Succeeding in Hard Times

Small businesses are able to nimbly navigate economic challenges.

By Brannon S. Dawkins

If you ever find yourself dismissing the importance of small businesses, in any economy, have a conversation with a business professor.

Incubating Ideas

Where do small businesses go to grow? Birmingham's Innovation Depot. The small business incubator was recognized in the May issue of Inc. magazine, along with 19 other incubators around the country. Innovation Depot off ers offi ces and shared conference rooms to biotechnology, life science, information technology and service businesses. Learn more about this creative place at innovationdepot.net.

"Small businesses create anywhere from 60 percent to 80 percent of private sector jobs in this country," says Darin White, an associate professor of marketing at Samford University's Brock School of Business. "And they generate $6 trillion in annual revenue."

Bob Robicheaux, chairman of UAB's department of marketing, industrial distribution and economics also points out that about 50 percent of all private sector employees are in small businesses with fewer than 100 employees. "It's true that 45 percent of total private payroll in the U.S. is in small businesses," he says. "And studies show that in the last decade, about 70 percent to 75 percent of all new jobs created have been in small businesses."

The fact that small businesses are a dominant player when it comes to job creation makes them extremely important during an economic recession.

"Traditionally, turmoil or rapid change in the economy typically magnifies the importance of small business innovation because few businesses can be successful without changing and adapting," White says. "Small businesses are very agile and can change much more rapidly than a large corporation. They're also much closer to their customers."

White says it's also important not to discount how passionate most small business owners are about their companies. "They're very entrepreneurial in spirit."

And the small business environment breeds creativity, Robicheaux says.

"Large organizations stifle innovations," he says. "You've got to go through committees and red tape. In a small business, you just do it. When the economy changes, you can completely change what you're doing in 30 days. You can change quickly to customer demands."

Recessions also tend to be a common time for starting a small business. "There are lots of people who have lost their jobs. Many of them are very bright people with great skills," Robicheaux explains. "Many go on to find franchise opportunities or start their own little business because of being forced to leave the nest. They wouldn't have taken that risk if they wouldn't have gotten kicked out of the nest."

So is the Birmingham region ripe for small business start-ups these days?

"Well, it's a double edged sword," Robicheaux says. "On the one hand, Birmingham is very well poised to attract small businesses and regional branches of large businesses because of the cost to do business in Alabama. Office space is available and we have wonderful communities in the region with great school systems. Business people are always amazed with communities like Vestavia Hills, Homewood, Trussville, Pelham and the list goes on and on."

But national exposure of the sewer debt crisis in Jefferson County continues to take its toll.

"I have talked to business people who are interested in coming here, but they always want to know if we're in Jefferson County," Robicheaux says. "Then they tell me to contact them later when the debt crisis is solved."

Regardless of where you plan to locate your small business, there is another harsh reality to consider: The failure rate of small business start-ups is high.

"An incredibly small percentage of new ventures make it past five years," Robicheaux says. "It's risky, but then again people who find that they are successful entrepreneurs, quite often wind up being engaged in multiple start-ups. They understand how to evaluate a market opportunity."

"It is fair to say that a vast majority of entrepreneurs who fail do so because they had a flawed business plan," he adds.

But in the Birmingham region, small business entrepreneurs have resources available to make sure they have a well-prepared business plan.

RESOURCES

Alabama Small Business Development Network
The Tuscaloosa-based network of 11 statewide universities offers counseling, training and help with business plans.
(205) 348-1582
asbdc.org

Birmingham SCORE
(Service Corp of Retired Executives)
Retired individuals who assist in putting together business plans or help with existing plans.
(205) 264-8425
birmingham.scorechapter.org

Central Alabama Women's Business Center
Provides a woman with the tools, knowledge and resources needed to start and grow her business.
(205) 453-0249
cawbc.org