Anthony Timperman had a brilliant business idea he thought would launch into the stratosphere. Then the economy changed, and six months into preparing to take a line of eco-friendly, sustainable cleaning products to market, he realized it was time for a contingency plan.
Anthony and his partners called their advisors looking to tap a network of investors. That well had run dry.
They tried family and friends, but they too were feeling the pinch. Fortunately, there were a few family members that could help and the product launch was back on track.
According to the US Small Business Administration, more than half of the 763,000 jobs lost in the first two quarters of 2008 were lost in small firms, and unincorporated self-employment fell from an average of 10.4 million in 2007 to an average of 10.1 million in 2008 — 9.6 million by November and December.
Small businesses continued to face challenges in the current climate, including accessing capital in the midst of financial instability, according to the SBA.
"Over the longer term, small firms face concerns about the cost and availability of health insurance, attracting a quality work force, meeting global competition, and perennial concerns about regulation, taxes, and government procurement opportunities," SBA said in a report to President Obama. "Research continues to show that small businesses and entrepreneurs will play important roles in the economy's eventual recovery, through their flexibility and ability to create innovative solutions, new industries, and jobs."
So how important are small businesses to the US economy? According to research from the US Dept. of Commerce and the Bureau of the Census and International Trade Administration, small firms:
- Represent 99.7 percent of all employer firms
- Employ about half of all private sector employees
- Pay nearly 45 percent of total US private payroll
- Have generated 60 to 80 percent of net new jobs annually over the last decade
- Create more than half of nonfarm private gross domestic product (GDP)
- Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers)
- Are 52 percent home-based and 2 percent franchises
- Produce 13 times more patents per employee than large patenting firms
Despite these figures, small businesses continue to struggle even in good times. According to a study in Monthly Labor Review, two-thirds of new employer establishments survive at least two years, 44 percent survive at least four years, and 31 percent survive at least seven years.
Anthony and his team plan to be on the long-term surviving side of those numbers and have scaled back their plans a bit to ensure liquidity. They will soon launch the Re:Consider product line in its first test market.