Written by David Fisher
Accounting for 99 percent of all employer firms and employing nearly half the workforce in the U.S., small businesses have an outsized impact on the economy. A recent report by Babson College, The State of Small Business in America, provides new insights into the issues and opportunities these businesses face, offering strategies to drive job creation and economic growth. ICIC’s three urban business initiatives have shown that the right mixture of education, networks, and access to capital resources can drive business growth. Babson’s report provides new evidence of the importance of education in fostering business growth.
The report, The State of Small Business in America, draws on data from a survey of over 1,800 small business owners across the country – approximately 1,600 were Goldman Sachs 10,000 Small Businesses (10KSB) participants. 10,000 Small Businesses provides growth-oriented entrepreneurs with a three-month practical business education. The curriculum covers all of the traditional business disciplines through a practical peer learning-based approach, and is built around how to plan for growth. The report summarizes feedback from 10KSB participants and a control group around access to capital, workforce, the regulatory environment, and technology.
Small businesses in America account for 60 percent of private sector job growth. Survey respondents were established small businesses with a minimum of $150,000 in revenue and four employees. The business owners identified challenges around securing capital, understanding and managing regulation, hiring skilled staff, adopting cost-effective technology and navigating cyber-security.
Access to capital is a challenge for small business owners in America, and education makes a difference. The report finds companies receiving business and management education have higher success rates obtaining financial capital. 10KSB respondents were more likely to receive funding requested from financial institutions and a greater portion of their request compared to the control group (75% to 43% respectively). With a finance-heavy curriculum, 10KSB alumni walk away with a stronger understanding of what financial institutions need from a business in order to make a loan, learning how to position their companies for success. The program further exposes businesses to other funding options, including nonprofit lenders and government sources. Previous Babson research shows that 10KSB alumni are more likely to seek funds from Community Development Financial Institutions upon program completion compared to prior to the program (a 57 percent increase).
Asked about how to ease capital access, survey respondents expressed a desire for more flexible terms, smaller loan minimums, and less paperwork. 10,000 Small Businesses program outcomes show that business education can make an impact on entrepreneurs’ ability to navigate the complex capital process, negotiate terms, and borrow successfully .
Ultimately, businesses that apply for and receive financial capital are more likely to increase their revenue and create jobs. Babson’s research provides new data to support two long-standing focuses of ICIC’s urban business initiatives: education and access to capital as key drivers of business growth and economic development.
Through Goldman Sachs 10,000 Small Businesses, entrepreneurs from all 50 states have the opportunity to step away from day-to-day operations and focus on growth. To learn more and apply for Goldman Sachs 10,000 Small Businesses, please visit 10ksbapply.com.
Inner City Capital Connections is a national program with an 11-year track record of helping companies accelerate business growth and access capital. Learn more and apply or nominate an urban business.
The 2016 Inner City 100 Conference and Awards, “Accelerating Success: The Road from Here,” will be held on September 14 in Boston. Learn more and register.