Returning Small Business to the Spotlight
Not long ago small business was winning praise from government leaders and economists for helping to pull the United States out of recession. After all, it was small companies that were creating the new jobs while Fortune 500 companies were laying off workers.
But small firms now seem to be falling out of the spotlight and out of favor.
Although small companies continue to create most of the new jobs, attention in Washington and elsewhere is shifting to the corporate megaliths born in a new wave of mergers, and to the technology companies fueling the stock market.
That shift in attention may explain why Congress feels free to play political football with the Small Business Administration budget and why some corporations that once eagerly courted the small-business market are now getting picky.
“We’re not really targeting mom-and-pops; we’re looking for cutting-edge, growing companies,” say some of these corporate types with a sniff.
“Consultants? Home-based businesses? Actually, we’re thinking more along the lines of companies with at least 100 employees and international sales of $1*million to $5*million,” say others.
The Times refocused the spotlight on small business this summer, surveying nearly 2,000 company owners in Los Angeles County and taking a close look at
Asian-, Latino- and black-owned businesses.
The picture that emerged is of a loyal, stable and prosperous small-business community, one that may not appear to have the glamorous demographics and clout sought by some politicians and corporations but that has a solid foundation that contributes to Southern California’s entrepreneurial reputation and success.
Using businesses listed with Dun & Bradstreet, the survey discovered:
* Most of the county’s small companies are prospering, with 72% of those surveyed describing business conditions in their own establishment as robust. Nearly half, 46%, reported an increase in sales and revenue in the previous 12 months. And 40% said they expected to add employees in the next 12 months.
* Smaller companies are the norm, with 15% classifying themselves as home-based and 46% as sole proprietors. About 28% had no employees and 33% had only one to four employees.
* Revenues also are small, with only 30% of the companies grossing more than $500,000.
* Nearly a third had considered relocating. But 40% of those wanted to move elsewhere in the same neighborhood or into the city of Los Angeles.
This made sense because more than half of the firms surveyed--55%--reported that their customers come from their neighborhoods or from Los Angeles County.
Asian business owners reported that 68% of their business came from customers in those locations; for Latinos it was 66%, and for blacks, 63%.
* The companies had deep roots. Although 30% were just 1 to 5 years old, 50% had lasted from six to 20 years, and 19% were more than 21 years old. In the Latino community, half were more than 21 years old.
* Many of the companies were started by immigrants. Among Asian business owners, 74% were immigrants; among Latinos, the figure was 43%.
* Despite optimism about the future, many businesses expressed concern about a dearth of skilled labor. Next on the list of serious obstacles businesses said they faced were stiff federal and state taxes.
What the survey does not capture is movement. It is a snapshot in time of entities that are constantly evolving. Looking at it and other surveys as definitive is to miss the dynamism of small businesses.
To focus on the static percentage of home-based businesses is to miss the sole proprietor who starts a themed entertainment company in a spare bedroom and within 18 months expands to seven employees in a San Fernando office working on theme parks and attractions in Germany and Chile. Or the garage-based public relations firm that takes on partners and grows to national prominence.
To focus on the age of companies misses the 40-year-old glass company purchased by a new owner and revamped so that more than 100 employees are added, along with offices in other states, and sales are increased to $12 million in two years.
To focus on the small revenue is to miss the restaurant that starts with a hot plate and expands to a chain, several books and a television show for its chefs.
The small-business universe is the seedbed of all business development. Politicians who view the small-business community as difficult to tap for campaign contributions, and large corporations that perceive small firms as a less than stellar target market, will end up ignoring, snubbing or failing to provide resources for our business future. To fail to pay attention to this group of entrepreneurs is to endanger the entire business community.
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The results of the Times Small-Business Survey will be discussed in a session at the Los Angeles Times Small Business Strategies Conference, Sept. 24-25 at the Los Angeles Convention Center. For more information or to register online, phone (800) 350-3211 or go to https://www.latimes.com/sbsc.
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Times staff writer Vicki Torres can be reached at (213) 237-6553 or at vicki.torres@latimes.com.
