Six Million Businesses and Shrinking

There are only 6 million active businesses in America.  Another 20 million are in name only according to Gallup.

They report that “Of the 6 million, 3.8 million have four or fewer employees,” otherwise known as micro businesses.

According to another study, most micro businesses never want to grow to more than 10 employees, which would place them among the one million businesses today with between 5 to 9 employees.

That means there are “only 2 million small, medium and large businesses in the United States,” including about 1,000 companies in the “big business” category with 10,000 or more employees.

For sources of “dark money” and undue, often opaque influence among lawmakers look to the larger employers, something shown in an investigative piece just re-published in Pacific Standard.

For job creation, however, look to those first two groups, especially micro businesses.

So how do we foster more of these concerns that generate the vast majority of new jobs?

Buy local, obviously.

Some experts point to enforcing regulations evenly along with simplifying some.  Most, however, point to making credit more available.

The rub is that over the last 15 years, small business loan volume is down 14% and loans made to micro businesses are down a third.

What happened?  One indication is that since 2008 alone, one in four “local banks” have simply vanished.

When I graduated from high school in 1966, more than 7 out of every 10 banks were small, single-office local banks, totally more than 10,000 nationwide.

Branch banking had become the norm by the time I moved to Durham, NC in 1989.

Today, there are half as many commercial banks overall as there were when I graduated from college in 1972 and fewer than 1,000 single-office or truly local banks in the entire country.

Even so, small banks and credit unions make most of the loans to small businesses, including micro businesses.  There are just fewer and fewer of them.

Contrary to lobbyists, the decline of small, local banks isn’t due to regulatory reform after the great recession.  Click here to download an excellent review of the reasons.


Far more compelling is that this problem began with policy changes more than a decade earlier.

In 1995, small banks and credit unions held 27% of bank market share compared to the 17% held by giant banks.

Today, giant banks control 59% of bank market share, more than five times as much as small banks and credit unions, and just four mega banks control most of that.

Now, the four largest banks alone control 42% of all banking, yet they make a very small share of loans to job creating local businesses.  Nor do they play nice with one another.

These four mega-banks alone control nearly four times the amount of banking as all of the remaining small banks and credit unions put together.

In the four years leading up to the great recession about 300 commercial banks disappeared each year but we were creating nearly half as many.

The vanish-rate continues, but we’re creating only 6 new banks a year on average according to the Institute for Local Self-Reliance, the source delving into much of these data.

Good policies and lending by small - usually stand-alone local banks -fueled the growth of America’s middle class in the 1960s and 1970s before anti-government rhetoric and deregulation began to hollow it out.

It is likely no coincidence that today this powerful segment of households is rapidly shrinking or that the deaths of businesses now outnumbers the births of new businesses.

As a moderate Independent, fiscally and socially, I find analysis intriguing that shows that nine out of the last ten recessions occurred under Republican presidents while Democratic presidents created nearly twice as many jobs per year.

Of course, this illustrates how intricate and complex economic development is but that the underlying principles always come back to main street as well as the political courage to resist powerful special interests.


It is also ironic that conservative states such as North Carolina where I live regulate cities and local governments from practicing the most basic tenant of economic development – buying local.

Calculating The Value of Serial Volunteers

I sometimes tease a friend of mine, a micro business owner and a fellow-motorcycle enthusiast in Durham, North Carolina, about being a serial volunteer.

He is one of more than 1-in-4 American adults over the age of 25 who volunteer.  According to an article in the journal Democracy, my friend and other volunteers across the nation “provide the equivalent of nine million full-time workers, or 6 percent of the U.S. labor force.”

This does not mean 9 million new jobs would be created if volunteering was outlawed.  Volunteers such as my friend are providing services found unaffordable by the marketplace or abandoned by local governments.

Overall, including other age groups, 49% of Americans volunteer to charitable causes, with 94% of that proportion doing so on behalf of their religion.  This is up from 43% previously when we fell just behind Sri Lanka in volunteerism across the globe.

Utah is one of the highest states for the percentage of people who volunteer.  I wonder if that is due in part to active or returned Mormon missionaries (who undertake two-year volunteer assignments,) but that wouldn’t explain why Minnesotans are in second place.

North Carolina, where I live, is fifth from the bottom at 36%, but much higher where I live because of “whatever it is we do in Durham.”

Dr. Clive Belfield, a professor of economics and researcher at Queens College, recently took a stab at quantifying both the costs and benefits associated with volunteer programs at the national level.

You may know him as the North Carolina project leader for research into employment and earnings outcomes from community college education.

First, the cost of national volunteer programs is estimated at $1.4 billion in direct public funding with another $600 million of in-kind resources and other sources of funding for a total of $2 billion annually.

In monetary terms, the volunteers generate $7.9 billion in benefit to society, a net gain or return on investment each year of $5.9 billion.  That’s a return of 4 to 1.

For any fiscal conservatives reading, that is a return of $4 for every tax dollar spent on national service.

Not everyone gives sweat and blood.  Overall, philanthropic giving in American comes to more than $300 billion each year.  Professor Belfield finds the idea of an expanded national service program appealing.

There are 40 million Americans between the ages of 16 and 24 in America, and judging from their experience since since the church’s inception in the 1830s his argument is bolstered by the superior life skills the experience has given over a million Mormon Missionaries.

Wherever I’ve lived, some very impressive friends have been former members of the Peace Corps, each one a contributor to community, state and country.

At a budget of only $379 million annually, no group is more cost effective.

Americans operate under the misimpression that they work too hard, but as a country we’re working less than we did even in the 1960s and 1980s.  Read the report at this link from The Atlantic, especially the chart over forty years of the hours of leisure time by gender and age.

Working moms, especially single working moms, may have reason to feel they are working more, even with modern conveniences, but even there the amount on housework and other chores had dropped 35%.

Men—especially married men—are hardly working compared to a few decades ago.

Maybe It just feels different to many because they haven’t updated the term leisure to mean more than just not being at work.

Volunteers understand that in the words of Ken Matos who handles research for the Families and Work Institute, leisure is “time you can actually do the things you want.”

Maybe the key to not feeling overwhelmed is to learn to shed the 75% of distractions at work that are self-interruptions unrelated to work, and to learn to redirect when we aren’t at work.

The six or seven hours I spend each day on these essays is pure leisure to me.  Sitting in occasional meetings of groups with which I am involved and where many people seem disengaged, however, can be pure hell!

Any organization which has been through a thorough workplace diagnostic as part of the selection process for the Sloan Awards for Business Excellence will recall that “autonomy” is one of the six secrets to engaged employees.

Many employees throw this term out when really they are trying to resist working and networking as a team or resist following protocols or object to accountability.  But those things aren’t what workplace autonomy means.

In fact, workplaces such as Google understand that it doesn’t require much time at all to fuel a sense of workplace autonomy.

There it involves only a few hours on occasion to work through a innovation a worker has been noodling or to reflect and think through strategy or…a couple of hours to volunteer for a mission-related cause they are passionate about.

True volunteers fuel their sense of engagement and autonomy by volunteering during their leisure time.

Probing the Pluralistic Small Business Views

Having spent the better part of four decades working with local businesses, one thing I know is that they have always exhibited far more diversity of opinion than represented by the news media or associations portending to represent them.

State and national associations often give a distorted impression to policy makers and news media by disguising that their misuse of the term small business is dominated by the concerns of companies with hundred of employees and tens of millions of dollars in revenue.

Further distorting the views of small business, association legislative committees and related PACs are often hijacked by cabals of narrow viewpoints of formulaic-type businesses unrepresentative of the either the membership or businesses of that type in general.

A quick check of their membership lists or board members, which reporters and elected official seem to rarely do before giving credence to their claims, reveals that most are using the term small business only as a disguise.

What most of us think of as small businesses are now called micro businesses.  These have around 5 or fewer employees.  The majority have annual revenues of $100,000 or less and most never want to grow beyond 10 employees.

They are primarily sole proprietorships, far more likely than other businesses to be locally based with owners living in the same community as their business.  About half depend at first, on another job.  Half are based outside the home as they grow.

About a third of microbusinesses depend primarily on locals for their business but 4-on-10 rely on a mix of locals and visitors including day-trippers from surrounding areas and clients outside the community.

Micro businesses are the backbone and true drivers of local economies.

In North Carolina where I live, micro businesses represent nearly 60% of all business establishments and more than 60% of those considered small businesses overall.

Rarely are they members of local chambers of commerce which today are dominated by much larger concerns many with mid-level executives who are paid to attend meetings, many watching out for special interests.

Chambers often complain that the threshold small and micro businesses can pay to be members is too low to provide the services they need.  In desperate need of membership revenues they turn to larger businesses instead.

Truly small or micro businesses rarely find time away from the cash register for meetings of any type, let alone getting involved in the push and shove of politics.

Their voice is also not found in the positions taken by the U.S. Chamber of Commerce (no relation to local chambers) or most state chambers.

Without typically charging a fee, community marketing organizations, most of which are apolitical, usually incorporate all businesses regardless of size under their promotional umbrella.

The handful that still firewall benefits behind outdated membership models continues to shrivel.

Guess which approach is more customer-driven?  These are also the DMOs that are far more effective on behalf of the communities they serve.  Of course, most community marketing organization migrated to or were founded with self-funding models years ago.

That community marketing organizations incorporate small and micro businesses under their tent is significant because surveys show that to grow and thrive, their greatest need, outside of capital, is marketing.

Showing the diversity of opinion among small and micro businesses are two Gallup tracking polls, one with Wells Fargo as a partner which uses a cut off of $20 million in revenues and a new one focused on truly small or micro businesses with Sam’s Club as a partner.

The Wells Fargo definition captures 80% of all business establishments with employees, small to the size of a mega-bank maybe.

The definition for Sam’s Club’s new tracker captures micro business owners which, according to Gallup, represents 80% of business owners overall including the 44% that do not employ anyone other than themselves.  This excludes hobbyists or paper only businesses.

Micro business is now far more representative of the definition of small business.

Showing the pluralism of views among small business owners under either definition is a comparison of views regarding an increase to the minimum wage.

The Wells Fargo index found that nearly half of those surveyed had no problem with raising the minimum wage.  More than 4-in-10 felt it would help most small business employees and another quarter felt it would have little effect.

A similar proportion believed it would have no effect on small business or might actually help them.

Of course these findings escape those in Congress pushed to block the increase by those lobbyists who feign to represent small business there.

Another more recent poll probed much deeper down into truly small businesses, including micro businesses in the state of New York, and found that 74% support raising the minimum wage and indexing it to rise with the cost of living.

A similar percentage agreed that cities and towns should be able to set the minimum wage even higher.

By political affiliation 45% identified themselves as Republicans, 40% as Democrats and 15% as independent or other.

Republicans and Independents who lean Republican may claim they represent business but over time their numbers have included only about 4-in-10 small business owners, just a notch or two different than the ratio of those who identify themselves as Democrats.

Survey findings by associations of the political affiliations of small business members often skew differently depending on the ideology the association uses to recruit members.

But even polls of those that skew right show, for instance, that only 1-in-3 members express concern to elected officials with hopes of reducing and reforming government regulation.

This hardly makes it the hot button issue that legislators in states such as North Carolina claim to justify gutting state and local regulations.

Even polls by those in sympathy show that a far greater proportion of members just want existing regulations to be actively, fairly and evenly administered.

Polls by less ideological associations including pioneers of the micro business definition show that more than 3-in-4 members felt regulations on the books should be enforced, especially those that an even larger ratio felt were important to protect business.

While special interest “whiners” are using pretense to undermine the North Carolina Environmental Bill of Rights that voters embedded in the constitution by a vote of 7-to-1, it is clear they are not representative of North Carolinians in general or those who own small or micro businesses.

Serious members on both sides of the aisle know that any concern about regulations is only solved by energetic, passionate, fair and even enforcement by the executive branch, unfettered by interference by special interests or legislative allies.

Only 20% of micro businesses worry about regulations, a percentage similar to those who worry about taxes.  Of more concern is consumer demand and the rising cost of supplies and materials. 

It is clear that a recent op-ed by a small business owner advocating for a more livable minimum wage is representative of the majority of small and micro businesses.

More certain is that the viewpoints of small and micro businesses are far more pluralistic than the impression we're given.