By Tom Still
MADISON – Two fresh statistics from the U.S. Labor
Department underscore the importance of small business creation to the American
economy. The feds reported last week that 192,000 jobs were added nationwide in
March; meanwhile, the U.S. manufacturing sector lost 1,000 jobs for the
month.
A thousand jobs are a rounding error when spread over a nation
of 330 million people, but it illustrates continued employment consolidation
within a vital sector. It also begs the question: If not within manufacturing,
what kinds of businesses are creating those 192,000 jobs?
Mostly smaller, newer firms representing a mix of industries
and professions, according to trends reported over time. Small businesses
account for 65 percent of net, new private-sector jobs, according to federal
figures, and businesses between one and 10 years old create 40 percent of all jobs.
The Ewing Marion Kauffman Foundation in Kansas City, Mo., which follows
entrepreneurship nationally, has also attributed most net new jobs to young
companies.
It’s why the debate over company creation in Wisconsin will
command attention as the election year gathers steam.
In her economic growth plan released in late March,
Democratic candidate for governor Mary Burke cited the importance of small
business creation and growth to Wisconsin’s economy.
“Every giant corporation was once a small startup – and, in
Wisconsin, nearly all of our largest Wisconsin-based businesses got their start
right here in the Badger state… and stayed. That’s why entrepreneurship matters
so much to our state’s long-term future,” Burke said.
Her report noted Wisconsin is 48th among the 50
states in new business startups, a figure that has popped up from time to time
in other reports. Other studies have shown Wisconsin ranking somewhat higher by
related measures, such as net new startups – in short, startups that endure
over time.
A December 2013 report by the University of Nebraska’s
Bureau of Business Research ranked Wisconsin 41st in “establishment
births per person,” up four notches from the prior year. The same report ranked
Wisconsin 21st in the percentage rate of establishment growth and 15th
in growth in establishments per person.
“The numbers suggest that Wisconsin is doing well when it
comes to nurturing those companies that do get launched there,” said Eric
Thompson, who launched the Nebraska index about six years ago. “Your
entrepreneurs tend to be good at staying in business.”
A January 2014 report by Economic Modeling Specialists
International showed Wisconsin 13th among all 50 states from 2009 to
2012 in “net new business establishments,” with an increase of 3,733 during
that time – somewhat surprising given it came during the depths of the Great
Recession.
Those aren’t top-tier results, but they’re not tail-end
metrics, either.
Economists general struggle with company creation figures
because states can report data in different ways. In many states, Wisconsin
among them, the birth of limited liability companies doesn’t necessarily
translate to new, jobs-creating companies. Many LLCs are pass-through entities,
especially in real estate.
Most economists agree, however, that business survival rates
can be as important as startup rates. One reason why new companies in Wisconsin
have high survival rates is the existence of a support system that is far more
extensive today than a decade ago. A number of organizations share in training
and connecting entrepreneurs to investors, mentors and other resources. While
access to investment capital is still limited – especially for emerging companies
– other resources, events and tools exist to help them bootstrap their way to
success.
Ten years ago, there was no Governor’s Business Plan Contest
(by the way, three-quarters of its finalists are still in business), no Center
for Technology Commercialization, no Wisconsin Angel Network, no BizStarts
Milwaukee, no MERLIN Mentors, no investment tax credits, no Wisconsin
Entrepreneurs’ Conference, no private accelerators such as Gener8tor and
precious few regional economic development groups. The rise of that
infrastructure has extended many a helping hand.
Entrepreneurship was a bureau in the former Wisconsin
Department of Commerce, but it commands division-level status in the Wisconsin
Economic Development Corp., its public-private successor. In the UW System,
where teaching students how to start businesses was confined to a few lonely
programs a decade ago, it is now a trend on most campuses and within the
UW-Extension.
Can Wisconsin be cranking out more startups? Of course, but
what happens to those companies after they launch is no less important.
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