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Fri September 16, 2011
If small business is key to economic growth, what about really small business?
As the election season begins, it almost seems politicians are obligated to tout small business as one way to stave off further economic collapse and bring back the American Dream for all of those whom it has left behind.
Small business overall does have a tremendous economic footprint in this country, employing half of all private sector employees, by government estimates. But small business is also a really big umbrella. The United States Small Business Association includes any firm with less than 500 employees a small business. It’s easy to see how a business with 500 employees could be critical to a town.
Then there are people like Laura Cowan. She hopes to be a small business owner, but she’s not there yet. Cowan runs a green, affordable parenting blog out of her home, and patches together paying work while she balances full-time care of her young daughter. She is what has been called a “micro-preneur.” These are people who run very small businesses, typically with only one, or at most a handful, of employees.
In developing countries, micro-enterprise has received great attention for helping move some people, especially women, out of abject poverty. In this country, that strategy has been tried, but has worked less well. One reason is because starting a small business is very high risk, and pretty low-reward. There are people who begin these types of businesses because they have no other way to support themselves, but there are also a lot of people looking to make a change in their lives and thinking starting a business might be a good idea.
It is less certain what the effects of micro-enterprises are on the economy in this country. They haven’t been studied anywhere near as much as small businesses. It’s not clear how often micro-enterprises turn into flourishing small businesses, how often they stay small, and how often they fail.
Here are portraits of three different Micro-entrepreneurs in Michigan:
Cowan wanted to work book publishing when she graduated from college in 2003. But it’s a tough field to break into, so the Whitmore Lake resident worked in automotive writing and publishing, a bigger market in Michigan. Cowan was laid off in 2008. She had a child and decided to get back to writing while being a stay-at -ome mom. As her daughter grew, she started an affordable green parenting blog called 29 diapers. “(The blog) has been my grand project in exploring new ways of monetizing a new media venture in this economy.” Cowan says. The blog pays for itself, but not much of anything else.
Cowan calls her husband her “biggest angel investor.” Because he is covering most of the families expenses right now. Even so, Cowan thinks her micro-enterprise has taught her a lot about running a business. “I’m going to give it another year and see if it takes off.” Cowan said. If it doesn’t, she going to “shift her energy to other projects.” Cowan recently took on another editing job, and just finished a novel.
Six years ago Peters, his brother Brian Peters, and Justin Spindler founded Quite Scientific Records. It’s a small label based in Ann Arbor and Ypsilanti, but it’s got some up-and -coming artists. Detroit-based Dale Earnhardt Jr. Jr. started on the label before they moved on, with Quite Scientific's blessing, to Warner Brothers Records. Despite this and other successes, the business still isn’t big enough to support the founders.
All three partners have other full-time jobs, also in the music industry. But, Peters at least, isn’t unsatisfied. “We’ve put almost 30 records now and pay royalties to all our artists. We definitely consider ourselves successful.” Peters thinks there are advantages to starting slow and small. “We can grow the company organically,” he said. “We’re fine letting it grow organically to the point where at some point one of us can work there full time, if not all three of us.”
Another reason Peters is comfortable with a very small business is because he wants to avoid the risk that comes with starting up a full-fledged small business. But, he does think he might be willing to take the risk if support were easier to come by. “If smaller businesses could get loans, that then we could at least try to do it for a year or two.” Peters said. “But it’s hard enough for a larger business to get that, let alone us.”
Bing Goei runs Eastern Floral in Grand Rapids. It’s a retail floral shop with over $5 million in annual sales. But Goei started the company as a micro-enterprise. In 1972 he began as a wholesaler, in his garage. “I think I worked by myself for about three years,” Goei said. Eventually, he grew his wholesale business to the point where he could move into retail, and he bought his first retail shop in 1997.
He now has seven. Goei believes, strongly, in mirco-enterprise. Like many who have championed the concept in developing countries, Goei thinks it can be a pathway out of poverty. “One of the major causes of our social challenges is poverty,” said Goei. “These kinds of micro-enterprises can break some of these personal cycles of poverty.” Goei has even started a small business incubator called the International Center for Entrepreneurial Excellence focused on helping women and ethnic minorities start small businesses. “There’s nothing wrong with being a small business.” Goie says. In this country we glamourize big business, but there are many of us that say, if I can do something I love and I can take care of my children, I’m fine with that.”