Executive Voices: an Op-Ed Column

Shifting Focus
Tending to small business now will ensure economic growth for years to come

By Lt. Gov. Beverly Perdue

For many years North Carolina’s economic development strategy has focused on luring large corporations to our state with tax incentives, a great business climate, and a great quality of life. By some measures, the strategy has been successful, but in this current economy and for the foreseeable future, I believe we must broaden our approach.

This highly competitive economy requires a holistic strategy that targets the needs of both large and small companies. It is important to continue to attract large employers to North Carolina, but we also need a renewed focus on nurturing and developing small businesses and entrepreneurs.

A quick glance at the statistics tells us that small business is a pillar of our economy:

80 percent of the jobs created in 2002 were created by businesses with fewer than 50 people.

96 percent of the businesses in North Carolina employ fewer than 100 people.

77 percent of the businesses in North Carolina employ fewer than 10 people.

Small business activity accounts for nearly half of the state’s gross domestic product.

There’s no denying that large employers are important, but many jobs are created by small businesses and most of our employees work in small businesses.

With the right type of support, small businesses can become large employers. Each start-up has the potential to become the next Krispy Kreme, Lowe’s, or SAS Institute, but they need the coordinated assistance of government agencies, business leaders, and state leaders to succeed. There are a number of initiatives that are critical to ensure North Carolina has the best small business climate in the nation.

Small businesses face a number of regulatory hurdles before start up. For a small business to comply with each of the necessary regulatory components, they may need to interact with up to 64 different agencies. It is hard enough to start and maintain a successful small business. When you add the time spent jumping through regulatory hoops, the chances for success diminish. We need to make it easier for small business to navigate the myriad of regulations necessary for starting a company. This can be achieved by creating a Small Business Ombudsman Office located within the Department of Commerce. This would be a one-stop shop designed to assist small businesses with:

Inquiries about state laws, administrative rules, or agency interpretations;

Providing information and referral on special programs for small businesses;

Monitoring the progress of legislation and rules, acting as a small business advocate;

Conducting training and organizing local networks to encourage entrepreneurship.

Other states have used this model with success, and I believe we need some form of it to show our unwavering commitment to small businesses.

Second, I would like for the state to adopt a Small Business Regulatory Flexibility Act. Certain agency rules or regulations may make sense for large industries; however, these same regulations may add undue burdens to small businesses. This act would require that agencies review their rules and regulations and possibly alter or suspend certain regulations to assist small businesses. It is ridiculous for the local café to meet the same kitchen equipment regulations as a banquet hall. This type of act could redress similar situations.

Third, we need a renewed focus on entrepreneurial initiatives in both rural and urban communities. We must find innovative ways to assist start-up companies that are creating new businesses and more jobs for North Carolina. They represent the type of entrepreneurial efforts that North Carolina needs to continue to support and are the companies that have put North Carolina on the map in the new digital age. Typically these start–ups are in urban areas where financial resources, human capital and technology access are plentiful.  While we need to pay attention to these businesses and these areas, we must also attend to the needs of entrepreneurs who provide jobs in rural areas and places where it may not be so attractive to start a business, but jobs are needed badly. North Carolina has a rich history of entrepreneurship in rural communities; success stories that for years drove our economy. This renewed focus on entrepreneurship is critical to jump-start our sputtering economy.

As we think about encouraging entrepreneurs, we also need to seek the capital they require to be successful. Whether it’s connecting the venture capital community to these entrepreneurs or creating a micro-loan program that will provide these companies with capital options at the outset, with the right funding options and networks, we can create an environment, especially in rural communities, where small businesses can thrive.

The final component to any successful economic development plan requires an evaluation and adjustment of our corporate tax structure. Our business tax burden is the third highest among states in our region, even with our lower property taxes. North Carolina lacks the competitive advantage we need to attract major employers. Programs like the Job Development Investment Grant Program will provide the necessary incentives along with an adjustment of the tax structure to lure new companies to North Carolina, to keep our good employers here, and to nurture small businesses. Altering the tax structure is critical for future economic development.

In these trying times, I believe it is important to look at new ideas that will help us return our citizens to work and create a thriving economy for the future. Together, we can ensure a strong economic future for all North Carolinians.

Beverly Perdue served two terms in the state House and five terms in the Senate before being elected lieutenant governor in 2000. Among other duties, she serves on the State Economic Development Board.

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