Non-Farm Employment up in 47 States

From the Congressional Joint Economic Committee:
* “Over the past year (since August 2003), the unemployment rate has fallen in 45 states. 34 states have unemployment rates at or below the national unemployment rate of 5.4 percent.
* Non-farm payroll employment has increased in 47 states over the past year. The largest over-the-year gains in employment occurred in Florida (+155,400), Texas (+116,600), California (+112,300), Virginia (+85,000), and New York (+69,500).
* In 2004, 48 states have added new payroll jobs.
* Non-farm payroll employment increased in 30 states in August. The states with the largest payroll job gains during July were Florida (+16,600), Georgia (+15,000), Texas (+14,400), Arizona (+10,200), and Colorado (+8,200).”

Small Business Acquisition on the Rise

It seems that the increase in entrepreneurial aspirations among baby boomers that I wrote about just yesterday is creating another trend within small business.
Anita Campbell at Small Business Trends writes about the increase in small business acquisitions. She rightly cautions against assuming that acquiring a business will greatly reduce risk. “(B)uying a business can bring risks of different kinds. As the article points out, failure to do due diligence can lead to nasty surprises. A business may turn out not to be as attractive or profitable as the buyer expected.”
Quite true. And a more significant risk can actually occur if the purchased business is turned around and begins to improve. The growth of a business is the stage that creates the most risk and is the stage where failure is more likely to occur and most costly to the entrepreneur (just ask any banker).

More Evidence That Baby Boomers Can Be Entrepreneurial, Too

The trend toward more entrepreneurial careers for young adults finds a parallel with those of us in the “baby boomer-s” generation (as discussed earlier at this site). StartupJournal cites a study by AARP finding that “16% of those over age 50 are self-employed, compared to 10% of the general work force. About a third of the self-employed seniors also are first-time entrepreneurs who had previously always worked for others.”
The stories of two “seasoned” first time entrepreneurs are told in this article written by Mark Henricks. Each found the path to entrepreneurship in different ways. For some it is life circumstances, while for others it is a choice to take a new direction in life.
“Janice Taylor is an example of an older American who chose to become an entrepreneur largely for the fun of it. Not long after she turned 50 last year Ms. Taylor gave up an investor relations position at a New York City media company to pursue a venture that mixes weight control with art.”
“Mary Rooney Sheahen lost her job as a Chicago hospital CEO in 2000, but eventually opted to start her own company rather than seek another position in health-care administration. ‘It gave me an opportunity to step back and say, ‘Do I want to keep doing this?’ Ms. Rooney Sheahen recalls.”

Important Step in Assuring Regulations Fair to Small Business

The Office of Advocacy of the SBA reports that the state of Rhode Island has taken a major step forward in assuring that regulations do not unfairly burden small business. This is consistent with evidence that shows the importance of a two-pronged approach to supporting entrepreneurial economic development: education and getting government out of the way.
“‘Rhode Island’s small business owners now have a seat at the table when regulatory decisions are made,’ said Thomas M. Sullivan, Chief Counsel for Advocacy. ‘When their voice is heard, better decisions are made, and that means more jobs and growth for Rhode Island.'”
Rhode Island is the latest state to move in this important direction. The Office of Advocacy reports that legislation is “pending in 11 states. In the past year, small business regulatory flexibility has been implemented in six other states, most recently in Missouri and Kentucky.”
All of these states are following the model legislation written about earlier at this site.

Job Growth Back on Track

From the Congressional Joint Economic Committee:
“The economic expansion has regained traction following the soft patch of late spring. Payroll employment growth picked up in August and consumer spending appears to have rebounded in July and August. Business investment spending continues to grow and employment and output in manufacturing are on the rise. Levels of activity in housing markets and new construction remain strong. Exports rebounded in July while imports declined, leading to an improvement in the trade balance. Inflation, inflation expectations, energy prices and long-term interest rates have recently eased. Forecasters see strong growth in the gross domestic product (GDP) for the second half of the year.”
Find the full report here.

Service and Information Sectors Show Major Growth in Q2

While manufacturing is, and will remain, a vital part of our economy, we have heard for years about the transformation to a service/information economy. And yet, up until now, the government did very little to track this major part of our economy–on that is dominated by entrepreneurs. On Monday (gee, I missed it in the papers and the evening news, too) the Census Bureau issued its first full report on this sector’s economic health. Any fears that service and information are still hurting were completely smashed by this report.
Here is a summary of this report for Q2 2004 from Inc.com:
“The report showed that information services revenue rose 4.4% in the second quarter of 2004 to 0.1 billion. Revenue from administrative and support services, as well as waste management and remediation services, totaled 1.9 billion, up 5.6% from the first quarter. Revenue from professional, scientific, and technical services posted the largest gain, rising 6.3% to 1.6 billion.”
How important is this sector?
“According to the Census Bureau, the three sectors constitute approximately 15% of U.S. gross domestic product, with service industries in general accounting for nearly 55% of the nation’s economic activity, excluding retail and wholesale trade.”
Note that this is excluding retail and wholesale. So these are not just burger flipping jobs. This report certainly helps support the strong employment data we have seen recently from the household employment numbers.

Watch What They Do; Don’t Listen to What They Lobby For

Competition in domains that were once thought to be permanent governmental monopolies is proving to be effective in many arenas. Certainly schools have been one of the modern success stories of privatization. In today’s Tennessean it seems that public school teachers in Nashville (yes, those same public school teachers who fight the creation of charter schools and lobby for more and more and more money without any accountability) agree that competition and markets really do work.
“More than one out of every four Metro teachers, or 28.6%, send their children to private school, according to a study released last week.”
So, how does this compare to the overall population in Nashville? Teachers are twice as likely to send their kids to private schools as the average family in Nashville.
What could possibly be the reason behind this startling statistic?
Well, School board Vice Chairwoman Kathy Nevill thinks it must be racism. “A lot of it stems back to the same reason the community left the school system — they are scared to death of busing. To some degree they are still scared to death of diversity.”
The Director of Nashville Pedro Garcia “had not seen the report and questioned its accuracy.” He has gathered his own data. “‘I talk to lots of teachers, and I know where they send their kids. I don’t believe it’s anywhere that high.'” But if the data proves to be true, isn’t that a call to action, Dr. Garcia?
“If the report holds up, Garcia said, he is not overly concerned. ‘Teachers can send their kids wherever they choose,’ he said.”
Well, maybe we should go to the teachers and find out the real reason.
“Attempts to interview Metro teachers whose children attend private schools were not successful.”
I’ll go out on a limb and posit my own explanation. The private schools are better and the teachers know it. Gee, maybe if we all had real choice in schools it might just push public schools a little harder to improve and compete.

One Contrary Entrepreneur Keeps Jobs in US

While many shoe manufacturers long ago gave up on making shoes in the US, FastCompany tells about one entrepreneur who hasn’t followed that trend. John Stollenwerk, president, chief executive, and owner of Allen-Edmonds Shoe Corp., is among the last remaining shoe manufacturers in America. He employees about 700 people in his company, which located in Wisconsin (see Packers beat Carolina in opening MNF).
While many have held him up as a true patriot, Stollenwerk is just responding to his market. Customers have come to appreciate the quality that Allen-Edmonds produces and the service they can provide to their customers. Take as, an example, banking. Predictions that soon there might only be two or three mega-banks have proven wrong. The market has needs not being met by the mega-banks and entrepreneurs are responding with many new (and successful I might add) banks for us to choose from. It takes vision and commitment to that vision, but like those worms and shrimp that were discovered living off the gas vents in the bottom of the ocean, entrepreneurs can flourish in remarkably hostile environments.
“This unassuming leader isn’t refusing to go overseas because of some abstract principle. It’s all about the shoes, and he still believes that Allen-Edmonds can make them better — and serve customers faster — in the United States.”
What is most remarkable to me is the courage that Stollenwerk has shown in sticking to his vision for the company that he purchased in 1980. “‘John could take this all offshore tomorrow, and we could probably double — maybe even triple — our profits,’ says Mark Birmingham, Allen-Edmonds’s COO. ‘But he knows that’s probably shortsighted’….That philosophy — built around a willingness to sacrifice short-term gains for the long-term good of his organization — is what defines Stollenwerk’s quiet kind of courage.”

Data Made to Dance

Academic types, and I’m talking about the purists among my colleagues, have long been enamored with high growth companies (they call them gazelles, always with a whimsical tone in their voices) rather than small businesses (which they call life-style businesses, always with bit of a condescending tone). And if you read their text books and research articles on entrepreneurial finance, you would think that all entrepreneurs are funded through venture capital. The facts are that VCs have always played a very small part in entrepreneurial financing.
In a report in Inc.com on Kauffman’s GEM (Global Entrepreneurship Monitor) study, this bias comes through loud and clear. The article sounds alarm bells even in its headline “VC Money for Start-ups Continues to Dry Up: Report shows amount of investments in early-stage companies hit lowest level since 1980.” Is this evidence that our entrepreneurial economy is collapsing? The shrill tone of Inc.com’s report leads one to conclude that it may be true (I won’t go so far as to claim this is politically motivated by journalists or academics — I’ll leave that to the reader to decide).
“Small business owners looking for investors would do better with their time than to seek venture capital. According to a study by Global Entrepreneurship Monitor, of the $18.2 billion in venture capital invested in 2003, only $304 million was invested in seed- or start-up-stage companies, the lowest level since 1980.”
“Lowest level since 1980”?? It must be a crisis in the making! But to understand this data, we need to understand that venture capital has been evolving over the past twenty five years. Venture capital in 1980 was nothing like venture capital today. As the venture capital market became larger, more complex, and more specialized, the investment strategies pursued by its managers has changed in focus from start-up to later stage investment.
In its wake there came a growth in angel investment. Wealthy individuals who preferred investing in start-ups pursued these opportunities directly, while the venture capital funds attracted investors interested in lower risk second and third stage investments (that is, established companies with a track record needing capital for growth rather than start-up).
In fact, the GEM data shows this trend as reported by Inc.com at the very end of the article.
“The Center for Venture Research estimated that angels invested $18.1 billion in start-ups last year, up from $15.7 billion in 2002, and that there are between 250,000 and 400,000 angel investors in the country, as well as 1 million to 5 million potential angels.”
Markets work and markets evolve, even if they are capital markets. Venture Capitalists are, in fact, very busy doing what they have done for years: investing in growing ventures. And they are doing so, as this web log has reported, at a brisk pace in 2004. If small businesses are fruitlessly chasing VC funds, we can probably thank academics and the media who continue to give too much focus on venture capital and lead them down this blind alley. VC money is important, but has become specialized and focuses on a very small part of the entrepreneurial economy. Keep it in perspective and put it in context.