The Case for Microenterprise Development

FAST FACTS & HIGHLIGHTS
Since 2001, Nebraska Enterprise Fund has participated with FIELD / MicroTest, a program of the Aspen Institute, in reporting data from our program partners (programs engaged with entrepreneurs and small /micro businesses in helping them develop their microenterprises.) Nebraska data and information is compiled along with surveys and data from similar microenterprise development organizations across the U.S. in FIELD/MicroTest publications.

The following “Fast Facts” help paint a broad picture of microenterprise in the U.S. The source for each fact is cited with, in most cases, a direct hyperlink to the full on-line reference. These facts, designed for researchers and others looking for basic information about entrepreneurship, microenterprise and assistance-providing organizations, have been organized around several themes:

• Fast Facts About Microentrepreneurs
• Fast Facts About Business Ownership
• Fast Facts About Programs Assisting Microentrepreneurs
• Fast Facts About Training and Technical Assistance

Fast Facts About Microentrepreneurs:
There are 20 million microenterprises in the United States; an estimated 10 million individuals fit the characteristics of the target groups the microenterprise industry seeks to serve: such as women, minorities, low-income individuals, individuals with disabilities, and those with difficulty accessing commercial credit markets. Source: Opening Opportunities, Building Ownership: Fulfilling the Promise of Microenterprise in the United States.

A survey of microenterprise programs in 2008 found that the majority of microentrepreneurs they serve are female (59%) 60 percent are of a traditionally disadvantaged background (60%) and 68 percent had incomes at or below the area median income (HUD guidelines).  Source: FY2008 Program Performance Data Overview

Surveys find that microenterprise program clients reduce their reliance on poverty:

• A 2008 study found one year after receiving services, the number of clients receiving public assistance dropped from 17 percent at intake to nine percent one year later. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes
  
• A recent study based on program-administered surveys from 878 clients found that 158 – or 18percent of clients – were in poverty at the time they entered the microenterprise program. Of those 158 clients, 94 – or almost 60 percent – had moved out of poverty by the time they were surveyed, approximately one year after entering the program. Ninety percent of clients not in poverty when they entered the program were able to stay above the poverty line. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes
  
• A study of microenterprise programs working with welfare recipients found that two years after intake, TANF receipt was reported at 25 percent, down from 94 percent at intake. Source: Microenterprise as a Welfare to Work Strategy: Two-Year Findings
  

Surveys also find that household income increases:

• In a recent study of clients, who provided household income data over a five-year period from intake to survey, the median contribution of draw from the microenterprise to household income increased from 52 percent at intake to 71 percent at survey. Source: At the Five-Year Mark: Outcomes Reported by U.S. Microenterprise Clients
• In a 2008 study, the average household income of families participating in a microenterprise program increased from $29,927 to $36,000 – a 17 percent increase. The median length of time between when clients first entered the program and when they were surveyed was one year. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes
• Welfare recipients studied also showed strong increases in household income, with median household income increasing 87 percent, from $10,114 to $18,952, two years after enrolling in a microenterprise program. Source:Microenterprise as a Welfare to Work Strategy: Two-Year Findings
• Sixty-seven percent of entrepreneurs surveyed stated they have some form of health insurance. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes

Fast Facts About Business Ownership:

• In a recent study of microenterprise clients who received services over a five-year span (2002-2007), 88 percent were still operating a business five years later and 70 percent reported operating their businesses full-time. Source: At the Five-Year Mark: Outcomes Reported by U.S. Microenterprise Clients
• In a recent study of microenterprise clients who received services over a five-year span (2002-2007), 54 percent of clients with a business at intake and survey reported an increase in median revenues from approximately $52,000 at intake to just over $82,000 at survey (a 60 percent increase). Source: At the Five-Year Mark: Outcomes Reported by U.S. Microenterprise Clients
• Seventy-eight percent of microentrepreneurs surveyed in a 2008 study were operating a business at least one year after receiving services from a microenterprise program. Some of these entrepreneurs were in business when they came to the program; others were hoping to start a business. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes
• A study of welfare recipients who received microenterprise assistance found they had a two-year business survival rate of 68%. Source: Microenterprise as a Welfare to Work Strategy: Two-Year Findings. Similarly, in a five-year longitudinal study of microenterprises programs, they reported that the five-year survival rate for existing businesses was 88 percent and 72 percent for new businesses. Source: At the Five-Year Mark: Outcomes Reported by U.S. Microenterprise Clients
• In a 2008 study, microenterprise clients experienced a 37 percent median increase in their business revenues and an average increase in sales revenue of 49 percent. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes  

Fast Facts About Programs Assisting Microentrepreneurs:

• In a recent survey, FIELD identified almost 700 programs across the United States helping aspiring entrepreneurs grow their businesses. The survey identified 266 programs that reported providing business development services. Of those 266 programs, 92 percent offered one-on-one technical assistance and 85 percent offered group-based trainings. Source: Field-Wide Survey Data Highlights FY2008 Data
• According to a recent study, 270 microenterprise development programs served an estimated 117,000 individuals and more than 38,000 businesses. Source: Field-Wide Survey Data Highlights FY2008 Data
  
• In 2008, 118 organizations reported documenting and tracking applicants’ credit scores. Of those 118, 64 (54 percent) indicated they report borrowers’ credit performance to credit bureaus directly or through other organizations. Source: Field-Wide Survey Data Highlights FY2008 Data
  
• According to a recent study, 82 percent of microenterprise organizations have five or fewer full-time equivalent (FTE) staff members. Source: Field-Wide Survey Data Highlights FY2008 Data
• A 2008 study revealed that half of all clients entered a microenterprise program looking for early-stage business assistance. The top four reasons for starting a business reported by clients were: flexibility to take care of dependents or other family obligations; wage jobs were not available in field of choice; wage jobs were not available in the area; and disabilities made wage work difficult. Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes
• In a 2008 study of clients with a business, 62 percent were working at their business full time, meaning at least 35 hours per week. Thirty-seven percent were working at their business part time. The most common full-time businesses included sole ownership (69 percent) and family-owned businesses (22 percent), while part-time businesses included sole-ownership (74 percent) and family-owned (16 percent). Source: Microentrepreneurs and their Businesses: 2008 MicroTest Outcomes
  
• Today there are more than 500 programs across the United States helping aspiring entrepreneurs grow their businesses. More than 94 percent of these emerging business owners seek training and/or technical assistance designed to help them achieve success. Source: Highlights from the 2005 Data Collection Project
• Microenterprise development programs in the U.S. served an estimated 150,000 to 170,000 individuals in 2000. Source: Opening Opportunities, Building Ownership: Fulfilling the Promise of Microenterprise in the United States
• In 2008, 52 programs reported to FIELD’s MicroTest program a median cost per client of $2,487. These costs are relatively modest and in line with other job creation strategies. The business outcomes associated with participation in microenterprise services exceed the cost of providing them and compare favorably to the costs of outcomes associated with other workforce development strategies. Source: FY2008 Program Performance Data Overview
• In 2008, 34 microenterprise programs that make loans to their clients reported a median loan loss rate of six percent. A median cost of 51 cents was reported by 30 programs that reported costs to make and manage each dollar in their loan portfolio. Source: FY2008 Program Performance Data Overview

Fast Facts About Training and Technical Assistance:

• The types of business development services provided by microenterprise programs continue to expand to meet the needs of their clients. According to a 2009 study, the types of business development services provided include: technical assistance, training, mentoring, financial literacy, credit counseling, technological services, tax preparation and legal assistance. Source: Field-Wide Survey Data Highlights FY2008 Data
• In a recent study, 184 programs reported that they provided training and technical assistance to 61,833 individuals, for an average of 336 clients per organization. Source: Field-Wide Survey Data Highlights FY2008 Data
• Substantial numbers of low-income individuals start, stabilize and expand their businesses within 18 months of completing training. At four programs studied by Aspen, ownership increased by an average of 49 percent among those who entered training prior to business start-up. Source: Improving Microenterprise Training and Technical Assistance: Findings for Program Managers
• Effective programs know that readiness for business matters. Aspen-sponsored research has found that business ownership and/or exposure to business ownership is clearly associated with completing training and having a business after training. So are having relevant work experience, and extensive personal support systems. Strong programs offer a range of services to help clients assess their capacity and acquire the resources and experience needed. Source: Improving Microenterprise Training and Technical Assistance: Findings for Program Managers
• Financial skills matter. In one program studied by Aspen, the clients who achieved economic self-sufficiency during an 18-month period were much more likely to report using key financial skills — such as cash-flow projections and management, break-even analysis and pricing — than other clients. Source: Improving Microenterprise Training and Technical Assistance: Findings for Program Managers
• Training style also matters. In another program, clients with dynamic trainers using adult learning techniques were 20 percent more likely to complete training, 32 percent more likely to complete a business plan and 5 percent more likely to have an open business within eight months of training completion. Source: Improving Microenterprise Training and Technical Assistance: Findings for Program Managers
• Completing training, and other markers of participation and achievement — such as completing a business plan, completing class assignments and having high attendance — are all associated with having a business, and/or experiencing business growth after training. Source: Improving Microenterprise Training and Technical Assistance: Findings for Program Managers
• Effective programs also offer ongoing technical assistance over the critical start-up and growth stages of business development, knowing that clients need repeated opportunities to hear and learn new information and skills. The median increase in business revenues was 30 percent for clients in two model programs that participated in long-term, comprehensive assistance of this type. Source: FIELD Best Practice Guide: Volume 4, Keeping It Personalized: Consulting, Coaching & Mentoring for Microentrepreneurs

Fast Facts and Highlights courtesy of The Aspen Institute www.fieldus.org