Why We Should Love Small Business

Since small business is the “heart” of our economy, the Office of Advocacy of the U.S. Small Business Administration decided to send all of you entrepreneurs this Valentine to tell you why they love you.

Ten Reasons To Love Small Business
10. Small businesses make up 99.7 percent of all United States employers.
9. Small businesses create more than 50 percent of the American nonfarm private gross domestic product (GDP).
8. Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms.
7. The more than 24 million small businesses in the United States are located in every community and neighborhood.
6. Small businesses employ 50.1 percent of the United States’ non-farm private sector workers.
5. Home-based businesses account for 53 percent of all small businesses.
4. Small businesses are 97 percent of America’s exporters and produce 26 percent of all export value.
3. United States saw an estimated 580,865 new small firms with employees start-up in the last year measured.
2. There are approximately 4,115,900 minority-owned businesses and 6,492,795 women-owned businesses in the United States, and almost all of them are small businesses.
1. The latest figures show that small business creates 65 percent or more of America’s net new jobs.

Here’s hoping all of you entrepreneurs find a “sweet” deal tomorrow on St. Valentine’s Day.

Is Sweden Moving From Socialism to Capitalism?

Instapundit has a link to a story at Market Watch about the growth of capitalism in Sweden.

Sweden endured a deep financial crisis in the early ’90s, with sluggish growth and high unemployment, but this provided an impetus to new approaches in fiscal policy. As a result, the central bank became independent and set a low inflation target of 2%. Centralized salary negotiations were abolished and the labor market developed into one of Europe’s most flexible.
Large companies have long been the major driving force behind the Swedish economy, but attention is now focused on the lack of small and emerging companies.

Over the past several years I have seen an explosion of interest in entrepreneurship and free enterprise in Sweden. They are developing amazing educational programs at their universities. They are enacting public policy decisions that the US should pay attention to. It now appears that the Swedish government is moving ahead of the US in recognition of the global shift to a new entrepreneurial economy.
Perhaps we are witnessing the beginning of an entrepreneurial, grassroots transformation of the economic climate in Europe.
(Thanks to Bill Hobbs for passing this along).

The Risks of Absentee Ownership

One of the first business lessons I remember learning from my father when I was a kid was about the risks of absentee ownership. For many reasons, things just don’t seem to get done quite the same when the owner is away.
CNNMoney has the story of a reservist who was called to Iraq, and learned this lesson the hard way. He owned a limo business in New Jersey.

“The first three months I got letters saying the business was fine,” he recalls, sitting at his kitchen table one recent morning in Villas, N.J., a blue-collar coastal town dotted with crab shacks and tackle shops. “But it was actually going under.”
His cars were either running late or not running at all. Client calls went unanswered. And customers, used to a dependable service, started to leave.
When he returned home 16 months later, his company had lost 75% of its business to competitors, and Hinker, a 35-year-old father of one, was $25,000 in personal debt. To pay the bills, he sold four company vehicles and picked up a graveyard shift guarding prisoners at the local jail.

This is also one of the risks that entrepreneurs can face when they expand geographically. It becomes harder to keep on top of the details that only the owner seems to care about. As our business expanded across North Carolina, I spent a good deal of my time on the road visiting each of our locations. It was important not only to keep on top of the details, but I discovered that these visits were even more important to keep our vision clearly communicated to all of our employees. These visits became a blend of accountability and motivation.
I was talking to Richard Schulze, founder of Best Buy, several years ago and was somewhat surprised to hear him say that he still tried to visit everyone of the 400+ Best Buy stores at least once every year. It seemed that even with the growth of his company, he still believed in the importance of keeping on top of his operations first hand.
(Thanks to Scott Pafford for passing this story along).

The Peace Corps Has Discovered the Power of Free Enterprise

Back when I was coming out of college, most of the people I knew going into the Peace Corps worked on projects related to education, public works, and so forth. Today, the Peace Corps has discovered the power of entrepreneurship and free enterprise to help change the world.
I was reminded of this by a story in our local paper about a woman who had owned her own hair salon who is volunteering to help aspiring entrepreneurs in the Philippines.

(Alice) Rotan….owned her own salon for 14 years in Chicago. The knowledge she gained from owning her own salon is what she will share with locals in the Philippines who want to start up small businesses.

Entrepreneurship is the most powerful tool we have to share with the rest of the world. Godspeed to Ms. Rotan and all of the other selfless volunteers who are helping to spread free enterprise, one person at a time, around the globe.

Small Businesses Beginning to Compete for “Superstar” Employees

The conventional wisdom has been that small businesses just cannot compete with large corporations for the best management talent. However, there seems to be trends that are leveling the playing field among employers of all sizes as they compete for talent.
From the Herman Group:

Attitudes toward human capital are understandably different in smaller organizations. That attitude, and the opportunity to play a more significant role, appeals to people who want to be involved, who seek meaningful work, who want to make a difference. Mix in today’s emerging values centered on life-work balance, personal engagement with work, and being able to choose where you work, and smaller employers become very attractive. Result: those companies will be able to employ high-caliber talent that was not as available in the past. Superstars who sought glamorous jobs in major corporations will show a preference for smaller companies instead.

Recent studies also show that the pay gap between small and large employers is narrowing, with small companies paying about 90% of the wages paid by large employers.
(Thanks to Patricia Jacobs for passing this along).

Strong Job Growth in January

The Bureau of Labor Statistics (BLS) released data on the January employment situation.
Highlights of today’s employment situation report:
– 193,000 new jobs were added to employers’ payrolls in January.
– A broad spectrum of industries experienced job growth, including construction, mining, health care, and financial services.
– The January unemployment rate (calculated from the household survey of employment) was 4.7%, the lowest rate since July 2001.
– Approximately 1.2 million persons age 16 and over had evacuated from where they were living in August due to Hurricane Katrina. About 600,000 of the evacuees had returned home. Of all evacuees identified, 56.8 percent were in the labor force in January. The employment-population ratio for these evacuees was 48.4 percent. The unemployment rate for persons identified as evacuees was 14.7 percent; it was much higher for evacuees who had not returned home (26.3 percent) than for those who had returned home (2.9 percent).
– The number of discouraged workers (those who would like to work but who are not currently looking because they believe no prospects are available) was 396,000 in January, down by 119,000 from a year earlier.

Revenue Forecasting, Continued

Pelle at Stake Ventures posted a comment at my site and has a post at his site about my recent post on revenue forecasting.
Here is part of what he posted at his site:

The article makes the classic mistake of thinking all start-ups follow the same industrial kind of model with VC’s and business plans etc. I think it is not at all relevant to web based start-ups. Where this is probably relevant are the kind of start-ups where you do need a huge upfront investment.
As all internet start-ups and sooner or later realize these revenue forecasts that you do are nothing more than a waste of time.

Here is my response:

First, you have assumed that I am talking about business plans for the outside world. In that case, you and Guy [Kawasaki] are probably right, as investors and bankers are probably not going to believe your numbers anyway. A VC friend likes to tell folks that he has one person on his staff whose only job is to rip apart the numbers in a plan that they like and reconstruct them with their own assumptions.
However, I am talking much more about planning for the entrepreneur than a plan for the investor.
By spending the time to develop forecasts that tie into the marketing plan, at the very minimum you have now identify the key assumptions that are tied to the big unknowns that create uncertainty in your forecasts.
You now know what you need to track carefully as your business grows. The assumptions become not only what you use to forecast, but become the barometers you use to assess where your new business is really going and why.
This way your forecasts, just like your plan, becomes a fluid and evolves as you learn, as your business grows, and as things change. You imply that I view a forecast as some sort of a contract. Nothing could be further from the truth. I want you to adjust your forecast with each month of experience, with each mistake you make, and with every brilliant decision you make along the way.
When you look at your plan and see how different your business actually looks after you’ve operated a year than it did in the original plan does not mean you should never plan. It means that your plan and your forecasts are a starting point based on the knowledge you have now and that you have learned and used that learning to get better.
When we fail to forecast we are simply setting ourselves up for a game of blind man’s bluff. That is too expensive a game and too risky for me.

I like Pelle’s site and plan to visit it more often. Great post and a fun discussion!