NEW BUSINESSES TO AID LAPORTE COUNTY IN THE ECONOMIC RECOVERY

LaPorte County doubles the number of new businesses seeking assumed names in 2009.

Academic research documents the contribution of small and young businesses to economic recovery.   With this knowledge government leaders and economic developers are well served to provide programs aiding new business formation.

Future small business formation will be accomplished by a small subset of the population.  Economic Development strategy targeting this subset increases the likelihood and success of new business formation and creation of jobs and additional investment in the LaPorte economy.

In 1979 a David L. Birch, doing government sponsored research, identified that small business created 2/3’s of all new jobs.  This discovery set in place a transformation of local community sponsored economic development strategies.

No longer were economic development strategies to be solely dedicated to the recruitment of the next business willing to locate but economic development programs should also consider helping small businesses expand; hopefully creating new jobs quicker and in greater quantity.

Since this revelation, small business creation and expansion has become a staple of local economic development programs.

Adding fuel to this message has continued over the past 30-years.

The US Small Business Administration adds that in the decade of 1980-90- 56% of the new jobs that were created came from businesses having less than 20 employees.   It’s the same for the next half decade “1990-95” where these small businesses created 49% of the new jobs.

Most notable is research completed by the National Federation of Independent Businesses showing that these new jobs came in the beginning of an economic recovery.

The evidence that new small businesses create the majority of new jobs continues. 

Research by the Kauffman Foundation documented that in 2006-07 over 2/3’s of the new jobs created occurred in businesses less than 5-years old.  The research also disclosed that over 50% of these jobs originated from firms with less than 50 employees.

A logical question to be asked is who will start these new businesses?

Again research by the Kauffman Foundation gives an indication.

Their researches studying entrepreneurial activity between 1996 and 2008 concluded that nationally 32 of every 100,000 people will start a new business.

In Indiana the researchers say 28 out of every 100,000 people will start a new business.

Other national findings show:

  1. Construction or other service business was most likely new business formed.
  2. A new business owner was most likely a Latino or Asian-American.
  3. New business owners likely had less than or a high-school education.
  4. New immigrants have a higher tendency to start a new business.
  5. New business owners were most likely to be male aged between 55-64 years.

To measure how well LaPorte County complies with this national standard, data from the US Department of Commerce and County Recorders office was studied. 

US Department of Commerce County Business Pattern data reveals for Indiana businesses filing business income taxes, that in the period of 1998 to 2007 the number of business with less than 50 employees grew by 6,167 firms; 4.5%.

In LaPorte County during this same period the number decreased by 29 firms (a 1.1% decrease) and the number increased in our neighboring county Porter by 394 firms: 12.7%.

For business that report business income on their personal income taxes we studied the growth of businesses filing an Assumed Name Registration with the LaPorte County Recorder. 

   
Laporte County
Assumed Business Name Certificates
   
Year Number of New Certificates Issued
   
2010 to date 47
2009 441
2008 160
2007 185
2006 173
2005 194
2004 204
2003 176

We found that between the seven-year period between 2003 and 2009 an average annual enrollment of new businesses of 209, ranging from low of 160 to a high of 204, with the highest enrollment being 441 in 2009.  It is interesting to note that registrations actually doubled in the height of the current economic recession.

What’s this all mean?

Quite simply, new small businesses will contribute to job recovery in LaPorte County.  These will likely be started by a small subset of the population.

We believe the LaPorte County entrepreneurial profile will focus on Latinos, new immigrants, Asian-Americans and while males aged between 55-64 years.

Author note:  This was prepared by Charles Eckenstahler for presentation at the the Purdue North Central “Topics in Regional Economic Development”   classs, Spring 2010.

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