An overview of recent studies showing government spending on Small Business Development Centers yields high ROI.
Recent studies indicate that government-funded Small Business Development Center (SBDC) counseling offers a substantial return on investment. According to the data, after the entire cost of running approximately 900 centers is factored in, every dollar spent on counseling established companies generates $1.55 in subsequent tax revenues. The results from counseling start-ups are even better: every dollar spent yields $5.82 in return.
One of the most useful services SBDCs provide the pre-venture group? "They encourage people who don't have any business being in business to get out of the market faster," says one of the authors of an SBDC-impact study, Professor James Chrisman of the University of Calgary.
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Economic Impact of SBDC Counseling Activities in the United States, 1990Ñ1992
|
Pre-venture clients* |
Established businesses |
| Number of clients |
29,088 |
41,220 |
| Estimated number of jobs created |
70,016 |
32,008 |
| Jobs per client |
2.41 |
0.78 |
| Estimated new sales created |
$3.5 billion |
$2.5 billion |
| New sales per client |
$120,000 |
$61,000 |
| Estimated tax revenue generated by clients (sales tax, state income tax, federal income tax) |
$291 million |
$167 million |
| Estimated direct and indirect costof consulting provided to clients |
$50 million |
$108 million |
| Benefit to cost ratio |
5.82 to 1 |
1.55 to 1 |
| Cost per job created |
$714 |
$3,374 |
*Includes 14,696 start-ups -- those that actually launched their ventures
Source: Two SBDC impact studies -- one by Professor James Chrisman (University of Calgary) and Frances Katrishen (University of South Carolina), 1990Ñ1991; and one by Professor Chrisman and Peter Robinson (University of Calgary), 1991Ñ1992.
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FROM THE TRENCHES
Mea Culpa
"Ironically, corporate autopsies of relatively new ventures reveal death was not caused by factors beyond management's control. They died because management, particularly the founder, failed to prepare the firm for the long journey."
-- From McGraw-Hill Guide to Managing Growth in Your Emerging Business, by Stephen Harper (McGraw-Hill, 1994)
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