Reactions to my recent article, "The Middle Class Problem Is Now an Emergency: Entrepreneurs, We Need You!," have inspired me to write a more detailed column on the value of encouraging potential entrepreneurs. Many of you expressed skepticism that more entrepreneurship would really boost our economy. Several noted that choosing to be an entrepreneur was not an easy or a simple choice. And others simply vented about high taxes and job losses that they attribute to global trade or political decisions.
I'd like to make it clear at the outset that I'm not advocating entrepreneurship for everyone, quite the contrary. Starting and sustaining a small business or developing a start-up enterprise requires many personal qualities. Creativity and a strong work ethic are vital as well as being detail oriented and willing to research thoroughly and accept risks. Not everyone has or is able to cultivate these qualities. As one reader said, "...you have to want it enough!"
This month, I celebrated my 90th birthday, and some unfinished business still motivates me. During this turbulent economic time where income inequality is the greatest on record, I want to share the insights I've gained from nearly seven decades of "boots on the ground" business experience as a global entrepreneur. And since I don't have a single losing year on my record, I must have been doing something right all these years.
First, let us make sure we are in agreement about what constitutes a small business. The official U.S. Small Business Administration definition is as follows: "...one that is independently owned and operated, is organized for profit, and is not dominant in its field." The size standards can vary by industry with employee limits topping out at anywhere from 100 to 500 and gross sales of $2.5 to $21.5 million. If these figures seem rather high, remember that small businesses can also be micro in size and include sole proprietorships. I think the key phrase in the SBA definition is "independently owned and operated." By nature, entrepreneurs should want the element of independent control.
How important are entrepreneurs to our economy? According to the SBA's Office of Advocacy, small businesses are "the heart of the American economy." However, Erik Hurst, an economist at the Chicago Booth School of Business, cautioned in a recent NPR interview that based on surveys and jobs data he's reviewed, most small businesses "don't grow and don't innovate in any real way." Though, he did say that some of these small businesses do develop and end up being responsible for most of the new job creation. "A handful of those will start small and grow into being something rather big," he says. "But those are a fraction of all the small businesses that start."
Regardless of how a business begins and the size it ultimately becomes, and no matter what side of the fence you sit on politically, here are ten facts that are not open for dispute.
1. Between 1993 and 2011, small firms accounted for 64% of the net new jobs created in the United States.
2. Small businesses comprise 98 percent of America's exporters and produce 33 percent of all export value.
3. Small businesses create more than 46 percent of the American nonfarm private gross domestic product (GDP).
4. Small businesses create 43 percent of all high-tech employment.
5. Home-based businesses account for 52 percent of all small businesses.
6. Women own more than 7.8 million small businesses.
7. Veterans also own more than 3.7 million small businesses, and are at least 45 percent more likely to be self-employed in the private sector workforce than those with no active-duty military experience.
8. Small businesses received over $90 billion in Federal contracts in FY 2011.
9. Small, high-patenting firms produce 16 times more patents per employee than large patenting firms.
10. With approximately 28 million small businesses in the United States, employing 60 million Americans, small businesses employ half of the private sector workforce.
If I were to compare the current state of our economy to a football game, I'd say we are in the fourth quarter at the start of a two-minute drill. We have had three full quarters to look back on and learn from our mistakes as well as our triumphs. At this point, we need to act boldly. In my opinion, entrepreneurs are indeed the playmakers for our economy.
One clear tactic that will benefit us ALL, is to help foster entrepreneurship and look at ways in which we can evolve entrepreneurs so they can help our economy by creating those much-needed new jobs. At the end of the day, without entrepreneurs doing their part to push their business ideas forward, no matter how big or small, our economy would certainly struggle and stagnate. Our system is a dynamic laboratory, an ongoing experiment in what works and what doesn't.
We need to embrace entrepreneurs, no matter where they are on their journey toward reaching greater prosperity for us all. And, to continue the football analogy, we need to draft even greater numbers to replenish those who retire.
If you are thinking about becoming an entrepreneur, now is not the time to stay on the sidelines. As one popular saying goes, "If you do not step forward, you'll always be in the same place." Or, as Mark Twain once remarked, "In 20 years, you will be more disappointed by what you didn't do than by what you did."
I urge those who can muster the strength to get off the bench and head downfield to go toward entrepreneurship if you think you have what it takes. The good news is there are plenty of great resources out there along the way to get you started on the right foot.
Jack Nadel is the author of the award-winning book, The Evolution of an Entrepreneur: 50 of My Best Tips for Surviving and Thriving in Business (www.JackNadel.com). He is the founder and chairman emeritus of Jack Nadel International, a global leader in the specialty advertising and marketing industry. Jack, founder of more than a dozen companies worldwide, is also the author of other books, including, There's No Business Like Your Bu$iness, How to Succeed in Business Without Lying, Cheating or Stealing, Cracking the Global Market, and My Enemy My Friend.