A lot of Mississippians depend on small businesses for employment. Statistics for 2007 from the Mississippi Department of Employment Security and the U.S. Small Business Administration reveal that more than half of the state’s private employers have less than five employees. Approximately 85% have fewer than 20 employees.
Additionally, there were approximately 143,800 self-employed small business owners in 2007, with roughly 147,000 in 2008 and the number is growing every year. The number of self employed has grown by 38% in the past eight years.
Dr. Bill Gunther of the University of Southern Mississippi’s (USM’s) College of Business says that’s not too different from the rest of the country.
“I find it interesting that 51.7% of all establishments in Mississippi have between one and four employees, and it’s 54% in the United States,” he said. “Three-fourths of all businesses don’t have any employees because they’re mom-and-pop businesses that technically don’t hire employees. Small businesses are very important.”
Ron Aldridge, state director of the National Federation of Independent Businesses, says it’s important to remember that since the 1970s, small businesses have created two out of every three new jobs in the economy.
“Net new jobs is the number of jobs created, minus the number of jobs lost,” he said. “Generally, during economic expansions small business’ share of net new jobs falls relatively. During economically difficult times, small business’ share of net new jobs grows relatively. That makes small businesses critically important to our workforce.”
It’s the small businesses that continue to employ more workers under age 25 and older than 65. They hire a higher percentage of employees with a high school education or less. They are also more likely to hire former welfare recipients and women.
“For as long as NFIB has collected data, small businesses have produced the overwhelming share of net new jobs during difficult economic times,” Aldridge said. “During expansions, larger firms assumed a more prominent role.”
Approximately 80% of the businesses in the world are family businesses, according to Dr. James Chrisman, professor of management in the College of Business and Industry at Mississippi State University (MSU). He specializes in family businesses and is head of MSU’s new Center for Family Enterprise Research, which will study issues family businesses face in their creation, growth and transfer to the next generation.
“Family businesses have a lot of challenges facing them, but I don’t think they’re dying out. They will continue to be a part of the economic landscape,” he said. “In my study, most of them mention having limited financial resources — important in today’s environment — and limited human resources.”
Chrisman says these businesses face employment challenges because they can’t attract the same level of employees of big companies. They must rely heavily on the family for employees.
“They have the family relationships and commitment, but they may have limitations for what the business needs,” he said. “The business may go outside the family and have more people with more skills to choose from and have that trade off. Today, the cost of making a wrong choice is higher. The big thing is balancing the need to diversify employee skills with the need to bring in family members and keeping the family trust.”
He also feels family businesses often have some difficulty making the transition from the first to the second generation. “Getting someone to take over the business is important, and over the next few years that need will increase with aging Baby Boomers,” he added. “A lack of planning and the greater need could spell some problems down the road.”
Gunther, who teaches graduate-level managerial economics and sophomore-level principles of economics, fears the current economic crisis will affect small business employment. “Everyone will be constrained,” he said. “Small businesses have fewer jobs. I don’t agree with those who say that Mississippi is insulated from this crisis.”
The professor, who is also director of USM’s Bureau of Business and Economic Research, points out that the state has fewer people employed than in 2000, with a dramatic loss of 10,300 jobs in the past three months. The losses were in all sectors.
“It depends on how you cut the data. Politicians give the number of jobs added,” he said. “We’re re-structuring. We’ve lost a lot of manufacturing jobs. Casino jobs have peaked out and haven’t added new jobs. The net effect is less people working.”
Contact MBJ contributing writer Lynn Lofton at email@example.com.