Small Business In The Age of Change

May has been christened Small Business Month.  You’ll likely be reminded of some if the benefits of small business and entrepreneurship in the coming weeks.  This week especially, April 30-May 6, 2023 is Small Business Week.  It’s a great time to remember the vital role that small businesses plays in daily life, economics and societal health.

Worldwide the devaluation of small business in many quadrants is leading to the erosion of society itself; because small business is the leading employer of local citizenry.  And when citizens are not earning, citizens cannot buy, support public works, invest in education and upgrade city structures both infrastructural and social.  Long-term developing economies exemplify this phenomena, where a very thin sector of people are employed.

There are over 32 million businesses in the United States, but about 26.5 percent are small businesses with no employees according to US Census data.  This means small businesses plays a vital role in the economy even where self-employment is the onky outcome.  When the US Fed increases interest rates and pushes inflation, there are palpable consequences for small businesses and the population at large.

Recently, the news of big name corporations and multinationals have taken the headlines on major layoffs.  The likes of Disney, Facebook, and McDonalds Restaurants just to name a few.  However, the losses have been great across all industries, but small businesses have been hit quite hard since the 2020 pandemic even with US Payroll Protection incentive programs and other small business grants and loans.

While the US may be turning up the heat on developing economies through inflation, it is also extinguishing hundreds of small businesses.  And yes, since the pandemic, there has been an increase in new small businesses, but new startups are often replacing older more lucrative operations. Generally it takes about five years in the US for a small business to become profitable.

And most small businesses are so small they have less than 10 employees.  In fact the 78.5 percent of all businesses in the USA has less than 10 employees. In a difficult climate such as today, these companies are being wiped out or forced to consolidate.  This means less work, when there are less employers.

And while the evil capitalists (different from the good ones), are laughing at the demise of their competition, economies and societies will be wrecked.  Because believe it it not, economies need competition and big business needs small business for a functioning society.  If “Jody” cannot work at the 10-person accounting firm–she can’t keep a Netflix subscription, go out for drinks at the Cheesecake Factory or buy a new iPhone. Small businesses matter. Entrepreneurs matter.

According to an Entrepreneur Magazine online report, Uganda, Thailand and Brazil have the highest entreprenuerial rates worldwide. And while that is a good thing, it also notes an important factor about scale, access to capital and financial liquidity among the population.  Note that of the top 25 most entrepreneurial countries absolutely none are developed economies. None.  Why is that?

Because everyone doesn’t have to sell to make a living.  Some people can simply go to work, and that is important.  When small business is poorly capitalized and the population has very little liquidity; a small business cannot grow. And if a small business cannot become a Medium Enterprise, it cannoy become a true corporation or a multinational.  Name one Ugandan, Thai or Brazilian business that employs staff at liveable wages, provides pension, health insurance and vacation? Name one that has a branded product you have used or accessed in a developed country or outside of their region?  You can’t.

Small businesses and entrepreneurship are more than just endeavors by hungry capitalists or innovative solution providers.  These are necessary tools of economy, society and community. 

Therefore it is important to note the ways that subjugation, ethnic violence, destabilizations, coups and descrimination bare upon business and community.  These factors must be addressed. The Black American community offers an example of relentless entrepreneurs who broke through all odds to build thriving businesses that supported entire cities and towns.  These enclaves were smashed by US restrictive government policies, violence, immenent domain and local mobs. 

Even today we see the results of the continued socioeconomic violence. Black businesses make up just 2.3 percent of employer firms–businesses that employ workers, US Census data reveals.  In fact there are aproximately 3.2 million black business out of 36 million US firms, despite black Americans comprising 14 percent of the population. 

And while black female entrepreneurship has skyocketed in recent years, JP Morgan reports, this may not always be a sign of socioeconomic health.  The impetus to start may have a deliterious origin, if we consider the examole if entrepreneurship and the developing world.  Black American women have gone into business because they have had to for survival.  A Harvard Business report indicates 17 percent of Black women lead a black business. In repressive societies, stable jobs are not reserved for targetted communities.

We see examples of this in the countries with some of the highest unemployment rates in the world. South Africa, Djibouti, West Bank and Gaza Strip have the highest rates of unemployment worldwide, reports ILOSTAT, International Labor Organization.  It is not a coincidence that these are all formerly colonized nations, most with a history of repression or violence against indigenes.  There is then a necessity to rectify and provude special corrective attention to revive these entrepreneurial ecosystems.

Small business is then an indicator. It can belie that which is good and growing and that which is locked out if mainstream sources of income–especially where there are established business markets.  And it is not feasible for other big businesses or potential competitors to finance black or minority owned businesses. No matter how generous the grant or startup program, minority businesses need their own leg to stand on through access to capital through traditional means that allows the entrepreneur to scale at his/her own pace, unmolested by restrictions and denials based on gender, race or ethnicity.

Small businesses provide empmoyment and opportunities for the population but also for the nation itself.  These include exports, brands and partnerships that draw investment, talent and national confidence.  They help train new generations of leadership and enhance education through cooperation, research, apprenticeship and internship.

While many watch the pending decline of the dollar and the teetering US banking system, they forget the health of small businesses and entrepreneurs hang in the balance. The too-big-to-fail banks are often a poor fit for entrepreneurs and small businesses who want to scale.  Big business may be fine withthe likes of UBS, Chase and HSBC, but often such banking institutions do not provide the financial instruments and attention that smaller regional banks provide small businesses.  Regional banks, savings and loan, even credit unions offer a vital window to capital as a small business dares to scale up.

Regional banks offer small 5-man operations the levity to expand to 10 or 20 employees.  It is an opportunity for local communities to be connected to the businesses and institutions that serve them.  The US Small Business Association reports that small business accounta for nearly 62 percent of all new job creation.  Without small businesses economoes remain weak and unstable.

Underdeveloped economies exemplify this madening cycle of instability. Bank loans come at an exorbitant premium in these economies and local populations are capital prohibitive.  This means even having a good product with high demand does not guarantee success.  If your average customer can only purchase twice a month–your profits are capped. This is where vital discussions about currency and capital need to be diacussed in developing economies around the world. At this stage in history, there is no time to let another year go by without tackling the issue.  The Aid organizations and experts are failing developing economies, its time to go to the people in the trenches for answers.

Small businesses an d entrepreneurs (the men in the trenches) then must be savvy to survive these current times and those from developeming economies must break the vice grip of poor liquidity, trade barriers and low capitalization. Intra-regional trade must increase in these regions and helping small businesses become productive must become the priority of local and federal government–communities and villages everywhere. Without small business growth, employment cannot increase.  It is impossible to believe that big business can absorb all who need to earn.

While many love entrepreneurship, not everyone wants to be a business owner.  And that is OK.  In fact, that is a good thing. Economies need workers, employees, teachers, health professionals and experts.  There is nothing wrong with collecting a paycheck. But we need to empower those who are in business or who want to start. Because those are the employers of tomorrow. Without industry and growing business, where is innovation, export and production–where is GDP?  There will be yet another IMF/World Bank loan to unpack.

Small business must rise beyond the one-man threshold.  Society must be committed to both small business and entrepreneurship for its enormous impact on society. There are 400 Million entrepreneurs in the world today that can help transform your city, county or region. We have to be brave enough to find solutions that benefit all sectors of society. No man is an island entire of itself and neither is any entrepreneur. Small business matters. Entrepreneurship Matters.

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