Last year, Amazon had several states, including Connecticut, clamoring – with tax incentives in hand – to land the online retail behemoth’s second U.S. headquarters. It was all over the news. But while it is often major corporate players whose moves make major headlines, Connecticut’s economy, like much of America’s, is mostly driven by small […]
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Last year, Amazon had several states, including Connecticut, clamoring – with tax incentives in hand – to land the online retail behemoth’s second U.S. headquarters. It was all over the news.
But while it is often major corporate players whose moves make major headlines, Connecticut’s economy, like much of America’s, is mostly driven by small – not large – businesses. In fact, 99.4% of companies in the Nutmeg state are considered small, according to the Small Business Administration (SBA), and these firms collectively accounted for more than 735,000 jobs here – nearly half of all Connecticut private sector employment in 2018.
The small business sector has been working its way back from the depths of the Great Recession a decade ago – including adding more than 7,300 net new jobs last year, SBA figures show. Yet while the number of small businesses in the state currently total more than 340,000 and have been steadily climbing, they continue to face headwinds on multiple fronts, including shifting consumer demands in a digital age, obstacles to accessing capital, increasing cost pressures, a graying skilled workforce, and legislative proposals that impact business.
Joe Brennan, president and CEO of the Connecticut Business & Industry Association (CBIA), sees business costs as one key challenge small businesses here face. “In Connecticut, the cost of healthcare, energy costs, labor costs, and maybe taxes, are [often] higher across the board than in many other states,” he said. “And the number of regulations and mandates on business are always a challenge.”
One of the high-profile proposed bills in play before the state legislature this year was an increase to the state’s minimum wage. “It’s harder for smaller businesses [to absorb those costs] than it might be for a mid-size or large company,” Brennan explained, noting the majority of CBIA member business have fewer than 25 employees.
However, there have been bright spots for the state’s small business community, including a variety of resources – from online education to low-cost loans to advisory services – to help with a variety of needs, including business planning, financial management and marketing.
That’s important, said Joe Ercolano, state director of the Connecticut Small Business Development Center (SBDC), because while many small business owners have expertise in their own products or services, they may lack critical business-related skills, such as financial forecasting, marketing and benchmarking.
Those are areas where SBSC’s statewide team of 13 advisors can help. “Our advisors, research, and proprietary software tools can help point out where [a business] might have some weaknesses and recommend some strategies to address them,” Ercolano explained, noting that financing and access to venture capital is often a top need for many businesses.
In fact, the SBDC, which is funded in part though the SBA, helped Connecticut businesses access more than $46 million in capital in 2018, while helping to launch 64 new businesses and serving nearly 1,100 clients, according to Ercolano.
Sheila Hummel, director of the Small Business Development Office for the Department of Economic and Community Development (DECD), said access to capital has been a challenge for some small businesses in recent years. For example, 18% of small business respondents in the CBIA 2018 survey did not turn a profit for the year. “Some businesses are cash strapped and struggling a bit,” Hummel said. “They are trying to retain their employees, but they aren’t really growing.”
To help provide support, DECD has been offering low-interest rate Express Loans – targeting businesses with under 100 employees – since 2011. During that time span, the program has provided nearly 2,000 companies with $324 million in assistance, reflecting a commitment to create or retain more than 30,000 jobs, according to DECD figures. In fact, Hummel said, businesses in 151 of Connecticut’s 169 cities and towns have benefited from this program.
She sees the evolution of technology as a reality that small businesses will continue to face, with potential threats to some industries, like retail, and a boon for others. For example, a national report from the Institute for Local Self-Reliance (ILSR), a non-profit advocacy group, found that between 2005 and 2015, the number of small business retailers in the U.S. declined by more than 85,000 – with 90% of small independent business respondents saying Amazon had a negative impact on their revenue.
In contrast, funding for tech-based start-ups has been on the rise in Connecticut, as the state – through its CT Next venture capital efforts – has invested heavily in entrepreneurial ventures, like InsurTech, to drive innovation for anchor industries like insurance, advanced manufacturing, and healthcare.
For the past several years, as innovation hubs, start-up accelerators, and maker spaces have cropped up across Connecticut, policymakers have directed targeted money to help technology companies access federal funding through Small Business Innovation Research (SBIR) grants and the Small Business Technology Transfer (STTR) program, with the goal of expanding the investment of capital to support the state’s businesses. In 2018, 65 companies in Connecticut were awarded these grants.
Anne Hunt, district director of the SBA’s Connecticut District Office, hopes to see those numbers increase. She said the SBA, like other business-friendly organizations in the state, assists with both accessing capital and counseling, but also helps small businesses understand contracting. She notes that the federal government is the largest purchaser of good and services in the entire world and sets aside 23% of all prime government contracts for U.S.-based small businesses.
“We have a procurement technical assistance center to help [small] businesses get certified within the government to sell their goods and services,” Hunt said. According to the SBA, the U.S. government purchases nearly $500 billion worth of goods and services annually from the private sector.
And small business leaders have shown a vested interest in exploring learning opportunities. SDBC’s Joe Ercolano said his operation offered more than 400 workshops last year and, given the trends in technology, will be creating a robust online learning platform. The goal, he said, is the creation of a series of brief 10- or 15-minute videos on particular topics, tailored to the needs of Connecticut businesses.
That makes DECD’s Sheila Hummel optimistic. “I’ve seen a lot more sophistication among small businesses and the state has done a good job on focusing on small business,” she said. “It drives the economy.”
