Understanding small business needs: Washtenaw County study
Solutions for small business challenges outlined in the new “Washtenaw County Small Business & Entrepreneurship Survey.”
The Washtenaw County Office of Community and Economic Development, in conjunction with The Shed BEC, recently funded a study (Shed Study) to develop a picture of operations, challenges and goals of local small businesses. The report stressed networking and partnerships solutions.
Individuals have many reasons for becoming an entrepreneur. The study defined entrepreneurs as those that have long-term ownership of their own business or plan to develop a business venture with the purpose of selling and moving on to the next exploitable opportunity. While both need a plan of operations, the short-term ownership path is more likely supported by a formal business plan. This attracts venture capital, as well as purchasers. The U.S. Census Bureau “Survey of Business Owners” reported over half of all U.S. businesses operate primarily from someone’s home and produce annual sales of over $650 Billion.
This home-based option enables a relatively easy path to entrepreneurship. Reasons for seeking self- employment include dissatisfaction of job prospects, lack of a well-defined career path or wanting to exercise their passion to do what they do.
The Shed Study interviewed 66 respondents in the Washtenaw County area who had a combined annual sales total of $52 Million. The average respondent employed 4 to 5 people, relying heavily on part-time staff. This indicates that the businesses surveyed are considered microenterprises. Although 58 percent of the owners indicated that their business is a primary source of income, personal income was recognized by 80 percent as a potential obstacle to achieving their goals. They did, however, have a willingness to invest in their business to continue their operation in their local community.
Although most entrepreneurs value independence and try to learn it all themselves, there is a need for more direct operational support to help balance their talents in the early stage of their business. Planning is recognized by most service providers as a wise investment, but many entrepreneurs lack the time to put into planning that will make them fully operational. Understanding how to (and having the funds to) invest in both the facility and staff to increase the capacity of the business while maximizing its income is a learned trait.
Personnel management included hiring, training and turnover were found to be issues in the study with the time cost in training, resources and potential loss of sales to meet demand can be problematic. While marketing and sales were rated as the biggest challenges, cash-flow problems due to company growth were also found to be a big hurdle for entrepreneurs as they tried to increase their overall revenue. The study found that new businesses have not worked out distribution vs. volume issues and lack the size of production for efficient aggregation. Other problems identified included how and where to warehouse product as well as how to coordinate delivery.
The Shed Study recommended approaches for mitigating these challenges and maximizing business operations. Primary among the solutions was the recommendation to increase both formal and informal education. Another recommendation was for entrepreneurs to increase their network within their community and within the profession or trade. This networking will lead to discovering people and resources that can help them achieve tasks that they have a lack of time for when running a business. At the same time, networking increases an entrepreneurs’ sense of community. Networking can lead to sharing retail space and e-commerce sites, shared distribution efforts, shared sales and marketing staff, and perhaps minimize the need for staff and infrastructure. Entrepreneurs working within the local food system could tap into additional markets within their community and promote buying local to keep dollars local and help the local economy.
Visit The Shed BEC for the full report. Michigan State University Extension educators offer trainings on business and community topics to help you better understand shared values and methods of achieving a sustainable and prosperous community.