By Ray Bowman
Recently while traveling, I had the honor of meeting one of the world’s top five trend-spotters, Marian Salzman. She talked about some of the leading trends for 2016 and noted that “local is the new global” and that living large is no longer a trend. “Small is the new big” suffices to capture this notion, which I believe applies to business.
We often talk about the importance of both big and small businesses in terms of the overall economy. I contend that the most important contributor to our local economy is not only small business but the smallest of the small — the “non-employer business,” where the sole worker is the owner. We often don’t respect the power of these non-employer businesses because traditionally we gauge the importance of a business by its number of employees. It’s time we give these businesses their due respect.
One of the key drivers of innovation and growth in the California business landscape is the power of thousands and thousands of non-employer businesses. Supporting this idea is Andrew Hait, lead economist with the U.S. Census, whose research for the EDC-VC found that, in most states, retail is the No. 1 employer of the population. However, when you look at California, the employment sector “professional and technical” is the No. 1 employer with non-employer businesses accounting for most of those jobs.
In fact, in Ventura County, non-employer businesses not only make up the vast majority of businesses, they account for the majority of jobs and a greater number of gross receipts, with retail ranking fourth. These are small businesses that have no employees other than the owner, yet they outnumber all of the employees working in the retail sector. That’s significant.
And, contrary to popular belief, a huge majority of these independent contractors are making a good living and enjoying great quality of life.
As a community, we benefit from non-employer businesses because they are good taxpayers. Such businesses pay their taxes on a quarterly basis, which means that they tend to estimate high to avoid a tax burden. They also don’t qualify for large tax incentives or huge deductions, so they are a strong source of tax revenue.
While these entrepreneurs provide a living for themselves, they also supply essential expertise and quality goods and services to consumers and businesses that depend on them. Their experience makes them a huge asset to the community with knowledge and best practices to share with their clients and those who they may mentor.
Non-employer businesses are part of the secret sauce of the California economy.
They are a key reason that California is so innovative. California and Ventura County, in particular, have a huge, self-employed mobile workforce of experts who are on call to assist in the development of thousands of product ideas and support to some of the most innovative companies in the world.
If you ask any large manufacturer or tech company how important these independent contractors and non-employee service providers are, I’m sure they will tell you that they are a critical part of how they stay competitive. And ask the owners of any non-employer businesses how important their companies are, and they’ll tell you their lives depend on it.
• Ray Bowman is the director of the Small Business Development Center of Ventura and Santa Barbara Counties.