By the numbers, there’s no question: Small business is the driving force of our economy and a fundamental contributor to America’s wealth. Small businesses comprise 99.7 per cent of all businesses in the U.S.; they’re responsible for half of our gross domestic product and they generate nearly 70 per cent of all new jobs.
But small business in the United States represents much more than a mere set of facts and figures. It holds a highly esteemed, almost mythical place in our culture. Indeed, the entrepreneurial spirit represents a founding ideal that underpins our entire nation: the idea that an individual should be free to pursue his or her own vision and passions.
Small business jump-started the modern economy, from the farmer working his small plot of land, to the proprietor of the local corner-store. And entrepreneurs have been at the very crux of many scientific or technological advances in recent history: the assembly line, the advent of electricity and telephones, the growth of the rail and airline industries. They were thinking outside of the box long before the term was coined.
And small businesses are admired for reasons other than their concrete achievements: their resilience, their ability to adapt and take risks, their facility to succeed even when facing the most daunting challenge. The environment for small business has sometimes been far from friendly. The rise of corporate multinationals and other forms of “big business” meant that small businesses had to confront a new and powerful form of competition. In the decades following the birth of big business, small businesses also faced economic recessions, wars and eras of social transformation without the stability or resources of a larger corporation. Yet they continued to prosper and according to U.S. News and World Report grew at a rate of more than 200,000 per year.
The new e-conomy
Recent years have provided a shining example of small businesses’ enduring capacity to leave their larger rivals at the starting gate. With the advent of the personal computer, the Internet and e-commerce, entrepreneurship in the U.S. has undergone a “virtual” renaissance. There are few episodes in our business history to rival the paradigm shift heralded by the arrival of the likes of Amazon, Google and YouTube. That a relative upstart like AOL should see its name grafted onto the venerable Time Warner brand is unprecedented, and just one of the more overt signs of the enormous changes wrought by the innovators who first spotted the potential of the Internet.
These advances in technology level the playing field such that all businesses, whether small or big, reach their end customer through the same portal. The scales have been tipped in the direction of small business as traditional strengths like agility, flexibility and speed to market become the keys to success. In an era of “mass customization,” big business can only look on while their nimble counterparts provide a quick and personalized service to their impeccably researched demographic. In fact, small businesses’ mould-breaking structures and flatter hierarchies are revolutionizing the economy from the ground up. Never before have we seen small businesses spur entire industries, such as venture capital or angel investing, or witnessed the growth of sites like eBay, exclusively focused on providing a marketing platform for small businesses.
The melting pot
Currently, over 650,000 new businesses are started yearly, according to the Small Business Administration. And, for the first time, those owned by women or minorities are outstripping all other categories. Women owned firms alone total 10.4 million, employ more than 12.8 million people and generate $1.9 trillion in sales annually, reports the Center for Women’s Business Research.
The explosion in small business creation has also inspired many who are new to the country to join the start-up revolution. The U.S. Hispanic Chamber of Commerce has found that Latino-owned businesses are growing at the fastest rate of any small business segment. This rise mirrors the increased spending power of the Hispanic consumer; in fact, 66 per cent of the most successful Hispanic-owned firms are small businesses, with growth rates at an enviable annual average of 17 per cent, as stated by Hispanic Magazine.
If small businesses are springing up everywhere, it’s because there has never been a more providential time to start that start-up. Widespread PC ownership is key: It enables us to start businesses in our kitchens or garages with just a computer and a couple of thousand dollars. In fact, according to SCORE: Counselors to America’s Small Business, the number of small-office or home-office businesses is now 40 million strong in the U.S. — and growing at a viral rate of one million each year.
And, as job security becomes a thing of the past, many of these home-based businesses are a seeding ground for another new type of small business owner: the “mompreneur.” With 72 per cent of women with children now participating in the workforce (up from only 47 per cent in 1975, according to the Bureau of Labor Statistics), more and more mothers are looking for ways to meld their professional and personal lives, and see small business ownership as the perfect vehicle. Joining them are downsizing executives, trading the corporate treadmill for something that they own themselves and feel passionate about.
With this tectonic shift in work practices, it’s not surprising that economists and policymakers are heralding a New Economy based on technology, competition and the ability to corner a niche in an increasingly global marketplace. According to the Cato Institute, small businesses are paving the way in this altered landscape. They produce 13 to 14 times the number of patents as their larger counterparts, and comprise 97 per cent of America’s exporters. In fact, 26 per cent of our export value is derived from goods and services produced by small business owners, according to the United States Small Business Administration. It is probably not a wild coincidence that the Ewing Marion Kauffman Foundation has discovered that states such as California, Massachusetts and Washington — all at the cutting edge of technological innovation — are also leading states for rates of entrepreneurship and small business.
The future is small
Such a dramatic upswing in start-ups and changes in the basis of our economy may help small business to thrive, but it also means that small business owners face a very different set of challenges to those of a decade or two ago. The pace of technological innovation is astonishing, and small business owners have to think on their feet faster than ever before and be ready to take advantage of opportunities as quickly as they present themselves. In order to innovate, they need access to state-of-the-art technology. To be globally competitive, they must be able to take advantage of supportive policies and infrastructure.
But amid all the changes and challenges, one thing remains true: the entrepreneurial spirit continues to thrive. Passion is the energy source that drives the business — from the original idea behind the enterprise to the persuasive way it is sold. It is their savvy that allows entrepreneurs to make the most of what they have and to get what they need.
We can only speculate about what the world will bring us in the next 20 years. In 1987, the Internet was in its infancy, and cell phones were the size of bricks. In 2027, will we be taking the likes of energy-harvesting floors, smart elevators and web-based microfinancing for granted? Whatever happens, two things are certain: Small businesses will continue their role as engines for innovation and exemplars of individualism for our economy, and OPEN from American Express will be doing all we can to help them achieve success.
