Jobs Act – Meaningless for Most Small Business Owners – My Two Cents
I’ve been off the grid for about a week and am catching up on all of the small business articles. There is a lot of buzz and excitement about the Jobs Act – and associated CrowdFunding legislation that passed the House and now the Senate is fighting about. In a political season, this is being dubbed as the “small business funding solution”.
Here is my two cents. Unless you’re a high tech start up and a Silicon Valley junkie – there is likely nothing in this legislation that is going to help you. Ninety nine + percent of businesses in America aren’t on the fast track to IPO and don’t think they have the next Facebook or Twitter on their hands. Most small business owners are ordinary people trying to do their thing and satisfy their customers.
It seems to me that @StartUpAmerica has taken over the political agenda when it comes to small business financing. Many articles I have read espouse the idea that the vast majority of “high paying” new jobs come from fast growing technology companies. I don’t buy it.
Imagine a race.
On the one starting line are 100 Main Street Entrepreneurs. They want to start a contracting firm, a new restaurant, a retail store, or perhaps open a Franchise. Let’s assume that on average they will each employ 10 people. If at the end of the year, 70% of them survive, that’s 700 jobs added to the economy.
On the other starting team are 100 Silicon Valley, StartUpAmerica Entrepreneurs. They have a billion dollar company in mind, and they want to revolutionize the world. Let’s say that they will also each start with 10 employees. But realistically, at the end of year one, 20 of the companies have survived and 1 of the 20 is really rocking and rolling. If the rocking company has 100 employees, and the other 19 survivors still have their 10 – this team has added 290 jobs.
Main Street Entrepreneurs win the race.
Please don’t take my perspective the wrong way. I think that StartUpAmerica is a positive thing for a specific type of entrepreneur. And I am all in favor the Jobs Act and CrowdFunding if they will help a segment of entrepreneurs move their businesses forward.
What I am opposed to though is the Silicon Valley StartUpAmerica agenda taking over and leaving Main Street mom and pop entrepreneurs in the dust. Remember, in our imaginary race this group creates 700 jobs. They might not be the highest paying but last I checked our unemployment problem is not a “high paying” problem. Everyone deserves a job.
In some articles I have read, folks suggest that CrowdFunding will help main street businesses and that their fans and customers can become owners and investors in the company. The proof will be in the pudding, but I doubt that this will be true. It’s likely that the paperwork and accounting standards that will be required to meet the CrowdFunding standards will simply be too arduous and complicated for a main street business owner to take on. They have a tough enough time keeping track of their books today.
If the Jobs Act passes the Senate, I suspect we will hear lots of politicians this fall touting their support for small business. Don’t buy the argument. Let’s hold their feet to the fire (and our own as well) to make sure that we’re all doing everything we can to help ALL entrepreneurs, not just the special ones who think about big companies and IPO’s. If we focus on lots of singles, our economy will be better off in the long run.
That’s my two cents.
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UPDATE: March 28, 2012
Entrepreneur Magazine agrees with Ami's Blog Post!
Read It Here
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I only read the first paragraph. Sorry Ami,I have to get to work..If we as Americans would do a 100 million man march on Washington and NOT pay our taxes for the day maybe they would listen…got to go to work and pay my UNFAIR Share.
March 18, 2012Ami,
Great insight. Startup America is perhaps the most deceptive initiative to support giant businesses that the government and crony capitalists have ever devised.
Most people who hear the phrase “startup” believe they are talking about any business that is starting up, of which approximately 599,950 of the 600,000+/- startups every year will be small businesses with under 20 employees for their entire life cycle. Startup America lets people believe that on the surface so they can garner broad support for an incredibly narrow focus.
If you look at Startup America’s own sanctioned definitions of a startup (Danielle Forsythe, director of SA points us to http://www.startuplessonslearned.com/2010/06/what-is-startup.html and http://swombat.com/2011/12/17/what-is-a-startup ) you find that they only mean EXISTING companies 3-12 years old (their word, not mine), that fully intend to become giant corporations, have already been through one round of VC funding, and are blowing out the walls with growth. This would be a dozen or so of the 600,000 startups every year. I’m not sure what we’re supposed to call the other 599,950+ businesses that start each year, but SA does not count them as startups.
Also, they love to quote a September 2009 Kauffman Foundation study that says “all job growth comes from companies under five years old”, and then SA makes the jump to only their tiny segment of startups (that are 3-12 years old) are the ones who can do that. But Kauffman came out with a July 2010 clarification of that data that said ONLY companies under a year old and in the very earliest stages of starting add jobs to the economy. Any company over a year old (including SA’s 3-12 year old “startups”) are “net job destroyers”. http://bit.ly/xmjSX0
SA and it’s government supports found this clarification to be inconvenient because it shows that almost all job growth comes from small businesses under one year old (99.9% of companies under 1 yr old will always be small), and that SA’s much older startups are taking us the wrong direction.
Bias does not respond well to facts. SA has never addressed this inconvenient truth because they and their government backers have an agenda that falls apart in the light of these facts.
March 18, 2012Ami
You make some very good points and truly get to the bottom of where the loyalties lie in these types of organizations.
However, I must say, is this anything new that we haven’t seen before? I mean we have the biggest banks and organizations bailed out after making horrible decisions, we have numbers coming out of the government saying lending is up which we know from your interviews only consists of larger businesses with top end revenue and margins, and we have organizations backing legislation that still focus on business owners that are perfectly OK with or without access to capital.
The fact of the matter is that the real entrepreneurs and small business owners of this country are still suffocating and yet our government and even some of the private sector fail to see it. Where is the support or education for the small business owner that will create those 10 jobs and keep them? Where are the answers to the millions of questions from the small business community crying for help?
What needs to be done to make this issue a real issue and threat in the eyes of the our nations leaders!!??
March 20, 2012Re: “It seems to me that @StartUpAmerica has taken over the political agenda when it comes to small business financing”
You nailed it.
March 26, 2012Ami, great post.
March 28, 2012