Kansas Seeing More Startups, But Little Job Growth
Wichita State University held an entrepreneurship conference on Thursday at the Hyatt Regency downtown. The event featured several speakers who outlined the data behind startup businesses both large and small.
This is the second year for the Wichita Industry Research Exchange, which is put together by the Center for Economic Development and Business Research at Wichita State. Last year, a panel of experts discussed how to deal with an aging workforce. This year, the topic centered on entrepreneurs.
Chris Broberg, a professor at WSU, presented data about the creation of new businesses and what impact they have.
“The overall trend at the firm level is positive," Broberg says. "There’s a net positive trend of new firm growth.”
Firms, in this case, refer to any businesses. It could be a restaurant, a doctor’s office or a factory that manufactures airplane parts. Broberg says that Kansas, like much of the rest of the country, is seeing a steady increase in the amount of new businesses.
Broberg says that while more businesses are being created in Kansas, the impact on job growth is very small. From 1990 to 2010, Wichita saw an 86 percent increase in new companies. But that only translated to a meager 10 percent increase of new jobs. Broberg attributes this to the fact that new businesses either close after a short period, or only have one or two employees.
“What can be done about this? How can we increase the mix of firms in Kansas and our community to get more high-growth, high-quality, high-impact firms that are going to create jobs? And this gets really tricky,” Broberg says.
He says a big problem is that incentives and tax breaks that are offered by cities and state agencies are often meant to lure outside businesses to come to Kansas, or to expand large corporations that are already here. What’s missing is help for the little guy, the person starting a company from the ground up.
“Last year, I was interviewing entrepreneurs, and one of them, who’s creating a manufacturing business here in south-central Kansas, said, ‘You know what? I’m not making any sales, so taxes don’t make a difference to me. But I’m having to buy a bunch of equipment to start my firm. And yet, as an individual, I can’t write that off,'" Broberg says. "The laws in Kansas for net operating loss, corporations can write that off, but individuals cannot."
Broberg says there should be more incentives that are targeted to entrepreneurs. Another issue is getting entrepreneurs themselves to think big.
“A lot of my students, they come in wanting to do some of these low-growth businesses—a bakery for example," he says. "Nothing against bakeries, new bakeries are good. But, these lifestyle businesses that have the potential to grow gradually or not at all, are not what are really going to impact the economy.”
One way to help entrepreneurs think big just came to Wichita in the form of One Million Cups, an event with chapters all across the country. Each week, over a cup of coffee, owners of local startups present their business model and ideas for future growth. The audience is often seasoned business owners who can provide knowledge and feedback.
Bob Litan is a local attorney and economist who helped bring One Million Cups to Wichita.
“What’s encouraging about One Million Cups is to find out how many budding and real entrepreneurs there are now in the next generation," Litan says. "And so, I think it’s a very optimistic sign for the city that I wouldn’t have said existed six months ago, until I actually saw, and other people saw, this level of activity.”
Litan says that at least 150 people show every week, and that the conversations going on feed directly into what Chris Broberg from Wichita State says: Entrepreneurs have to have big ideas that will translate to strong companies.
“It gives them connections to be able to maybe take the next level, so they can find the next contractor, or the next source of IT work, or maybe the next set of customers or the next business idea that may transform what they’re doing into something that will grow faster,” Litan says.
Litan says events like One Million Cups are also a great way to provide mentorship and knowledge to women and minority groups, who are significantly underrepresented in the ownership circles of large companies.
Follow Sean Sandefur on Twitter @SeanSandefur.
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