By Jim Giammarinaro
President & CEO of the MetroWest Chamber of Commerce
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FRAMINGHAM – Sometimes people question why anyone would open a small business. There are many reasons.
People may be dissatisfied with their current work situation. They may feel they can do a better job at a particular skill than the company they work for. Sometimes people may see an unmet need and think they can fill that need with their own business. Personal circumstances may arise where having your own business provides you with the flexibility you need.
For me personally, I started two businesses based on my personal circumstances. I had the need for flexibility in my schedule based on my son’s special needs and jumped at the chance to start my own business. I felt I had a strong education in business and great work experience which would prove to be invaluable in running a business. Once I started, I came to realize how difficult running a successful small business can be. One must become proficient in sales because without sales you have no business. This means building long-term customer relationships with people who have an ongoing need for your product and making them happy with every purchase. You also need to be very wise with how you spend your capital. Spending money without making money in return is a recipe for disaster. You also need to build a great team and create a work environment where people want to stay with you for the long-term. The final major component is that you need to be very efficient with your time and take out any “non-value added” time in the process of delivering your product. Time is precious in small organization.
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Mastering all the components of running a small business will take time for anyone. Small business in our country is extremely valuable but not for the faint hearted. While I believe in small business and would encourage people to be entrepreneurial, the odds are against you. Failure rates for small business are 20% in the first year, 45% in the first 5 years, 65% in the first 10 years and only 25% of small businesses survive for over 15 years. It is a testament to the spirit of Americans that small business is such a large component of our country despite the odds.
Over 47% of the private workforce in America work for small businesses (over 98% of businesses have under 100 employees). Small businesses employ
60 million people. Many small businesses provide the owner with a “living” but will not make them rich.
The average small business owner makes $72,000 per year with over 86% of small business owners making under $100,000 per year. Despite the odds against making a career from your small business or getting rich, people continue to start small businesses. In 2019 (Pre-C)OVID) over 770,000 new businesses were started. If history holds true into the future, only around 190,000 of these business owners will be able to make a career from the business they started. And only 26,000 of the business owners who make it will be earning over $100,000 per year for themselves. Another interesting statistic relates to how large small businesses become.
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Only 7% of small businesses grow to have revenue of more than $1 million per year. Its no wonder why some reports show that the average small business owner sits on approximately $26,000 of extra cash. This is the reason why so many small businesses failed during the pandemic because despite government support with PPP and EIDL funding, cash just ran out.
Some people say that it is too bad that small businesses have such a high failure rate but that the business owner took the risk and must live with the consequences. I say that the consequences effect everyone, not just the small business owner. What would our downtowns look like without small business?
Large businesses are not able to meet every need we have and would not choose to do so. What would happen to the 60 million Americans which small businesses employ if small business were to become a thing of the past. Take a minute to think about how much of your life outside of work, both for entertainment and need, touches on what a small business has to offer. As we move forward and come out of the pandemic, please take the time to consider what you can do to support the small businesses in your community as small business failure effects everyone.
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Editor’s Note: SOURCE and the MetroWest Chamber have formed a partnership. The Chamber’s column will run on Tuesdays on the digital news media outlet.
MetroWest Medical Center