California’s Micro Businesses Are Job Making Machines

150 150 Heidi Pickman, CAMEO

San Diego’s Chris Saint created a small business called Sweet Treats by reinventing an old idea, the ice cream truck.
(Photo Credit: CAMEO)

EDITOR’S NOTE:  The California Economic Summit Will Be Held on May 11 in Santa Clara. We offer varying independent opinions about what can help California increase its job creation and competitiveness. CAMEO represents small businesses with fewer than 5 employees.

At the Bay Area Economic Forum earlier this month, McKinsey presented their findings about the Bay area economy.

The Bay Area represents an amplified state of the U.S. economy. On one hand, the region has posted stronger productivity and GDP gains than the rest of the country. On the other hand, the number of jobs has declined in many sectors over the past decade. Total employment is still approximately 200,000 jobs fewer than in 2007.

Most of the people attending the regional forum were concerned with the growth of companies like Wells Fargo, Facebook, Zynga and medical device manufacturers. Silicon Valley and the area’s large companies have done a great job at creating economic growth, but they aren’t creating the jobs we need to put all of our population back to work.
One obvious solution:  Nurture the small and micro-business owners and help them BYOB – be your own boss.
California is home to 4 million very small or micro-businesses with five or fewer employees. That’s 88 percent of the state’s businesses. To stimulate job creation policy makers must understand that 1) all start-ups create jobs and 2) recognition of and help for very small businesses need to be part of the conversation. 
The definition of start-up and the conversation needs to move beyond high-technology firms. We need to be talking about firms like Taqueria Lydia, Jessicurl (hair products), Semper Fi Security, Mission Cheese, Town Cutler, and Sweet Treats – in addition to the Facebooks and Twitters. 
In 2010, venture capitalists invested approximately $22 billion into 2,800 companies. With a small fraction of the money, micro enterprise development organizations served over 200,000 businesses with entrepreneurial training (think mini-MBA) and microloans (loans under $50,000). In California, CAMEO members served 22,000 businesses and supported and or created 38,000 jobs – on a collected budget of under $50 million. That’s about $1,300 per job. The high-speed rail project is going to cost $50,000 plus per job.
According to the 2011 Venture Impact study, produced by IHS Global Insight, originally venture-backed companies accounted for 11.87 million jobs and over $3.1 trillion in revenue in the United States (based on 2010 data). Those totals compare to 21 percent of GDP and 11 percent of private-sector employment.
In comparison, according to Association for Enterprise Opportunity, micro-businesses are 88 percent of all businesses, generate $2.4 trillion in receipts, account for 17 percent of GDP and employ more than 31 million people.
With less than three percent of the money, micro-businesses employ many more people than venture capital firms and generate about two-thirds of the GDP.
If California is serious about creating jobs, it needs to invest in the existing micro-business infrastructure, in addition to the VC community. If we increased the resources available to foster self-employment and the small businesses by five-fold, we’d rebound from the jobless recovery.
Stay tuned for my next post – I’ll lay out some of the ways we can support micro-businesses, strengthen California’s communities and help individuals grow their own jobs.


Heidi Pickman, CAMEO

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