Rayanna Anderson, director of the Small Business & Technology Development Center at Missouri State University, says she's seen a trend toward service-related startups.
Small-business starts on rise
National and local trends agree: Business startups are on the rise.
In 2009, 340 individuals out of every 100,000 opened a small business, a rate 4 percent higher than recorded a year earlier, according to the Kauffman Index of Entrepreneurial Activity. Kauffman’s 2009 data reveals there were 27,000 more small-business starts per month than in 2008 and 60,000 more per month than in 2007.
The study, which was published in May, found 2009 to have the highest level of startups in 14 years, even outpacing 1999 and 2000, the peak of the technology boom.
Lenders working with the U.S. Small Business Administration’s Springfield branch in fiscal 2010, which ended Sept. 30, secured guarantees for 477 loans – 30 percent of them for new businesses. The number of loans, which amounted to a record $123.5 million, is the branch’s fourth-largest year in terms of approvals.
Rayanna Anderson, director of the Small Business & Technology Development Center at Missouri State University, said she has noticed an increase in individuals starting new businesses during the current recession. Among its classes on starting a business and growing an existing business, Anderson said participation is rising in the evening session called Building the Ultimate Business Plan.
“We’ve seen an increase in people participating in that class, and a good caliber of people are consistently participating,” Anderson said.
She said many enrollees are seeking a second source of income or have experienced a layoff. A trend she’s recognized among the new startups is a focus on service-related businesses.
“Those businesses tend to be easier to start (and) usually need less capital,” Anderson said. But the No. 1 reason she said people start their own business is to have the control they may lack working for someone else.
Billy Kimmons, owner and founder of BK Architects, said that control was a big issue for him when he launched his firm in August 2008. While Kimmons said he didn’t realize the severity of the recession at the time, he has no regrets about being self-employed despite the fact that he is making less money as a business owner.
“One thing I’ve learned through this is that it’s not all about the money,” Kimmons said. “I would not stop what I’m doing now just to take a higher-paying job. What I’m doing here is shaping the rest of my life.”
The nature of Kimmons’ business didn’t require a lot of startup capital. He took out a home equity line of credit and compiled nearly $15,000 of debt when he first started. Kimmons said he paid off that debt around his second anniversary.
A review of business license filings with the city of Springfield during the month of October going back five years shows a spike in 2009. October filings 2006–08 averaged 69, and filings in October the last two years have exceeded 100. The city’s new business license data include renewals.
John McCarney, a counselor with SCORE, an SBA-sponsored mentoring organization for entrepreneurs comprised mostly of retired business leaders, said what’s different about the latest crop of startups is how they are financed.
“People still have those same dreams,” McCarney said. “The difference we see is that many people are self-financed when they decide to go off on their own.”
John Tan, co-owner of Flo Restaurant & Wine Bar on East Battlefield Road, said he and his brother received a $430,000 SBA-guaranteed loan using $43,000 in collateral saved through operating their other restaurants: Ocean Zen, 5 Spice and Yum Yum Bowl.
“In a bad economy, everyone is concerned with how people are going to spend their money,” Tan said.
Walter Cowart, branch manager of SBA’s Springfield office, said federal efforts to back small business loans are going to be a critical part of the nation’s economic recovery.
“The Jobs Act signed by the president on Sept. 27 will keep the lending community investing in the small-business sector. This lending is vital to the recovery as almost all new jobs come from hiring by small businesses,” Cowart said via e-mail.[[In-content Ad]]