Small Business: Role and Impact. Donna Davis CEO ARIZONA SMALL BUSINESS ASSOCIATION

Transcription

1 Small Business: Role and Impact Donna Davis CEO ARIZONA SMALL BUSINESS ASSOCIATION

2 What is a small business? Independent business having fewer than 500 employees U.S. Small Business Administration definition

3 Small Business IS Big Business Impact on U.S. Economy Represent 99.7 percent of all employer firms. Employ half of all private sector employees. Pay 44 percent of total U.S. private payroll. Generated 65 percent of net new jobs over the past 17 years. Create more than half of the nonfarm private GDP. 1. U.S. Small Business Administration definition

4 Small Business IS Big Business Hire 43 percent of high tech workers (scientists, engineers, computer programmers, and others). Made up 97.5 percent of all identified exporters and produced 31 percent of export value in FY Produce 13 times more patents per employee than large patenting firms. Source: U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin.; Advocacy-funded research by Kathryn Kobe, 2007 ( and CHI Research, 2003 ( Dept. of Labor, Bureau of Labor Statistics.

5 Small Business IS Big Business Impact on Arizona s Economy Estimated number of small businesses is 497, ,490 <500 employees 389,134 non-employers 97% of the businesses in Arizona are classified as small (less than 500 employees) Need to diversify and grow large and medium business representation was first drop in self employment since 2000 Source: Office of Advocacy estimates based on data from the U.S. Dept. of Commerce, Census Bureau, and trends from the U.S. Dept. of Labor, Bureau of Labor Statistics, Business Employment Dynamics.

6 How Many Businesses Open and Close Each Year? In the U.S., an estimated 552,600 new employer firms opened for business in 2009, and 660,900 firms closed. This amounts to an annual turnover of about 10 percent. Non-employer firms have turnover rates three times as high, mostly because it is much easier for them to go into business and cease operations. Starts and Closures of Employer Firms, Category Births 644, , , ,400e 552,600e Closures 565, , , ,900e 660,900e Bankruptcies 39,201 19,695 28,322 43,546 60,837 Notes: e = Advocacy estimate. Bankruptcies include nonemployer firms. Source: U.S. Dept. of Commerce, Census Bureau; Administrative Office of the U.S. Courts; U.S. Dept. of Labor, Business Employment Dynamics (BED). Estimates based on Census data and BED trends

7 Good News Entrepreneurs are optimistic Response to the last 6 months: 42% Wasn t as bad as could have been 25% Did surprisingly well Source: 2010 Entrepreneur Magazine Survey

8 More Good News Most businesses that were going to fail have done so. Arizona culturally supports the concept of small business and entrepreneurship Independent, make it happen mindset Source: 2010 Entrepreneur Magazine Survey

9 Tough Times Weak demand for product and services (anemic sales) Uncertainty and unknowns generated by federal, state and local government Skyrocketing costs (health care, unemployment taxes, etc.) Access to capital has improved

10 Best and Worst State Tax Systems Small Business & Entrepreneurship Council s Business Tax Index 2010 Ranks the states from best to worst in terms of the costs of their tax systems on entrepreneurship and small business Pulls together 16 different tax measures and combines those into one tax score that allows the 50 states and District of Columbia to be compared and ranked Top 5: South Dakota, Texas, Nevada, Wyoming, Washington Bottom 5: New York, California, Minnesota, New Jersey, Distr. of Columbia

11 Where Does Arizona Rank? Overall score: 17 Personal Income tax: 16 Individual Capital Gains tax: 17 Corporate Capital Gains tax : 26 Corporate Income tax: 25 Property tax: 24 Sales, Gross Receipts, Excise Taxes: 45 Unemployment Insurance tax: 3

12 How Do Regulations Affect Small Firms? The smallest firms (fewer than 20 employees) spend 36 percent more per employee than larger firms to comply with federal regulations. The disparity is greatest in two areas: very small firms spend four and a half times as much per employee to comply with environmental regulations and three times more per employee on tax compliance than their largest counterparts. Type of Regulations Annual Cost of Federal Regulations by Firm size Fewer than 20 Employees Cost per Employees for Firms with: Employees 500 or More Employees All Regulations $10,585 $7,454 $7,755 Economics 4,120 4,750 5,835 Tax Compliance 1,584 1, Occupational Safety and Home-Land Security Source: The Impact of Regulations Costs on Small Firms, an Advocacy-funded study by Nicole Crain and Mark Crain, 2010 (

13 Why Big Business Needs Small Business Symbiotic relationship Entrepreneurs and Corporate Executives need each other more than ever. 1. Most big businesses are running lean and desire to keep headcount low 2. Require certain expertise that are only needed now and then 3. Need fresh perspectives open up to new opportunities, problem solving 4. Need faster turnaround or responsiveness 5. Smaller projects that is not profitable for their current, bigger vendors

14 Why Small Business Needs Big Business 1. Big business (500 employees or larger) in the state represent 53% of private sector employment and 58% of private sector payroll. 2. Big business creates opportunities for ancillary businesses (restaurants, gas stations, printers, dry cleaner, etc.) 3. Allows small business to be part of profitable supply chains 4. Assist in getting their innovative products/services to national and international marketplace. Production/Distribution/Marketing 5. Financial assistance and access to capital

15 We Need Your Help! Protect our strengths for attracting and retaining business Minimize and/or remove deterrents Avoid slowing down permitting processes or increasing costs to run a business If you don t make dust, you eat it