Small Business Labs

Stimulus Package in Action

The Metropolitan Transportation Commission runs the subway (BART) and bus system for the San Francisco bay area. 

They voted last night on how to spend their stimulus package money.  Projects include:

- $270 million will help refurbish buses, BART tracks and hardware.

- $118 million will fix potholes and roadbeds

- $70 million will go towards a project to connect BART to the Oakland airport

- $32 million for various safety and related infrastructure projects.

Most of these projects are slated to start in the next 90 days, with the rest starting by the end of the year.

Coworking and the Recession

Reuters has an article on the wider appeal of coworking due to the recession.  We continue to see coworking growing through the downturn, although probably not as robustly as it would have if the economy stayed strong. 

In past recessions self-employment declined during the early stages of the recession and then picked up in the middle and later stages.  This recession appears to be following the same pattern.  And with the recession over 1 year old self-employment probably started picking up late last year and will continue to grow this year. 

The new self-employed will need places to work and network and this bodes well for coworking.

Kauffman's Fast Facts on Entrepreneurship

The Kauffman Foundation has released a 2 pager full of facts on entrepreneurship and the U.S. economy.  Examples of their fast facts include:

•  From 1980 to 2005 firms less than 5 years old accounted all net job growth in the U.S.
•  70% of registered voters think the health of the economy depends on entrepreneurs
•  40% of young people between the ages of 8 and 21 have or would like to start their own business
•  In 2007 the immigrant rate of entrepreneurship was much higher than the native born rate

Download the report to see all the fast facts.

Women Growing Percentage of Workforce

The NY Times article, As Layoffs Surge, Women May Pass Men in the Job Force discusses the growing role women play in the workforce. 

As the graph below from the NY Times indicates, the share of jobs held by women has been growing steadily over the last few decades.  This has been due to increased workforce participation rates by women.

       

The recession is also increasing the share of jobs held by women.  Men are over represented in troubled industries (construction, manufacturing, etc.) and in the current recession men have suffered 82% of the job losses.  Men currently have a much higher unemployment rate (7.6%, men 20 and older) than women (6.7%, women 20 and older). 

Women are also starting more small businesses.  According to the Center For Women's Business Research there are roughly 10.1 million women owned business in the U.S. 

Small Business Stimulus Package Round Up

The dust has settled a bit on the American Recovery and Reinvestment Act of 2009 - the official name of the recently passed $787 billion economic stimulus package. 

There are a number of good articles on the package and how it impacts small business:

1. SBA Advocacy Chief Economist Chad Moutray covers the small business impact of the stimulus package at a high level on the SBA's Small Business Watchdog blog. 

It covers both specific small business measures and provides a good overview of the infrastructure spend.  If you are interested in small business and just want to read one article on this topic, read this one.

2. Businessweek has a good article on the small business tax provisions in the stimulus package. 

3. Technology Review says battery makers are big stimulus package winners.  $2 billion in grants, substantial tax credits for plant and equipment and a share of the broader green energy spending.

4. Speaking of green energy spending, it will tally $79 billion according to LA Times. 

5. Health related IT gets a big boost - $19 billion according to the Wisconsin Technology network.

6. The International Herald Tribune covers the $7.2 billion in broadband infrastructure spend.   

7. Purchasing.com provides a good overview of infrastructure spending on roads, bridges and transportation.

8. US News covers potential "pork" projects associated with the stimulus package.

9.  The Center for American Progress - a progressive think tank - defends the package against the most common criticisms.

10.  Cato Institute - a conservative think tank - has aweb section dedicated to the package and deficit spending in general.     

PaySimple's 8 Outstanding Small Business Blogs

PaySimple, a leading provider of SaaS (Software as a Service) on-demand electronic payment solutions for small businesses, has a blog post 8 Outstanding Blogs and Resources for Small Businesses and they included Smallbizlabs in their list. 

From the blog post:

Here is a list of blogs, in no particular order, in which I feel most closely follows our PATH philosophy:

• Duct Tape Marketing – Great at providing daily resources and advice for small businesses.
• Small Business Trends – A variety of distinct voices that help small businesses get on track for success. Not only are there great conversations, but Anita Campbell is more than helpful when responding to questions/comments.
• How To Change The World – A practical guide to entrepreneurship and marketing. Not only is Guy Kawasaki’s blog interesting, but by following him on other social networks, you are sure to run across useful and entertaining information.
• SmallBizTechnology.com – With so many new technologies emerging every day, SmallBizTechnology helps small businesses provide information and strategies to help your business grow.
• Escape From Cubicle Nation – Tired of the corporate world? Want to start your own business? Pamela Slim encourages, while providing advice and resources to start your dream job.
• StartUp Nation – A laundry list of authors that cover a variety of categories – they are a “one-stop shop” for great content and resources.
• Small Business Labs – Great place to keep up-to-date with the future of small businesses.
• American Express OPEN Blog – A compilation of small business experts writing on topics including Finance, Marketing, Innovation, Leadership, and Management. Keep your eyes open because you will definitely run across authors from the other blogs in this list.

Needless to say, we are thrilled to be in the same list with these great blogs.  Thanks.

Trends in Agricultural Self-Employment

Self-employment week ends not a moment too soon with a look at agricultural self-employment. 

Agricultural employment is the U.S. has fallen consistently for decades.  For example, in 1948 there were over 7 million American agricultural workers.  Today, despite our population and workforce being over 2.5 times larger than in 1948, only about 2.2 million people are classified as agricultural workers.

Automation, productivity increases and food imports have accounted for the long term decline in farm employment. 

But as the chart below shows, agricultural self-employment may be bottoming out. 

   

Increased consumer interest in food safety, organic food and buying fresh and local food has led to a growing number of small farms.  Related to this, the number of farmers' markets has grown from under 400 in 1970 to over 4500 today.   

We've posted extensively on the trends related to the growth of small farms and local food.  Based on these trends, our expectation is agricultural self-employment will increase substantially over the ne next decade. 

Self-Employment and Nonemployer Businesses

Self-employment week continues with a look at the differences between government definitions of self-employment and nonemployer businesses.  And yes, it doesn't get much more exciting than this:).

Let's start with nonemployer businesses (we call them Personal Businesses).  According to the U.S. Census Bureau:

"A nonemployer business is one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes. Most nonemployers are self-employed individuals operating very small unincorporated businesses, which may or may not be the owner’s principal source of income."

The data comes mostly from tax returns filed with the IRS.  So as long as we aren't looking at cabinet nominees or those buying and selling senate seats, it is probably pretty accurate.

According to the Census, there were roughly 21 million nonemployer businesses in U.S. in 2007, up from 20.8 million in 2006.  We've posted a lot in the past on personal businesses and covered them in detail in our Changing Faces of Entrepreneurship research report. 

Self-employment data comes from the Current Population Survey (CPS), which is a monthly survey of about 50,000 U.S. households.  The CPS has been around over 50 years and is the primary source of information on the U.S. labor force.  The widely followed monthly unemployment rate, for example, is derived from CPS data.

According to the CPS, about 16 million people were self-employed in 2007.  This is total self-employment and includes unincorporated, incorporated and agricultural self-employed.  Alert readers of the prior two posts in this series will immediately recognize why we need this qualifier.

So in 2007 the U.S. had 21 million personal (nonemployer) businesses and 16 million self-employed.

Because the data collection methods are so different, one should not try to draw a lot of conclusions from the combination of the two datasets. 

Incorporated Self-Employment Growing

Incorporated, non-agricultural self-employment in the U.S. grew from roughly 4.1 million to 5.6 million between 1998 and 2008.  Unincorporated non-agricultural self-employment remained relatively flat, going from roughly 9.0 million in 1998 to 9.2 million in 2008. 

Non-agricultural employment is often used when looking at U.S. self-employment trends.  This is because it excludes the long term, steady decline in the number of small farms and agricultural employment.

As the chart below shows, the shifts in self-employment have led to a steady increase in the percentage of incorporated self-employed relative to the total number of self-employed.

           

Total self-employment during this period grew from roughly 13 million to 14.8 million (differences due to rounding).  As our post from yesterday shows, the percentage of self-employed compared to total employment has remained somewhat stable over the last decade. 

The growth of incorporated self-employed comes from both new small businesses as well as unincorporated self-employed choosing to incorporate. 

There are many reasons unincorporated self-employed choose to incorporate.  Tax benefits, liability protection and customer expectations are all good reasons for the self-employed to create a corporate entity.

Creating a corporate entity can also help the self-employed to gain access to credit and protect their consumer credit rating.   

And, of course, it much easier and cheaper to set up a corporation today than it was in the past.  LLCs in particular require little cost and effort to set up and administer. 

We expect incorporated self-employment to continue to grow its share of total self-employment over the next few years. 

Self-Employment Overview

Self-employment is an important source of jobs for the U.S. economy.  And as the chart below shows, the last decade has seen little change in the percentage of the workforce that is self-employed.  Self-employment has remained relatively stable - hovering around 10% of the non-agricultural workforce.  

  

The chart data is from the Current Population Survey (CPS), which for historical reasons classifies the self-employed into two categories.  

Unincorporated self-employed refers to people who identify themselves as self-employed but don't have a corporate entity.  The percentage of unincorporated self-employment has trended down over the last decade, going from 7% in 1998 to 6.44% in 2008. 

The second group is the incorporated self-employed.  This group consists of people who identify themselves as self-employed and say their business is incorporated.  The precentage of incorporated self-employed has trended up over the last decade, going from 3.2% in 1998 to 3.93 in 2008. 

Over the next few days we will look at these trends in more detail.  

Many thanks to BLS economist Steve Hipple for providing and helping us understand the data.  His 2004 article Self- employment in the United States is an excellent reference source on this topic.