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Guest Column: Small businesses provide good barometer of nation’s economic health

Guest Column: Small businesses provide good barometer of nation’s economic health

When I need a good barometer of the nation’s economic health, I read the news reports. I talk to analysts. I track the leading economic indicators.

But if I want to know what’s going on closer to home, I have a simpler method of economic analysis. I examine storefronts.

As helpful as traditional sources of economic information can be, they often don’t tell me as much about the local economy as a “Help Wanted” sign in an auto repair shop an “Under Construction” sign in a local industrial park, or an “Everything Must Go” sign at a furniture store.

As a banker who works with small businesses every day, I would argue these are some of the best economic indicators we have. Signs like these say something about business owners’ past success and plans for the future.

They also make a statement about their communities. That’s because the health of the local economy is closely tied to the health of its small businesses.

This is only logical, given that 99.7 percent of the nation’s 27 million businesses have fewer than 100 employees, according to the U.S. Census Bureau. The trouble is the large corporations are the ones getting most of the media attention. Small businesses, by comparison, rarely make the news.

And it’s easy to understand why. The news media can hardly be expected to track the success of every computer repair service or family-owned landscaping business. Besides, is it really important when a six-person business adds a new employee, or a small manufacturer obtains a new patent?

It is to the companies doing these things, of course-and to the people who fill those jobs. I’d argue that it should be important to the rest of us, as well, especially when you consider that added all together, small businesses represent the majority of new hires. This past July alone, small businesses created a net new 50,000 jobs, according to ADP’s latest National Employment Report. They also produce 13 to 14 times more patents per employee than large patenting firms.

There is no question, however, that the woes on Wall Street affect everyone. Some industries and businesses, in particular, are truly suffering right now. These are the ones we read about in the news.

But many of the small businesses I talk to remain cautiously optimistic. They still believe in their own ability to succeed and persevere, despite whatever challenges are thrown their way. Here is something else I’ve learned:  even in our precarious economy, many small businesses are doing better than you might think.

Many, in fact, believe others have it worse than they do. A July 2008 Global Business Barometer survey conducted by The Economist confirms this phenomenon.

Business leaders were asked about their expectations for future business conditions. In almost every case, their confidence in the global or U.S. economy was down. When asked about their own industries, however, they were almost always more hopeful.

Of course, much has changed about our economy since that survey was conducted in July. Still, I think it points to something that I’ve long-believed to be true:  many business people are just plain optimists. The grass is always greener on THEIR side of the fence.

I think there may be some truth to that. Rather than assume the worst, I find many small businesses use their small size and nimbleness to think creatively for ways to deliver greater value. They are willing to take a leap of faith, suspending whatever tells them that they can’t achieve their goals.

Americans understand this. In fact, a new survey by the Kansas City-based Ewing Marion Kaufmann Foundation asked respondents who they believed would best lead the country through the current economic crisis. Their response?  Not politicians or big-company CEOs. A full 56 percent placed their faith in the owners of successful small businesses.

The history books are filled with stories that suggest they’re right. I’m reminded of the story of the university track coach who, back in the early 1970s, began experimenting with ways to make a better running shoe. On a whim, he poured some urethane into his wife’s waffle iron. The result was a sole that was better able to absorb the impact as a runner’s shoe hit the track. His invention led to the founding of Nike. A Small Business Administration (SBA) loan helped the company grow and succeed.

And that’s the thing about small business:  you never know when one good -even crazy-idea might provide the fuel it needs to become an icon.

So, no matter what the state of our economy, let’s not forget about our small businesses, which truly are the backbone of our economy. They’re here to serve you. And when we all support local businesses, it’s a sign of good things to come.

Bob Hull is a small business banking specialist at Commerce Bank in Central Missouri.
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