Each year the U.S. Chamber of Commerce Foundation analyzes data to determine what states have done over the previous year to create jobs and expand the economy. The analysis is broken down into two parts, one that discusses what states should be doing and one that details what states are doing and then ranking the states using a performance, data-driven model. The Chamber calls the annual report, Enterprising States, and provides a copy of the 2013 analysis HERE.
This year Enterprising States focuses on the importance of supporting small business as a means of economic development and job creation in the United States. Historically, small businesses have been the country’s primary job creator, but following the latest recession these economic engines have failed to return to their traditional roles. The Chamber warns that, “[p]olicymakers ignore small business at their own peril and that of the economy.”
Last year, only 16% of small businesses added employees and businesses five-years-old or younger now employ just 8% of the total work force, which is a decrease of 33% over the past two decades. Small and new businesses continue to struggle in the post-Great Recession economy for a number of reasons, including significantly lower consumer spending and reduced lending by community banks. These factors contribute to a less than rosy outlook by small business owners. The U.S. Chamber surveyed small businesses in January 2013 and found more than half expected business to be worse over the next two years. This is more than twice as high as the same survey revealed a year earlier. Lower optimism results in fewer new hires, smaller investment and more defensive operations.
If small and new businesses are not adding jobs, what can states do to encourage small and new business startups? The U.S. Chamber recognized ten initiatives that appear to be working to support and grow small and new businesses in the country.
· Business plan competitions – identify and assist entrepreneurs turn ideas in start ups.
· Accelerator initiatives – programs that assist startups become stand-alone companies.
· Economic gardening initiatives – provide resources to existing firms so they can expand.
· Ecosystem initiatives – focus programs and projects on areas where a concentration of like-mission companies exist.
· Workforce development initiatives – help business train and locate qualified employees.
· Seed and venture capital – provides access to funding to help replace diminished availability of bank loans.
· Networking and collaboration initiatives – match small business with mentors in large business and higher education.
· International trade – reaching new global markets is vital for start ups and small business
· Streamlined state administrative processes – efforts to eliminate rules, regulations and uncertainty
· Broadband investment – high speed online access is critical being competitive
Thankfully, Arkansas utilizes many of these initiatives, but unfortunately many lack sufficient funding to be fully implemented on a statewide basis. A future blog post will highlight what Arkansas is doing to support small and new businesses. For more information contact Michael Lindsey at Michael@RogersLowell.com