Page 201 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

190 Michael D. Woods and Glenn Muske

businesses may represent nearly 10 million of the U.S. businesses as well
as 50 percent of U.S. business revenue. They may employ 50 percent or
more of the labor force. They are also common, with one in ten house-
holds owning at least one business.

Microbusiness Contributions
The preceding paragraphs have begun establishing, from a quantitative
perspective, some of the underlying economic reasons why a strong mi-
crobusiness segment is important to a local economy. The 24.4 million
businesses mentioned above employ approximately 32 million people and
generate approximately $400 billion in payroll (U.S. Small Business Ad-
ministration 2007). Alone, self-employed individuals generate annual re-
ceipts of nearly $900 billion (U.S. Census Bureau 2006). A study by Bruce,
Deskins, Hill, and Rork (2007) found increases in small businesses to be
the single-largest determinant of gross state product, employment, and state
personal income.
Other microbusiness contributions to the local economy include ap-
proximately 13 percent of the income and profits in a local economy (Fam-
ily Economics and Nutrition Review 2001) plus job creation. Many entre-
preneurs start a microbusiness and, considering that 74 percent of
graduating college seniors want to be self-employed the businesses they
start are likely to be micro in nature. Thus, it is in the best interests of eco-
nomic development planners to include this segment in any planning ac-
tivity (Levenburg and Lane 2003).
Jobs are another contribution of the microbusiness. In the 1990s, busi-
nesses employing four or fewer employees added the largest percentage of
jobs with a growth rate of more than 200 percent (Halstead and Deller
1997; Sexton 1999). They also provided human capital in terms of local
leadership (Miller 1998; Sharp and Flora 1999), volunteered for local com-
munity and civic groups, served on boards and as elected officials, and pro-
vided in-kind or cash contributions to civic and charitable organizations
(Dennis 2004). In many rural areas, they represent the primary, if not only,
business segment available. Job creation is important and the most job cre-
ation occurs within the first two years of a firm’s start-up (U.S. Small Busi-
ness Administration 2007).
The Kauffman Foundation (2005) noted that during a three-year period,
5 percent of nonemployer businesses, about 750,000 in total, became em-
ployer businesses. In short, they “grew up” and this change is happening at
an increasing pace. In addition, the nonemployer businesses are often im-
portant in the supply chain to larger firms. With today’s active push for out-
sourcing, nonemployer businesses are often key partners in the mainte-
nance and growth of larger businesses.