Politicians on both sides of the aisle have been struggling to stimulate the economy and put a definitive end to the Great Recession. These efforts have included sector-specific bailouts, cash for clunkers and the American Recovery and Reinvestment Act of 2009, which helped some notable companies and stimulated some industry sectors, but most of these efforts provided little benefit to the typical American business.
Last week, the Obama administration recognized the contributions of this important business demographic with its National Small Business Week. It's worth challenging a few of the myths about the American small business landscape -- as they are truly the engine of the economy.
1. Most Americans work for large corporations
Conventional wisdom used to hold that what's good for General Motors is good for America. While GM may no longer be the poster child for corporate America, large corporations can afford lobbyists who make sure their clients are first in line when legislation is drafted. One of the justifications in protecting the interests of corporations first is the notion that they employ the vast majority of Americans and that corporate interests are necessarily aligned with most workers'.
But large businesses only employ about 38 percent of the private sector workforce while small businesses employ 53 percent of the workforce. In fact, over 99 percent of employing organizations are small businesses and more than 95 percent of these businesses have fewer than 10 employees. The reality is that most Americans are employed by a very small business that has little in common with the tiny sliver of the business demographic represented by corporate America.
2. Job growth is driven by large employers
Since most of us read about the handful of large employers in the business pages on a regular basis, we often assume that job creation depends on their success. While corporations do employ many Americans, small businesses account for 64 percent of net new jobs created. Many of these new jobs are also new companies -- the startup rate in 2010 was the highest it has been in 15 years, according to the Kauffman Index of Entrepreneurial Activity. More than half a million new businesses were created in 2010 as the poor economy and high employment rates have led more individuals into business ownership.
Historically, small businesses grow faster than their large counterparts, too. The average growth rate of a large company with more than 500 employees over the decade ending in 2006 was about 1.3 percent. In that same period the growth rate for America's smallest businesses, the self-employed, was 3.4 percent. As small businesses grow, they hire employees, buy goods and services from other businesses, contribute to the local tax base and support individuals and their families.
3. Lending is readily available for small businesses in large and small amounts
When President Obama signed the Small Business Jobs Act last May, much attention was paid to the $30 billion Small Business Lending Fund that would be made available to community banks, credit unions and community development funds. This funding helped address the fact that neither the Troubled Asset Relief Program (TARP) funds nor industry bailouts specifically helped small businesses. Although the $30 billion in lending was authorized eight months ago, the Treasury Department has yet to distribute these funds, which means the community banks have not been able to boost small business lending as the legislation intended.
Further complicating the lending picture is the fact that self-employed business owners most often need what would be considered a "micro" loan to any lending institution, including a community bank. A business owner may only need $5,000 to invest in new office equipment or marketing efforts, but loans in such small amounts are not readily available through small business lending programs. Instead, this business owner has to use a personal credit card to make the investment, which typically has much less desirable terms and interest rates than a small business loan. What self-employed business owners need is recognition that these small loans are just as vital to business success as the larger loans that are supposed to be readily available.
4. Self-employed business owners get all the same tax benefits as larger businesses
Businesses have a seemingly infinite ability to "write-off" certain expenses on their corporate tax returns, right? But what about business owners who file individual tax returns, as most self-employed businesses do? It turns out there are fewer tax perks for the self-employed business owner. For example, corporations are able to claim health insurance policies for employees as a business expense and their employees pay for those policies with pre-tax dollars. A self-employed business owner could have claimed tax relief for purchasing health insurance last year, thanks to a one-year self-employed health insurance tax deduction in the Small Business Jobs Act, but will have to go back to paying full freight with no tax relief next year, unless Congress decides to make the deduction permanent.
Even the tax perks specifically created for self-employed business owners can be a challenge. Taxpayers who work from home are entitled to take a home office deduction, but about 60 percent of those eligible for the deduction don't take it. One reason is that many taxpayers have heard that taking this deduction will create an audit risk, which may have been true once but was largely addressed by tax changes made in the late 1990s. The other reason for the low participation rate is that the deduction is notoriously difficult to calculate. Congress is considering solving this problem by creating a standard home office deduction, which would certainly keep more business owners from leaving money on the table when it comes to tax relief.
5. Being self-employed is not a "real" job
One of the most frustrating myths that self-employed business owners face is the near-universal lack of understanding about their business demographic among policymakers. The many millions of self-employed and micro businesses are rarely "hobby" enterprises or a last ditch effort to prevent being unemployed.
Being your own boss means you have created a job for yourself and have prevented one more individual from showing up on the unemployment rolls. As the unemployment rate edged back up to 9 percent in April, more individuals may be considering creating a job for themselves. These jobs are just as valuable to the economy as an office or factory job. This dynamic business demographic contributes about $1 trillion to the economy every year -- no myth.
Follow Kristie Arslan on Twitter: www.twitter.com/nasetweets
Jerry Chautin: A Quick Fix for Commercial Mortgages Coming Due?
Another challenge for freelancers is where/how to find new clients. Small businesses have a similar challenge: where do they find top notch graphic designers, writers, web developers, marketing consultants, PR specialists? Finding freelancers is a rather luck-based process.
On MarketingZone, a new how-to site and community for small business on marketing, we've compiled and are continually updating this list of Best Sources to Find Marketing Freelancers.
http://www.marketingzone.com/1230-best-sources-marketing-freelancers-small-business
Hope this helps marketing freelancers find new clients. And small businesses find marketing experts to hire. Win-win.
Nope. Small business owner have to apply to commercial lenders for their loans, even micro-loans. The SBA guarantees, currently, up to 90% of the funds loaned. Sounds like a good deal for the banks, and certainly reduces risk for loan initiation. BUT the banks aren't lending. I'm a SCORE volunteer in one of the largest SCORE Chapters in the country. SCORE (initially, the acronym stood for Service Corps of Retired Executives) volunteers give free business consulting, advisement, and mentoring to small businesses. We work closely with the SBA's Small Business Development Centers which do the loan guarantee paperwork. On a quick survey, I've found that not a single one of our small business owners has been able to qualify for a micro-loan at any commercial bank, including our community banks, in the past 18 months. Our community banks are often members of a lending consortium. My own community bank is one of over 20 locally that chose to be part of a "financial lending corporation." Loan applications originated and accepted by that community bank are getting those applications kicked back refused by the financial lending corporation.
The bottom line: small business loans are NOT being made by commercial lending corporations even with as much as a 90% government guarantee. 2010 statistics show less than 4% default on small business loans. Obviously REAL risk is NOT the factor here.
That's where their campaign funds come from. It really is THAT simple.
Sometimes simple solutions cause more problems then they resolve. I think this one falls well into that category.
We need to get corporate money out of politics. We NEED campaign finance reform.
It wasn't long before i figured out the main source of income for the NASE was the sale of insurance.
I hope you are now advocating for your members needs as opposed to your own interests in selling insurance. I refer to the clear consensus in the 2008 NASE survey regarding universal health care coverage, with 84.8% of the respondents agreeing that all U.S. citizens should have health coverage.
20 years ago yes, but now they are all big business and nothing else.
Start a lawn company, have them take care of your property, pay them cost +5%, and now it is all a buisiness deduction for a company that just barely makes a profit.
http://www.huffingtonpost.com/kristie-arslan/five-big-myths-about-amer_b_866118.html
Why hasn’t the Treasury distributed these funds yet?
The event is the kick-off of a national campaign to create jobs for American and tribal small businesses and studios that make gift, art and souvenir products. Artisans and advocates will leaflet May 27-29, outside the gift shop, at the South Rim of Grand Canyon National Park.
"National Park Service concessioners have won the privilege to do business on federal land," Rosen says, "but they have turned their backs on hundreds of American and Native American enterprises that desperately need manufacturing work to sustain families and communities. At a time when unemployment for these entrepreneurs is at a record high, and some tribal unemployment has reached 50 percent, National Park concessions could be creating jobs by putting authentic American-made merchandise on their store shelves."
The protest is sponsored by the American Made Alliance and endorsed by the Council for Indigenous Arts and Culture and the Craft Emergency Relief Fund (CERF+).
For rally and campaign details: See www.americanmadealliance.org or send e-mail to AmericanMade@rosengrp.com.
Classic
Obama can't even do that for small business.
Obama's total focus is Wall Street, Big Banks and multi-national business.
He hates small business - and has done virtually nothing to help small business.
All the while sucking up to Dimon and Blankfein.
Gordon Brown (former Prime Minister and finance minister of UK) recently informed us that internationally there's need for 50 million jobs (even in India and China, and "MILLIONS IN EUROPE AND AMERICA"). Article describes the shrinking globe as international market place; rather than viewing jobs and consumer demand as national or bilateral trade agreements. America is being displaced as world's largest consumer nation.
http://www.newsweek.com/2011/05/15/take-back-the-future.html
Reality is post-WW II, Western countries through discipline and quality of production carried reputable brand recognitions. Unfortunately with recent financial meltdowns and other similar shenanigans eg. ENRON etc, many, even within the country, no longer trust these brand names.
Globalization produces opportunities which we can and should capitalize; NOT through market-manipulation, creative-financing, speculation, hedge-fund and insider-trading practices or slick-marketing; but THROUGH industrialization and technological innovation i.e. the old fashioned way, which we perfected since the industrial revolution. Such innovation, much of which is through individual ingenuity and personal accomplishments, will improve the lives of the aspiring millions across the globe and in our own backyard.
My department recently got to hire someone, but only because we were already 3 people down (out of 16) from where were are supposed to be when someone put in thier 2 week notice. And even at that it took 3 months to get approval to fill the spot.
Hiring freeze continues as we report our 3rd year of record setting profits in a row. Went from 6000 employees to 4700.
Private businesses must be profitable and generate wealth so that a portion of that wealth can be SKIMMED OFF amd/or FORCIBLY TAKEN as taxes by various federal, state, county, municipal, school district and other various government taxing autuorities to pay for various elite government bureaucratic employee payrolls (and other government expenses).
We must realize that without these greedy businesses trying to make profits, there would not be any jobs, not even government jobs, because without profitable businesses, the government would not have any wealth available to take from the profitable businesses and individuals as taxes in order to pay government payrolls and other government expenses.
US citizens benefited from the creation of a new electronic industry that employed millions and was caused by their greed for wealth.
I do not begrudge their accumulation of wealth from their hard work and economic risk taking.
If a company provides a good service at an attractive value and can develop a business model than it can potentially do well. If it does well, don't complain - find a way to offer a better service and an even better value. Dare to be great.
What I am trying to tell you is that TI was already a big company before a any semiconductors where made by TI. It was not a couple of guys working on their own dime, in a small little underfunded lab.
In an EE class at Texas A&M in 1959, my instructor was talking about a white paper submitted to the IEEE talking about semi-conductors, and he said that some guys were onto something new and big.