Research Shows Small Gains in Business Self-Sufficiency Would Mean Big Gains in Job Growth
Aug 15, 2024 04:02PM ● By WNC Business
RALEIGH – North Carolina Secretary of State Elaine F. Marshall announced today that tens of thousands of jobs will be created with even a small increase in the rate of North Carolina businesses reaching self-sufficiency. These new jobs would add an estimated $1.5 to $ 2 billion to North Carolina’s economy each year, according to new research conducted in a first-of-itskind collaboration between the North Carolina Department of the Secretary of State and Fayetteville State University faculty.
“North Carolina’s economy is one of the strongest in the United States, but not everyone is sharing in that success,” said Secretary Marshall. “Our historical data shows we have a small window of time to help our new business creators, so it’s crucial we take steps early to help assure they are connected to the business resources giving them the best opportunities for success.”
According to the research, most companies claim self-sufficiency when they generate annual revenues of $50,000 or more. Below $50,000 in revenue, most entrepreneurs do not work fulltime in the business. As part of the research, 37% of businesses identified as “self-sufficient”, while 45% identified as “aspirational”, meaning they do not yet meet the self-sufficient threshold, but expect to do so. Self-sufficient businesses report that they employ an average of 9.04 employees. Businesses not yet self-sufficient but identified as aspirational employ an average of 2.66 employees.
The report concludes that adopting policies and initiatives to help just 5% of “aspirational” businesses to become self-sufficient will create 24,550 new jobs annually. At a salary of $40,000 annually, those jobs would generate $980 million in new wages. When considering an economic multiplier effect, an increase in consumer spending, and an increase in tax revenues, the overall economic boost would range from $1.5 billion to $2 billion each year.
The report shows a short window of time to help these businesses reach self-sufficiency. About 25% of North Carolina businesses cease to operate within three years, compared to the national closure rate of 33%. Within seven years, 50.2% of North Carolina businesses cease to operate, compared to the national rate of 52.9%.
Entrepreneurs reported access to capital, current economic conditions, taxes, and insufficient assistance as the greatest challenges to self-sufficiency. The study suggests that helping entrepreneurs develop a credit history demonstrating credit readiness would substantially help these new business owners obtain needed capital. The report also suggests a comprehensive online searchable directory where entrepreneurs can identify existing resources that support their success in a single, easily navigated location.
“The Secretary of State’s Office is one of the first stops new businesses make in their entrepreneurial journey. This office is uniquely positioned to help our entrepreneurs make the important connections that will increase their chances for success,” Secretary Marshall added.
The NC Secretary of State’s Office has already started down this path as part of an initiative Secretary Marshall previously announced called Rural RISE NC. RISE stands for Resources for Innovators, Start-ups, and Entrepreneurs. Rural RISE NC helps connect newly formed businesses to important local, state, and federal business resources that can elevate their opportunities for success. This is primarily done in two ways. Businesses are sent information about Rural RISE NC at the time of their creation with the agency, and businesses can also find a searchable database of resources at sosnc.gov/RISE.
North Carolina has experienced a surge in new business formation since 2019. North Carolina’s formation rates exceed the national average. In 2019, North Carolina saw 100,300 new businesses created compared to 171,700 in 2023, a 71.1% increase.
FSU researchers surveyed North Carolina corporations, limited liability companies, and similar limited liability formations active as of May 20, 2023, and formed between July 1, 2015 and June 30, 2022. The results include a statistically significant 6,546 responses.
Governor Cooper’s Office of Strategic Partnerships introduced the North Carolina Department of the Secretary of State to researchers at Fayetteville State University. The NC Office of Strategic Partnerships develops, launches, and enhances partnerships between state government and North Carolina's research and philanthropic sectors.
Read the full report here.
Source: Office of the NC Secretary of State
“North Carolina’s economy is one of the strongest in the United States, but not everyone is sharing in that success,” said Secretary Marshall. “Our historical data shows we have a small window of time to help our new business creators, so it’s crucial we take steps early to help assure they are connected to the business resources giving them the best opportunities for success.”
According to the research, most companies claim self-sufficiency when they generate annual revenues of $50,000 or more. Below $50,000 in revenue, most entrepreneurs do not work fulltime in the business. As part of the research, 37% of businesses identified as “self-sufficient”, while 45% identified as “aspirational”, meaning they do not yet meet the self-sufficient threshold, but expect to do so. Self-sufficient businesses report that they employ an average of 9.04 employees. Businesses not yet self-sufficient but identified as aspirational employ an average of 2.66 employees.
The report concludes that adopting policies and initiatives to help just 5% of “aspirational” businesses to become self-sufficient will create 24,550 new jobs annually. At a salary of $40,000 annually, those jobs would generate $980 million in new wages. When considering an economic multiplier effect, an increase in consumer spending, and an increase in tax revenues, the overall economic boost would range from $1.5 billion to $2 billion each year.
The report shows a short window of time to help these businesses reach self-sufficiency. About 25% of North Carolina businesses cease to operate within three years, compared to the national closure rate of 33%. Within seven years, 50.2% of North Carolina businesses cease to operate, compared to the national rate of 52.9%.
Entrepreneurs reported access to capital, current economic conditions, taxes, and insufficient assistance as the greatest challenges to self-sufficiency. The study suggests that helping entrepreneurs develop a credit history demonstrating credit readiness would substantially help these new business owners obtain needed capital. The report also suggests a comprehensive online searchable directory where entrepreneurs can identify existing resources that support their success in a single, easily navigated location.
“The Secretary of State’s Office is one of the first stops new businesses make in their entrepreneurial journey. This office is uniquely positioned to help our entrepreneurs make the important connections that will increase their chances for success,” Secretary Marshall added.
The NC Secretary of State’s Office has already started down this path as part of an initiative Secretary Marshall previously announced called Rural RISE NC. RISE stands for Resources for Innovators, Start-ups, and Entrepreneurs. Rural RISE NC helps connect newly formed businesses to important local, state, and federal business resources that can elevate their opportunities for success. This is primarily done in two ways. Businesses are sent information about Rural RISE NC at the time of their creation with the agency, and businesses can also find a searchable database of resources at sosnc.gov/RISE.
North Carolina has experienced a surge in new business formation since 2019. North Carolina’s formation rates exceed the national average. In 2019, North Carolina saw 100,300 new businesses created compared to 171,700 in 2023, a 71.1% increase.
FSU researchers surveyed North Carolina corporations, limited liability companies, and similar limited liability formations active as of May 20, 2023, and formed between July 1, 2015 and June 30, 2022. The results include a statistically significant 6,546 responses.
Governor Cooper’s Office of Strategic Partnerships introduced the North Carolina Department of the Secretary of State to researchers at Fayetteville State University. The NC Office of Strategic Partnerships develops, launches, and enhances partnerships between state government and North Carolina's research and philanthropic sectors.
Read the full report here.
Source: Office of the NC Secretary of State