some ways this already works. Many local entrepreneurs are alumni of the University and many students come from local family firms. But we can still do more. If we can provide the infrastructure to help these businesses get off the ground. If we can provide the seed capital, the entrepreneurial expertise and the start-up funds. If we can make these efforts community driven beyond relying on the individual – then and only then will we have our own job generating machine. That is what I hope for and I am working towards and anybody is welcome to help. For those of you that are up for awards today I commend you for your entrepreneurial efforts, you make important economic and social contributions to our community and I am pleased to celebrate your successes with you today. I’d like to thank you for your time and I look forward to talking to you at the end of the awards.