The nation’s smallest businesses could be its the country's biggest hope, according to new research that finds that small changes on a micro level could be enough to shift the nation’s economic revitalization into high gear.
If one out of every three micro-businesses --– defined as “very small” businesses were to hire one employee each, and the economy would be well on its way to recovering completely, the report said.
That’s just one of the many findings from the Association for Enterprise Opportunity (AEO), which released the report his week in conjunction with its annual “Main Street Matters” conference being held in Washington, D.C. The organization also announced the launching of a new program, called the Catalyst Initiative, that will aim to guide the smallest businesses toward growth and change.
Some of the statistics cited by the report paint a bleak picture for the nation’s smallest businesses:
- In 2010, the major U.S. commercial banks turned down roughly one million applications for small business financing;
- Just over 5 percent of all businesses generate annual sales greater than $1 million. For women, Latinos, and Native Americans, the rate falls to only 2 percent. For black business owners, the rate is under 1 percent;
- The odds that a black business owner in the U.S. will have annual revenues of less than $100,000 are almost 20 percent higher than for their peers;
- There are over 40 million people living at or below the poverty line for whom self-employment is likely to be their most viable economic option.
The problem, the report contends, is that small business owners, many of whom have only a few employees, do not have access to the tools they need to grow. The solution, the report said, is a multi-faceted, but possible one.
“Unlocking Main Street’s growth potential will require coordinated actions among individuals, companies, non-profits, foundations, and government,” the AEO said in its report. No single actor or group can solve the complex challenges of availability and access. The good news is that while the need is great, solutions are in reach.”
The solutions to the problem come from implementing many different approaches, the report said. They include:
- Current programs, products, and services could reach more people: Operating model innovations can reduce the costs to serve low-wealth business borrowers by more than 65 percent without necessarily sacrificing the personal touch. Product innovations can push opportunities to businesses and business owners who previously lacked access.
- Businesses could become more competitive for procurement opportunities: As one example, each percentage point of procurement spent by the federal government alone that could flow to small, disadvantaged businesses represents $5 billion.
- Micro-businesses could connect to international trade routes: Access to logistics services and distribution networks need not be a barrier for micro-businesses to participate in international trade. A 1 percent share of imports to developing countries is worth $37 billion. If U.S. micro-businesses increased their share of imports by countries in sub-Saharan Africa alone to parity with India and China, it would be worth $5 billion.