Small Business Labs

Reinventing the SBA

Bizjournals has an in-depth story looking at the role of the Small Business Adminstration in today's world.  The question the article asks is "can an agency created during the Eisenhower administration serve the needs of small businesses in the 21st century?" 

According to the article many, including the vast majority of small businesses, don't see the need for the SBA.  Key quote:

"The SBA is irrelevant to many small businesses. In a 2006 survey of small business owners by the National Federation of Independent Business, 85 percent said the SBA had no direct impact on their businesses over the past three years. "If the SBA were to go away tomorrow, would anybody really notice?" asks Susan Eckerly, vice president of federal public policy for the National Federation of Independent Business. NFIB's indifference toward the SBA is noteworthy because the Republican-leaning group is the most powerful organization lobbying for small businesses in Washington."

The article goes on to talk about 5 changes that could be done to make the SBA more relevant. 

I'm not surprised by the NFIB survey data.  In our research on small business the SBA is rarely mentioned.  But as the article points out, the SBA does a lot of great things that the average small business does not see or is not aware of.  Key quote on the the SBA Office of Advocacy:

"Even SBA skeptics like the NFIB are strong believers in the SBA's Office of Advocacy. The office makes sure federal agencies consider the impact regulations have on small businesses, and conducts and compiles research on small business issues."

In our work we often refer to and use SBA research and information.  Their work is a great resource and plays a key role in helping us all to better understand the role of small businesses in the U.S. economy. 

I also think the importance of their advocacy role cannot be overstated.  Small business needs a strong voice in Washington - particularly with federal regulatory agencies.  The reality is other groups (big business, unions, etc.) have better funded lobbying efforts.  The SBA provides a balance to these groups.  So while I'm all for improving the SBA, let's make sure we do it in a way that maintains the good the SBA provides.

Disclosure: We regularly use SBA data and research in our work and consider the SBA an important information resource.   We have never done work for the SBA, or directly or indirectly received funding from them. 

http://www.bizjournals.com/edit_special/66.html?page=1

The Earliest Years of New Businesses

The Kaufman Foundation has released a report on a study that has tracked 5000 small businesses started in 2004.  Some of their keys findings are:

• Nearly 60% of the firms had no employees in their first year of operation
• Just under 9% shut down in their first year of operation
• 37% had no revenue in their first year of operation
• 90% of the companies initial equity captial came from the founder

The study covers a lot of ground and the companies will continued to be followed over the next few years. 

Book Review - The Illusions of Entrepreneurship

Scott Shane, who is a professor of entrepreneurial studies at Case Western Reserve University, recently published a fascinating book called The Illusions of Entrepreneurship.  In it Scott covers a series of myths about entrepreneurship and what they mean for investors, policy makers and entrepreneurs.    I really like his top 10 myths list, which you can find in a post he did on Guy Kawasaki's "How to Change the World Blog." 

The book draws on data from extensive research to provide accurate, useful information about who becomes an entrepreneur and why, how businesses are started, which factors lead to success, and which predict a likely failure.  Small business data is hard to find and often contradictory and confusing (at least it is for me).  Scott's done a great job in organzing and presenting a vast amount of key data on this topic.  He has also clearly footnoted his sources, which is a great help. 

Although it has only been out a few weeks, I've already referred back to it multiple times - and it is clearly going to be a key resource for me in the future.  While I don't agree with all of Scott's conclusions, the book is a great addition to small business literature and is a must read for anyone interested in entrepreneurship and entrepreneurship policy. 

Kauffman Foundation Report On Entrepreneurial Activity

The Kaufman Foundation recently released their annual report on US entrepreneurial activity.  This report takes a very comprehensive look at new small business formation - including small business formation rates by demographic group as well as by state and major MSAs.  We consider this report and work to one of the key data sources on entrepreneurial activity in the US, and we refer to it often.

The report shows that immigrant small business formation rates continue to grow, and continue to be substantially higher than for native born americans.  It also shows that Asians and Latinos continue to form small businesses at a faster rate than average.  For more details on the trends related to the increasing diversity in US entrepreneurial activity, see our recent forecast report that focused on the changing face of entrepreneurship.

The USA Today Small Business Blog has a nice summary of the report if you are interested but don't want to download and wade through the PDF.