by Stephen Parezo
If opinions expressed by a cross-section of academics, business experts, economists with national think tanks and large member associations representing micro-businesses are any indication, then the state of entrepreneurship in the United States appears as resilient as ever.
A recent study by Boston, MA-based global consultants Yankee Group indicates that small businesses are still a mainstay of the American economy with small and medium-sized firms making up 99.8% of all employer firms. The study says there are 5.6 million small businesses operating in the U.S. with 89% having less than 20 employees. Current sectors experiencing the most growth are construction, healthcare and manufacturing.
"The state of entrepreneurship is alive and well," said John Santora, who, as international small business services provider Fiducial's Director of Systems Support and Development, has responsibility over most product management, local marketing efforts and sales tools. "People always have ideas and if they have the drive and energy to take a concept and turn it into a product or service, then the opportunity is there for them to succeed. It's not easy and it takes a certain strength of character and resolve but the resources are there and the rewards can be great."
Santora pointed out that data from the U.S. Bureau of Labor Statistics shows that the percentage of sole proprietors as a percentage of the entire American work force has grown by 50% over the last 20 years. From 1980-2002, the percentage of small businesses in the work force increased from 8% to 13%. "That," he indicates, "is fairly significant."
Confidence index at highest level ever
Fiducial has seen first-hand that the small business sector of the economy remains vibrant and growing as evidenced by the increase in potential franchise candidates wanting to become company franchisees.
Howard Margolis, Fiducial's Director of Field Support and Development, noted that the number of those franchisee hopefuls who have completed requests for consideration forms has risen 47.6% in 2004 compared to 2002.
On the national scene, interest remains high among those aspiring to operate their own business. According to Margolis, pre-registration figures are up 300% for this weekend's International Franchise Association's Franchise Expo at the Washington Convention Center in Washington, D.C. Fiducial believes it will pick up many leads from interested entrepreneur hopefuls during the April 30-May 2 event.
This uptick is further supported by recent findings from the National Federation of Independent Business (NFIB) who checks the collective pulse of the small business economy through a monthly business confidence index. That index is at its highest level ever.
As the nation's largest small business advocacy group with 600,000 members, NFIB says there's good reason for entrepreneurs to be excited these days. In its timely survey of small business owners, NFIB's Chief Economist William C. Dunkelberg observes that the readings they received from small business owners indicate that 2004 "could be the best year in a very long time."
With economic growth looking real and sustainable, the NFIB report says the confidence of small firms is evident with 18% reporting that the current period is a good time to expand facilities.
"Overall, capital spending, inventory accumulation and hiring all look good in the coming months," writes Dunkelberg. "Prices are rising, some of this due to energy, but also due to a good economy, which means firms don't have to cut prices to keep or gain customers."
Fiducial's Santora agrees. "Customers feel the economy is improving," he said. "People are spending money and are more confident that their jobs are not going to be cut. Entrepreneurs will have to sell whatever they are offering to people more willing to part with their money."
Entrepreneurs want to turn back the clock
Gene Fairbrother, a consultant with the National Association for the Self-Employed (NASE), in Washington, D.C., cited IRS data that shows the number of tax returns filed by sole proprietors continues to grow every year.
Another indicator of a healthy atmosphere for small business is the increasing volume of calls taken each month by NASE's Shop Talk 800 group that speaks to hundreds of entrepreneurs across the nation. Call volumes have risen from 10% to 15% over the last 18 months.
According to NASE, these entrepreneurs want to control their own destiny, which marks a return to the early 20th century when most commerce was conducted by small business owners. From the early 1900s through the 1960s, the prevalent mindset among the working class was to work for large corporations. Now, entrepreneurs want to turn back the clock. "We're cycling back to the future," Fairbrother said.
Few firms have felt the economic downturn the last few years as much as small and micro-businesses have but while they've been hurting, they are seeing the trends improving."
We hear less questions of 'how do I survive' and more of 'how to capitalize' these days," he said.
The Internet revisited
More start-ups are going into the service market and, in his opinion, Fairbrother believes one of the best opportunities coming up is going back to the Internet.
"We are going to see growth on the Internet now that things have settled down," he said. "People are discovering that you still have to use traditional marketing to drive people to it. Whether it's a storefront on the street or on the web, there's absolutely no difference in marketing. These are the things that people are finding out."
Eric Engen, a resident scholar at the American Enterprise Institute (AEI), a think tank in the Nation's Capital, sees a lot of signs that entrepreneurship is becoming an important part of the economy's recovery. Department of Labor data shows that the number of small business owners is on the rise including self-employment, partnerships, sole proprietors and particularly limited liability companies (LLCs) whose registrations have expanded "by leaps and bounds."
Recent tax cuts have specifically benefited entrepreneurs. These cuts include the reduction in personal income tax since most small entrepreneurs are just paying personal taxes and are not incorporated. There also have been some specific provisions to allow complete expensing of investment for start-ups in the year they made their investments.
Less manufacturing, more productivity ahead
Many of today's small business owners were formerly employed by large corporations. After leaving these big firms to work for themselves, they hire their services back to their old employers. This is true especially in technology and computer related areas.
On the flip side, fewer entrepreneurs are trying their hand in such waning enterprises as the service station industry. Here, competition has become increasingly difficult with the emergence of new competitors.
"It has a lot to do with competition, the price of fuel and the fact that the BJ Warehouses and Wal-Marts are getting into the fuel business," said Jim Rizzolo, a Fiducial franchisee in Port St. Lucie, FL. At one point Rizzolo's business included several independent service station clients.
Some experts maintain that the nation's manufacturing sector will be drastically reduced in the coming years. William B. Gartner, a professor of entrepreneurship at the University of Southern California's Marshall School of Business, says America is heading away from a manufacturing economy toward a more service-oriented economy.
"We're going to see continual losses in manufacturing for a long time," said Gartner. "That's the future. The high attrition rate means people move on. Nothing lasts and particularly organizations don't. Most of the Fortune 500 companies of today weren't around 50 years ago."
Even so, AEI's Engen makes the distinction that while there will be less people employed in manufacturing, they will be "producing at a much more productive way and don't need as many workers."
Fiducial's Santora indicated that the rise of the service-oriented economy will be accompanied by additional requirements for both business and work flow consultants because these automated manufacturing systems need to be developed, installed, maintained and improved so the high quality control standards can be ensured.
In terms of policy, small businesses are seeking to offer the type of non-wage benefits as life, pension and health insurance like big businesses. Engen noted that there's current Associated Health Plan (AHP) legislation in Congress which would allow groups of small businesses to combine to get health policies from big health care insurance providers at a rate more closely tied with their larger counterparts.
"It's still being debated but it's something that's important," he said. "Even policy makers make it clear they understand that small businesses are still a vital part of the economy."
It's part of the American Dream
Upbeat about the future outlook for entrepreneurs, AEI's Engen doesn't see any reasons to suggest that this trend will stop.
"I really don't see any black cloud on the horizon that we're going to have major retrenchment," he said. "All the signs are pointing to a very vibrant segment."
With all the technological revolution-whether it's publishing or providing data-so much can be done to allow people greater freedom to truly pick what sort of career and niche they want.
"This is part of the American Dream," Engen said. "We've always had an independent entrepreneurial spirit and technology allows that to come out even more. A lot of people want that freedom and are constantly looking for new things that tie into what they are doing."
Helping companies simplify and maintain training and quality control standards will provide plenty of future opportunities for small businesses with Fiducial playing a role in helping entrepreneurs grow their operations.
"There's no reason that a hard working entrepreneur can't be successful with the right guidance and tools to make sure that they are aware of all the issues that affect the profitability of their business," Santora said.
Leading authorities also put stock in another vital ingredient that figures prominently in an entrepreneur's success?the indomitable spirit of the American small business owner."
I'm a believer that imagination always triumphs," Professor Gartner added.
