Want to buy a small business? How about a small town too? That way you can be the town’s major business figure as well as its mayor.
You wouldn’t have to worry about the town passing onerous ordinances that put you out of business, right?
Swett, South Dakota, is a 6-plus acre ghost town (in more ways than one) and it’s on the market for $250,000. Sadly, the demise of the town and the small business located there – a closed down bar – might be a bellwether for U.S small business in general, if recent trends continue.
Late last year, Gallup
published a study that showed how U.S. business startups have been in a steady decline over the last 30 years.
Further, in 2008 an ominous line was crossed: there were more business closings than business startups. If that continues on through a few generations of Americans, a lot of the country will start looking like Swett, South Dakota.
Let’s take a quick look at what’s at risk if the gradual decline of small business continues unabated:
Job growth slows drastically.
According to the Bureau of Labor Statistics, businesses with fewer than 50 employees accounted for 40 percent of the net job growth in the third quarter of 2013, essentially the same as the large firms with 500-plus employees. Small business is small – but mighty – when it comes to job creation. Overall, small business accounts for 55 percent of all jobs.
Retail gets more concentrated.
We recently celebrated Small Business Saturday and that put the spotlight on the country’s vibrant small business retailers. Small businesses are the largest retail employers in the U.S. economy, if they are endangered it can totally change the complexion of retail. So many of today’s successful retail goods producers started out by selling to small, independent retailers. Who else would take a chance on these unproven innovators?
The construction industry suffers.
U.S. small businesses occupy 30-50 percent of all commercial space. When more businesses close than open, it kills demand for new offices, stores and shopping centers. Construction jobs vanish. More small towns suffer the fate of Swett and become unoccupied and go up for sale with no buyers in sight.
I started this with the tale of Swett, because it might give us a terrifying glimpse of the future. When small business goes away, there is really nothing to come in behind it and put things right in a community. Small businesses are the last line of defense for small and medium-sized towns and cities. State and federal programs may try to revitalize some areas, but that takes money, and as small businesses fail, the tax base shrinks. This can be especially critical for local governments that depend on sales tax and property tax revenue. Vacancies depress property values, shrinking small business retail wipes out sales tax collection.
The vexing part of this story is that the governments that depend on healthy tax revenues from small business are one of the biggest causes of the small business decline. The costs of government regulations
hurt existing small business far more than they do big business and they also discourage people from taking the risks required to start a small business. In many cases, meeting regulatory requirements is just too costly for an average citizen.
Two things need to happen. Elected government officials as well as the bureaucrats who write the regulations need to be held accountable for the impact their laws and regulations have on small business. Second, we need to revitalize our culture so more people are willing to take a chance and start their own businesses. We need to teach business principles starting at an early age and hold up innovative and successful business people as examples to follow, not ogres to be condemned.
The irony is that as startups are declining overall, never before has there been so many great tools that allow a small business owner to compete with big business, including all the great products that Sage
If you’re with me, and a proponent of small business, help me spread the word!
(By the way, at the top I said that Swett was a ghost town in more ways than one. It seems that the unoccupied house that comes in the sale of the town is rumored to be haunted. But if you’re interest in buying it, don’t let that scare you!)
Note: The statistics cited here come mostly from the Small Business Administration and the National Retail Foundation.
is a business expert, an entrepreneur and New York Times best-selling author.
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