Microbusiness Awareness and a Call to Action
Yesterday morning the Association for Enterprise Opportunity (AEO) and Citi Community Development sponsored a forum at the Dallas Federal Reserve Bank. The forum was the brainchild of Steve LaFredo who works for Citi and is on the AEO board.
AEO is the national advocacy group for microlending and microtechnical assistance. By federal definition, the “micro” means firms with fewer than five workers (including the owner.) Technical assistance include all the business skills that are beyond the core product. They include accounting, marketing, HR, etc.
The forum had three purposes. First, to overview the state of the microbusiness economy. Second, to showcase high performing microbusiness support programs from around the country. Third, highlight some local initiatives to help these firms. Following are my notes from the forum. All the presentations should be up on the Fed website soon.
Connie Evans, the President and CEO of AEO presented some compelling research on the importance of microbusinesses:
- High poverty in a community is correlated with a low level of microbusiness participation
- Ethnically-owned microbusinesses are more likely to hire from within their own ethnic group
- Microbusinesses start hiring when their revenues reach the $100K to $249K range (60% in this range will hire an empoyee)
- If just one in three microbusinesses in the U.S. hired one worker we would be at full employment
Recession Hits Microbusiness Hard
Alfreda Norman, the Dallas Fed VP over Community Development and I summarized some dramatic findings on the state of microbusinesses. Alfreda showed data on how lending to microbusinesses collapsed after the financial crisis and hasn’t recovered. I reported that we added jobs after the recession because people in Dallas kept starting their own businesses while payroll employment fell. We will release a detailed report on that in a few weeks.
Proven Ways to Help Microbusiness
Julie Abrams who started the Women’s Initiative in California emphasized that by helping capable people start and grow their business we are actually empowering social change. When working with isolated communities like immigrants it is critical to build trust to make an impact. She also found that using adult learning methods involving the entrepreneurs’ real business tasks are the most effective training methods.
Patricia Harris, the Executive Director and CEO of The Edge Connection in Georgia, highlighted how they use incubators, including kitchen facilities, to facilitate hundreds of new businesses. The importance of the kitchen incubator came to light when they realized that over 20% of their clients had to illegally operate their food businesses out of their homes. The incubator permitted Edge to plug these now-legally operating businesses into federally funded training programs.
Neil Merlino, Founder and President of Count Me In a national training program, talked about their focus on building more million dollar women-owned businesses. They offer programs to help women grow their firms in phases. One program focused on moving $50K ventures up to the $250K range. The next tier engages firms at this level to take the big leap to a $1M in sales.They use American Idol-style events to screen candidates in their program.
Both Abrams and Merlino suggest the need to create scarcity. With limited resources and slots, training programs need to focus on the clients with the greatest potential. By making their training slots something to be coveted it helps filter out candidates that are not really motivated to do what it takes to start or grow a business. The Women’s Initiative includes a serious self-assessment process for potential clients. By identifying their strengths and gaps entrepreneurs can focus on the missing pieces. Merlino’s organization with its focus on already successful women entrepreneurs appears to set up stricter entry criteria through its competitions.
More on the local programs will have to await another post. The SourceLinkDallas network was featured and the Prison Entrepreneurship Program and the Small Business Center of Excellence at the Greater Dallas Hispanic Chamber demonstrate cause for optimism on making Dallas the leading entrepreneurial city.