It's a Matter of Numbers: Entrepreneurs and Job Creation

When it comes to participating in the workforce, we either work for entrepreneurs, are entrepreneurs or we work for the government. There's not much to it. We're either employers or employees.

Entrepreneurs

 
Although entrepreneurs make up just 11.5 percent of the population, ("Entrepreneurs: Beating the Odds") their ideas and abilities to take risks to form new ventures are the mechanisms behind job creation. If you're an employee, your paycheck is the result of someone recognizing an opportunity and taking a calculated risk to profit from it. If you're an employer, your drive and willingness to create a business helped put food one someone's table and a roof over their head.

The Jobs Entrepreneurs Create

According to the Kauffman Foundation, firms that are a year old create approximately 1 million jobs, while firms that have been in existence for 10 years create about 300,000 new jobs. Historically, from 1980 to 2005 almost all new net jobs came from companies that were less than five years old. These companies also innovate more new products than their older counterparts, which is a substantial benefit to consumers.

The Role of Future Job Growth and Entrepreneurs

The Kauffman Foundation also found that high-growth start ups like Groupon and Facebook are the most beneficial to both job creation and the economy overall. High-growth start ups not only invent new products that had not been largely commercialized, but they are rife with job opportunities. In less than 1.5 years, Groupon added some 350 people to its payroll.

Unfortunately, there are only about 15 high-growth start ups a year. At this rate, the GDP will double in about 24 years. If 45-75 high-growth start ups were formed each year, doubling the GDP rate would decrease to 18 years, according to Kauffman.

Training More Entrepreneurs

 
Entrepreneurs don't just emerge out of thin air. Even if you are an employee and wake up the next day, quit your job and start working on your idea and business plan, it's likely that you have years of workplace experience and skill set development behind you. Even then you may lack the knowledge and experience to actually run your own business.

Andrew Mason, the founder of Groupon, didn't just spring out of bed one morning, develop software and market it to the masses, despite his seemingly short rise to business success. Mason started on his entrepreneurial journey at age 15 when he opened up his food delivery business. The idea for Groupon didn't start out as a bargain, daily deal website either. The initial idea was to gather people to voice and fund relevant causes. And it was Eric Lefkofsky, the serial entrepreneur Mason worked for, who saw the monetary potential in Mason's ideas.

Having an entrepreneurial mindset can be taught, but it's this training that the majority of kids won't get in school. In order to increase entrepreneurial activity in the US, there needs to be training, formal and informal, and the earlier the better. It's those kids who are in the midst of their primary education who will determine whether the economy and job growth will flourish in decades to come. Grooming entrepreneurs and instilling the entrepreneurial mindset is the key to continued prosperity and success.

Success to you!

Melissa

Biz in a Boxx

Entrepreneurship: Beating the Odds

There's no other country in the world that praises entrepreneurship like the US. Our history books are full of inventors like Henry Ford, Benjamin Franklin and Thomas Edison who not only took risks to bring new innovations to the market, but carried out the belief that free enterprise was at the cornerstone of the American Dream.

Few countries take advantage of the entrepreneurial culture like the US. According to The Economist, Europeans have less to gain from entrepreneurship because of higher tax rates and risks outweigh rewards. In Germany, the law prevents people who have filed for bankruptcy to hold a CEO position. Not so in the US where failure is a motivator for getting back on the horse (despite the sting.)

American entrepreneurs don't become successful businessmen and women overnight despite the shortened tales of their rise to the top that are depicted far more often than the long road it took to get them on the Fortune 500 list. Yet, the contributions these entrepreneurs of our largest and smallest companies provide are astounding when you really look at the figures.

Entrepreneurship: What Are the Odds?

There are approximately 237 million adults (age 18+) in the US in which 11.5 percent are considered entrepreneurs. (Thailand tops the entrepreneurial chart; 19 percent engage in entrepreneurial activity.) Some 29 million small businesses represent 99.7 percent of all employer firms and employ over half of the private sector. These small businesses are responsible for 93.7 percent of all exported goods as well as the majority of all new innovations. Rather amazing accomplishments from such a small sector of the population.

To put it in perspective, half of all kids under the age of 17 (41 million) play an organized, competitive sport in the US. By the time they reach the age of 13, nearly 70 percent have stopped playing. Today, there's approximately 4 million professional athletes, representing only 10 percent of those kids who first started playing a sport in their younger years. Hence, the odds of your kid becoming an entrepreneur is roughly the same as him or her becoming a professional athlete.

Beating the Entrepreneurship Odds

There are similarities and differences between venturing down the small business path and donning a high-priced uniform. Entrepreneurship can be learned, but like playing a sport, there's plenty of practice involved. If entrepreneurship just happened overnight, it would be akin to changing out a light bulb and calling yourself an electrician.

Most small businesses today are started by older Americans; 36 percent are between the ages of 55-64 while those 20-34 years old only account for 26 percent of new firms. The average age for those starting technology companies aren't your recent college grads either; the average age in that start-up sector is 39. Education, skill development and experience are key components to entrepreneurial activity in the US.

Entrepreneurship Training

From 2008 to 2009, entrepreneurial activity amongst those 6-19 years old actually fell by almost 40 percent. More troubling is that those under the age of 20 represent just over a quarter of the total US population - 85 million to be exact. Knowing how important entrepreneurship is to the economy, job creation and innovation would suggest that training is vital to the health of free enterprise. What would happen if business acumen was taught at the K-12 level? How many kids would have a leg up on the competition once they reached adulthood? How many more firms, jobs and innovations would be created in a shorter period of time? Will the next generation continue in their entrepreneurial efforts that made the US so great?

I'm still betting entrepreneurship.

Melissa

Biz in a Boxx