The US government seems to be catching on to the importance of small businesses, dedicating more economic recovery dollars to this important group. However, many of the programs aimed at improving the economy through small business are actually promoting new startups. Many economic and business experts are wondering if startups are really the answer, or if we instead should encourage existing small businesses to expand and hire new employees.
There are several main reasons that startups aren’t an effective way to promote new jobs. First, very few small businesses—just over twenty percent, in fact—employ anyone at all, and startups are less likely than established small businesses to do so. Second, the small businesses that do employ others are employing fewer people, down from 5.7 to an average of four people per establishment. Last, the newest small businesses are more likely to close, especially right now. Any jobs that they contribute to the economy are most likely temporary.
So why promote startups? With fewer small businesses employing a declining amount of people, more small businesses need to be opened in order to get the same result. Unfortunately, the economic woes of our country are making it increasingly difficult to open a small business. As a result, fewer small businesses are being opened at a time when economic recovery demands an increase. The businesses that do make it off the planning table are running much leaner operations, with fewer or no employees and generally lower startup costs. This may make opening a small business less risky, but it reduces the small business’s positive impact on the economy.
The answer? Why not help existing small businesses? These businesses are more likely to employ other people and more stable as well. They have momentum, a customer base, and a brand that is recognized in their communities. In addition, they usually have more resources and can thus provide the type of jobs that American breadwinners need: full time, skilled work with decent pay and benefits. There are many small businesses struggling, so it makes no sense to overlook these people while focusing on businesses that have yet to be opened.
The amount given by the government to small business is greater than before, but it is still a tiny amount that represents less than one percent of economic stimulus funds. This makes it more important than ever to put every single dollar to the best possible use. If giving funds to startups won’t create the jobs we need, then maybe the money should be diverted to existing small businesses that are capable of having a larger economic effect.
If you are a small business, it is more important than ever to run efficiently and make all the right decisions for the present and the future. If you think your business needs a marketing boost to keep customers and income coming in, talk to a branding consultant today. After all, your nation is depending on your success.
