How to channel energy of microbusinesses into broad economic growth?
Microbusiness, including the self-employed and firms with only a few employees, might make up most of the total businesses in the United States, but corralling all those independent operators to bring about broad economic improvements can be a challenge. And so, alignment is the theme of a conference on microbusiness taking place in New Orleans this week.
The Association for Enterprise Opportunity, based in Washington, D.C., and describing itself as a voice for the interests of microbusinesses, is holding its annual meeting at the Astor Crowne Plaza Hotel, from Monday through Wednesday. The group's data show that 92 percent of all United States businesses are microbusinesses, with 25.5 million of them in operation, providing 41.3 million jobs, which amounts to 31 percent of all employment. They drive combined economic activity of $1 trillion a year.
"America needs to understand the power of microbusiness, particularly as we usher in a new, broader economy," wrote Patricia Harris, AEO chairwoman, in an introduction to the conference. "Think of the collective impact we will have as an aligned and unified force."
The group, which defines microbusinesses as those with five or fewer employees, argues for small business ownership as a way to reduce economic disparities by helping more people achieve financial independence. In a session moderated by New Orleans Business Alliance President Rod Miller, a panel of speakers on Monday addressed that goal and also how to direct the energy of microbusinesses toward goals such as advancing environmentally friendly practices and products.
"We are in a high-growth mode in New Orleans," Miller said at the conference. "New Orleans is a new economy."
But he said economic disparities persist, and helping people with microbusinesses is a solution to that.
Bob Massie, president of a group called the New Economy Coalition that combines focuses on economic equity and environmental preservation, described the need for greater coordination between groups with those goals.
Cylvia Hayes, the first lady of Oregon, described a need to change how ecomomic growth is measured from overall tallies of spending to a more nuanced assessment of who is benefitting from the spending.
"We ought to be asking growth of what and for what," she said. "It is not a force of nature or an act of God. The economy is a human-made construct. We invented it. We can re-invent it."
Henry A.J. Ramos, chief executive of the Insight Center for Community Economic Development, which says it seeks to help people and communities become economically secure, said the nature of "microenterprises," which often are locally focused, correlates well with environmental sustainability.
Ramos said he is optimistic about microbusinesses winning more support through political channels because they appeal in different ways both to conservatives and liberals. And he said pressure from consumers can bring about advancements on environmental issues and in other areas.
"We can use or joint procurement power to drive change in our economy," Ramos said.
Hayes said states and groups of states need to advance initiatives to support microbusinesses because the federal government is unreliable as a leader in that area. Massie said forming successful clusters of the smallest businesses will in turn influence neighbors and spread a movement.
"The new economy is underway," Miller said. "Economic reinvention, we can already feel it. We have the power as consumers. We have the power as business and civic leaders to really influence change with our habits."
Microbusiness: Creating a Life That's More Than 'a Living'
By Connie Evans, AEO President and CEO
I recently read about an unemployed, single mother who completed a two-week training course to become a certified nursing aide, an occupation listed as the "fastest-growing job in America." The woman was hopeful that the certification will allow her to now make a living.
Ideally, the certification will bring employment opportunities, but, very likely, her job options will be slightly-more-than minimum wage, if at all, and won't net enough income to allow her to move from a home that has sporadic electricity, and no running water.
Despite the Bureau of Labor Statistics report of May 2014 job gains, the nation's unemployment rate held steady at 6.3 percent, which is compounded by new research findings that re-employment of the long-term unemployed is not necessarily indicative of a fresh start: many jobs pay significantly less than previous positions, are not steady, full-time, or permanent.
We support job training as a means to re-employ individuals (for those for whom training is accessible, affordable and feasible). However, we point to entrepreneurship as a more promising option to escape the bonds of unemployment. Entrepreneurship, microbusiness in particular, continues to appeal to millions of persons whom the labor market no longer serves.
Scores of unemployed persons have turned to entrepreneurship as a survival tactic, and created a job, or jobs, in the process. In 2011, when Lasenta Lewis-Ellis was downsized from her near-$100,000-per-year job earning more than $1,600 weekly, she attempted to help her husband care for their family of eight with her $270 weekly unemployment benefits. That plan failed, as did her employment search -- having a master's degree and being a doctoral candidate didn't facilitate her search.
At a point Lasenta decided she wanted more, so she mustered up a measure of confidence, cashed out her 401K account and used $1,500 to start LLE Construction Group, LLC.
In its first year, LLE grossed $303,000, after being in business only five months in 2011. In 2012 the business grossed $685,000, and in 2013 the company grossed $1.1 million. To date, company revenues have increased by more than 263 percent.
Lasenta's is a great success story, but not uncommon. AEO report data show microbusinesses, although small, in the aggregate, have a significant influence on job creation by contributing to the employment of 41.3 million individuals -- this represents 31 percent of private sector employment. Lasenta hired her son to work for the company, and is training him to take over the business. She hires other employees seasonally and contractually.
Microbusinesses create plethora economic impacts, and create gains for families that cut across racial, ethnic, and gender lines. These enterprises are a practical option for persons of color (like Lasenta), unemployed persons (like Lasenta), and persons in the 50+ age group to attain self-sufficiency amidst a mercurial labor market, and as long-term job stability becomes more elusive.
Entrepreneurship allows individuals to escape poverty by giving them a vantage point of the economy other than "from the bottom up" -- we should champion it as a means for individuals to realize self-sufficiency and financial autonomy, and to make more than just a living.
Microbusinesses to get help on loans
Matthew Rydzfski thought he was running a small business until he tried to get a small business loan.
That’s when he found out that the Greenville company he and Wade Hawkins started in 2006, PremierePC, is a microbusiness. That made it much harder to get a loan, he said.
“You go to the bank and say, ‘Hey, I’d like a loan and this is my idea.’ They laugh at you,” said Rydzfski, who has four employees. “Unless you’re well funded already, as in you have personal net worth, you can’t get a loan.”
Gregg White, deputy director of the South Carolina District of the Small Business Administration, noted a deficit in microbusiness lenders across the state.
Now, a new state law, the Microenterprise Development Act, is trying to change that, and provide a boost to the economy.
The law, led by by Rep. Kenneth Hodges, D-Colleton, and signed by Gov. Nikki Haley in late May, directs the South Carolina Department of Commerce to establish a program that provides loans and grants for businesses that require $25,000 or less in startup capital and have five or fewer employees.
Helping such enterprises is important, Hodges said, because they are the backbone of any state’s economy. Furthermore, he said, self-employment is a viable alternative to unemployment.
A study by Washington, D.C.-based Association for Economic Opportunity found that 87 percent of all businesses in South Carolina are microbusinesses. That mirrors the national picture, and the association concluded that if one in three microbusinesses hired one additional employee, the U.S. would be at full employment.
“What we need to do is make people realize that it is a vital part of the South Carolina economy and we need to rally around them and encourage them,” Hodges said.
Rydzfski wonders why the state didn’t act sooner. “Any attention that can be brought to the absolute lack of attention that has existed ... can only benefit any of us,” he said.
Often, the priority has been attracting the big companies that can provide hundreds of jobs, said Deborah McKetty, president and CEO of the Greenville-based nonprofit CommunityWorks Carolina, which provides financing and specialized training for startup and existing businesses in the Upstate, including microbusiness loans.
“The focus hasn’t been on how do we grow the local businesses from within,” she said.
McKetty said for some in the unskilled labor market, self-employment through microbusinesses is “probably going to be one of the best hopes we have of really getting our folks employed.”
Hodges said the Microenterprise Development Act has been four years in the making. It’s a case where a committee was assigned to do a study, and the committee produced results. One was that microbusinesses are now included in the Commerce Department’s economic development strategy.
“That’s the intent of that bill,” he said.
The potential impact can be seen in the successes of people who have secured microbusiness loans from CommunityWorks.
Jayvn Taylor, 29, of Travelers Rest, wanted to be her own boss and do something she’s passionate about. So she soon will begin operating her Swamp Rabbit Smoothies food truck.
The idea for the food truck came as she would run or walk on the Greenville Hospital System Swamp Rabbit Trail in Travelers Rest.
The heat stirred her craving for a smoothie. Her first thought was someone should come up with the idea for a smoothie food truck. Then she thought, “Why can’t it be me?”
Her uncle, who started downtown Greenville’s Coffee Underground with a coffee cart before opening a storefront with a partner, advised her to be mobile and start small.
Taylor started her process toward entrepreneurship with help from the Clemson Regional Small Business Development Center. Her parents bought her the cart for Christmas.
A CommunityWorks microbusiness loan provided funding for equipment, including a refrigerator, blenders and a sliding-door freezer.
Tiffany Robinson went through the microbusiness lender program, also at CommunityWorks, to open her Anderson shop, A Night Out, which consigns bridal and formal wear.
Robinson said she was seeking something to do when she retires from the U.S. Postal Service, where she has worked for the past 25 years.
“I thought about it for a while, did some research and just decided why not go for it,” she said.
Like Taylor, Robinson said the hardest part of the process was finding financing.
“I was kind of at a loss for a while because when you go to most financial institutions they’re like, ‘how long have you been a business owner?’ Without a business track record, they really don’t want to give you any money,” she said.
CommunityWorks has closed 26 loans totaling over $255,000 to help startup businesses open their doors and existing businesses expand their operations. The businesses are in Anderson, Greenwood, Greenville, and Spartanburg counties, according to the organization.
The agency has eight businesses in the pipeline including a food truck, a home health care center, an exercise gym and an electrical contracting business.
Rydzfski and Hawkins both worked in information technology before deciding to open PremierePC, an outsource technical company.
Starting in 2006, the year before the economy started to slip into recession, set them up for years of financial struggles.
“It was pretty bad. We started with the money in our pockets so there wasn’t a lot of capital. There was no cushion to fall on,” Rydzfski said.
“We had no net worth,” he said, but since all they needed was money, “I thought going to a bank would be an appropriate place to go ... What you end up with is personal credit cards that you use.”
Only one bank in town was willing to give them a line of credit before the economy tanked, he said. The line of credit was maxed out in 18 months.
But because of a low-interest microbusiness loan from CommunityWorks, “We’re actually now, today, in the best fiscal situation we’ve ever been. Period.”
UPSTATE MICROBUSINESS NUMBERS
Total businesses: 14,748
Total microbusinesses: 12,999
Percentage of businesses that are microbusinesses: 88.14
Total businesses: 42,651
Total microbusinesses: 36,713
Percentage of businesses that are microbusinesses: 86.08
Total businesses: 3,966
Total microbusinesses: 3,535
Percentage of businesses that are microbusinesses: 89.13
Totaal businesses: 22,805
Total microbusinesses: 19,576
Percentage of businesses that are microbusinesses: 85.84
SOURCE: Association for Enterprise Opportunity, from census data