Why Are Small Business Owners Creating Fewer Jobs Today?
BY Norm Brodsky
Welcome to the new entrepreneurial status quo -- business owners who crave independence, not dominance.
When you get to be my age, you realize that, in business at least, climate change is real. The environment for starting companies is constantly evolving. I believe that, overall, it’s easier to start a business now than at any other point in my lifetime. I also believe more people are trying to start businesses than ever before. So you might think we’d be seeing new companies generating more jobs than ever, but we’re not. The reason says a lot about where we’re going--and where we’ve been.
A little history here. Young entrepreneurs today tend to take for granted the encouragement they get from family, friends, and society at large. That wasn’t the case when I started my first business in 1979. Entrepreneurs were generally regarded as either eccentrics or losers. My mother was ashamed to tell people what I was doing. She would introduce me as her son the lawyer, although I hadn’t been practicing for many years.
Not until the mid-1980s did entrepreneurship become cool, thanks partly to Inc., but even more to people such as Steve Jobs and Bill Gates. They had built big companies from scratch, and most of us wanted to do the same. Back then, $100 million in annual revenue was big. That became my goal, and I reached it, creating thousands of jobs in the process. Then I made some bad mistakes, landed in Chapter 11, and wound up destroying almost as many jobs as I’d created. Fortunately, other entrepreneurs weren’t so reckless. They turned the U.S. economy into a job-generating wonder.
For at least two decades, I seldom ran into any entrepreneur whose notion of success did not include building a business that would one day have a lot of employees. But that changed in the mid-2000s. I began seeing more entrepreneurs with a different mindset and a different goal. Many didn’t want employees at all. What they did want was the ability to support themselves and their families without having to report to a boss-;in a word, independence. Thanks to the Internet, moreover, they had an increasing number of avenues to pursue their independence.
Now, I’m not saying there aren’t any entrepreneurs who want to build big companies. Obviously, many do, and some succeed. Witness Twitter, Facebook, and Zappos, among others. But I believe entrepreneurs with such aspirations are a minority these days. As I’ve noted, most of the would-be entrepreneurs I meet are starting Web-based businesses on the side while continuing to hold full-time jobs. Their goal is to be independent rather than to build something big.
I expect this trend to accelerate, with one difference. Members of the post-Millennial generation won’t wait until they already have jobs before starting businesses. They’ll be planning for their independence from the get-go. That will pose new challenges for companies that want to attract and keep the best people. Smart companies are already offering employees a degree of independence unthinkable 20 years ago, including paid sabbaticals and flexible hours. They realize that they’re competing for talent, not just against other employers but also against the opportunity for employees to go out on their own. You can expect this competition to become increasingly intense. Now is the time to start preparing for it.
Do you have a question for Norm? Write to him at AskNorm@inc.com.