Small businesses account for almost two thirds of new jobs each year. Recent Kauffman Foundation research reported that the major driver in all job growth in the U.S is in fact driven by start-ups. There is a misconception that businesses will hire more as they age however the Census data used in this report proves the opposite. Start-ups create the most jobs, far and wide. As businesses age and grow they bring in more employees but not at the same rate and ratio as a start-up. What great new for our entrepreneurs! Start those businesses and turn our economy around!
Despite their great opportunities for growth, many start-ups fail. This report by Brookings sums up the reasons why some small businesses succeed and why some do not. The article cites improper funding as one reason many new businesses do not make the cut. Venture capital and angel investors are the most important drivers for small business growth since many cannot always find access to capital from traditional bank loans. Funding, or lack thereof, can often make or break a business.
Brookings' research has also shown that the dearth of a well educated workforce has contributed to small business failure. They suggest that promoting educational opportunities geared toward entrepreneurship and high growth industries will make a significant impact on small businesses. By creating the proper workforce there is less chance that a small business will go under.
We all love the mom and pop shops in our downtown areas regardless of the size of our city. These are the small businesses that are providing great jobs and creating growth at a rate which established businesses cannot match. Their survival is imperative for the economic turn-around. Improved access to funding and educational opportunities are essential if small businesses and start-ups are to continue to carry the torch for such high job creation.
Colby Spencer is an intern and Project Coordinator at MML. She can be reached at cspencer@mml.org.
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