Our economy is supported by small businesses. While there are different ways of measuring this, in general we accept that small businesses make up 99.7% of U.S. employer firms, create 63% of net new private-sector jobs, and provide 48.5% of private-sector employment.
Goldman Sachs 10,000 Small Businesses was designed by Babson College to provide an integrated program of education, business advising, and opportunities to access capital to support the growth of participating small businesses. 10,000 Small Businesses was announced in 2009 and launched in 2010. By last year we had grown enough to share what we had learned through the data we collected about the program.
We just released our second progress report which reports on almost 1,000 more business owners who have completed the program and extends the time span from six to 18 months post program. Stimulating Small Business Growth tells the story of small business growth, who grew, by how much, and how.
As the report shares, most participants in 10,000 Small Businesses grow their business revenues, 67% of them at six months and 76% by 18 months. And when looking specifically at those who grew, at 18 months they had grown their revenues by 86%. The results for job growth are equally impressive, with 46% reporting new jobs at six months, rising to 57% by 18 months. At 18 months, the average increase in job creation for those who grew was 155%. While exact national comparisons are difficult, the National Small Business Association 2014 Year-End Economic Report shares that 45% of U.S. businesses reported increased revenues and 22% reported creating new jobs.
These overall numbers, while interesting, raise many other questions, including who grows – considering both the owner and the business, and how they grow. For today, my focus is on the ‘who’, and I will be quoting verbatim from the report.
One question often asked is about the impact of education on business growth. Please note that we are not talking about specific entrepreneurship or even business education, but education in general. The diversity of the educational level of the 10,000 Small Businesses is a hallmark of the program, and business growth is achieved by business owners with all types of educational backgrounds. With the exception of having less than a high school degree (60% grow revenues at six months) and a high school degree (75% grew revenues at six months), all the rest of the educational levels’ revenue growth rates are similar across educational attainment levels, with more variation seen in the creation of jobs. At the six month point, the educational attainment categories with the most job creators are Associate Degrees (52%) and Some College/No Degree (49%).
Entrepreneur’s ages have also been a popular point of discussion in the media, with focal points often either millennials or those considered older (and I use that older phrase with ever increasing respect). While our numbers of participating business owners in some of these age categories are still small, intriguing themes are emerging. Our youngest business owners (those under 44) who grow the revenues are the most likely to increase their growth between the six and 18 month follow-ups. Also, when looking at what happened by 18 months after program completion, the number of businesses with younger owners that grew by more than 100% nearly doubled.
Nationally and internationally questions also often arise about whether or not certain industries grow faster than others. We do actually see differences across the industries represented in 10KSB and those differences also change between the six- and 18-month follow-ups. At six months, the largest numbers of business owners reporting growth in their revenues are found in three categories, with very similar rates in each: transportation and warehousing (73%), retail trade (73%) and accommodation and food services (72%), while the sector with the largest percentage of companies that grew jobs are finance and insurance (67%) and that very broad sector known as “other services” (63%).
And then there is the question of the impact of acquiring external capital. 10KSB small business owners learn to understand the business models of funders and therefore how to find a funding fit. Like the rest of the small business economy, most (although not all) 10KSB participants focus on debt rather than equity. Over 1/3 of small business owners entering 10KSB reported that they would be seeking capital to support their business growth within the next three months. By 18 months after the program the number of those intending to seek capital for growth increased to 66.7% of the owners. Why might this be good news? 10KSB business owners who applied for capital had larger growth numbers for every one of our growth measures than those who did not apply for capital. Most strikingly, those business owners who acquired capital created 33% more jobs than those who did not acquire capital.
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