Small business Tip of the Week: Where do jobs come from?
Sept. 20, 2010 at 4:20 a.m.
Where do jobs for small business come from?
We have all heard small businesses create the jobs, but how do small businesses create jobs?
For the last year or so, I have watched, listened to and read the news about job creation.
One thing is for sure: We need our economy back on track, resulting in job creation. Most of the current talking points about job creation appear to be concentrated on getting money to banks, so they can loan to small business, so small business can create jobs.
Everything I hear makes me believe the banks in our area have excess cash.
Money in the form of loans to small businesses does not create jobs.
In my opinion, one thing creates long-term sustainable jobs: customers. Customers are the lifeblood of any business, particularly small business. Whether the business is service, retail or a manufacturing, it has to produce a product or service and customers create the demand and growth opportunities.
Customers can be people or companies. Any growth in spending has a direct relation to the amount of discretionary dollars a person has, or profit a company has. One of the biggest influences our government has on consumer's discretionary dollars is through the taxing and regulatory policies it creates.
The uncertainty of today's policies appear to have most of us to worry about taxation and regulations.
As I see it, the job creation cycle begins with spending. Once consumers begin to spend, retailers begin to fill their shelves and expand their inventories to satisfy the demand. The increase in demand for inventory creates more demand for manufactured goods and manufacturers increase their output.
Service companies will expand their ability to increase service levels only because of customer demand.
When the demand happens, the first reaction of a small business is to increase productivity of their current staff and the use of equipment on hand.
Once the productivity of a business reaches it maximum capacity and based on the expected continued business growth, companies will begin to hire and new job growth will result.
In a growth environment for a company, hiring additional employees is one of the last steps taken.
In planning for the expected growth economy, businesses should dust off the business plan and take a close look at their financial position. Growth of small businesses is tied directly to proper planning and having sufficient capital.
Planning takes into account a business's target market, area of concentration, equipment needs, milestones for growth, marketing and capital, to name a few.
At the Small Business Development Center, we can help with this planning and research questions you may have in redefining your plan.
Joe Humphreys is associate director of the University of Houston-Victoria Small Business Development Center.