Page 200 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Understanding and Growing a Community’s Microbusiness Segment 189

of basing it on the number of employees. Microbusinesses would be in-
cluded in the SBA’s most general definition, namely small businesses have
500 or fewer employees. In the United States, this captures more than 99
percent of all businesses, or all but 17,000 of the 24 million plus firms.
Those businesses employ 51 percent of the workforce, generate more than
80 percent of all new jobs, and produce 52 percent of the gross domestic
product (Henderson 1997).
Microbusinesses therefore represent one part of a larger small business
segment. Devins (1999) and Kangasharju (2001) offer the most commonly
used microbusiness definition, namely a business that employs fewer than
ten people. Using this definition, microbusinesses still include 98 percent
of all U.S. businesses in 2003 (U.S. Small Business Administration 2006)
and include both the nearly 5.8 million businesses that employed someone
with a payroll at sometime during the year as well as 18.6 million nonem-
ployer firms. These numbers do not even capture farm and ranch opera-
tions.
There are other means by which microbusinesses, or similar entities, have
been defined. The Association for Enterprise Opportunity (AEO) (2004)
defines microenterprises as those that have five employees or fewer, require
$35,000 or less in start-up capital, and which do not have access to the tra-
ditional commercial banking sector. By this definition, AEO claims that
there are 20.7 million U.S. microenterprises representing 16.6 percent of all
U.S. employment (Walzer and Hamm, chapter 4).
Three informal methods have also been used to define the microbusiness
economic segment of the economy—(1) mom and pop stores, (2) home-
based businesses, and (3) at times, family businesses. Often, these types of
businesses are termed main street business as in rural or small towns. While
defining any one of these three types of business as microbusinesses may
often be correct, it must be noted that this automatic assumption is not al-
ways correct.
According to the U.S. Census Bureau (2006), mom and pop stores are as-
sumed to have no paid employees and are most often barber and beauty
shops, daycare providers, real estate agents, carpenters, plumbers, tax pre-
parers, and writers. Four groups within the mom and pop economic sec-
tor—real estate (including leasing and rentals); construction; professional,
scientific, and technical services; and retail trade—generated 60 percent of
all nonemployer receipts.
Home-based businesses are estimated to represent nearly 50 percent of
all small businesses and vary greatly in number of employees hired and
gross revenue, with only 2 percent bringing in more than $250,000 while
74 percent bring in less than $25,000 (U.S. Census Bureau 2006). Fam-
ily businesses are sometimes incorrectly assumed to be similar to “mom
and pop” businesses, but, according to Heck and Stafford (2001), family