[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
PRIVATE SECTOR INITIATIVES TO EDUCATE SMALL BUSINESS OWNERS AND
ENTREPRENEURS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ECONOMIC GROWTH, TAX AND CAPITAL ACCESS
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
SEPTEMBER 19, 2013
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 113-036
Available via the GPO Website: www.fdsys.gov
_____
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82-795 WASHINGTON : 2013
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Tom Rice.................................................... 1
Hon. Judy Chu.................................................... 2
WITNESSES
Dina Powell, Managing Director, Goldman Sachs, New York, NY...... 4
Stephen Morgan, Ed.D., Chair, Board of Trustees, My Own Business,
Inc., City of Industry, CA..................................... 6
Damien Stevens, Founder & CEO, Servosity, Greenville, SC......... 8
Kim Pate, Chief External Relations Officer, Corporation for
Enterprise Development, Washington, DC......................... 9
APPENDIX
Prepared Statements:
Dina Powell, Managing Director, Goldman Sachs, New York, NY.. 27
Stephen Morgan, Ed.D., Chair, Board of Trustees, My Own
Business, Inc., City of Industry, CA....................... 32
Damien Stevens, Founder & CEO, Servosity, Greenville, SC..... 35
Kim Pate, Chief External Relations Officer, Corporation for
Enterprise Development, Washington, DC..................... 37
Questions for the Reocrd:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
PRIVATE SECTOR INITIATIVES TO EDUCATE SMALL BUSINESS OWNERS AND
ENTREPRENEURS
----------
THURSDAY, SEPTEMBER 19, 2013
House of Representatives,
Committee on Small Business,
Subcommittee on Economic Growth,
Tax and Capital Access,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2360, Rayburn House Office Building. Hon. Tom Rice
[chairman of the subcommittee] presiding.
Present: Representatives Rice, Chabot, Schweikert, Chu,
Payne, Meng, and Schneider.
Chairman RICE. Good morning.
I want to start out with an apology in advance, and that is
I have two simultaneous Committee meetings right now, and we
are doing a markup in the Transportation and Infrastructure
Committee, and I have to be there. So I am going to start this
meeting off and at some point I will introduce my co-panelist,
David Schweikert, who will take over as chairman of the
meeting. And so I just want to apologize to you that at some
point during this meeting I am going to stand up and excuse
myself, but we have a very important markup going on in the
Transportation and Infrastructure Committee. Unfortunately, the
Committees do not check with each other's schedules when they
schedule these things.
I thank every one of you very much for being here in
advance. Thank you for taking your time to come and educate us.
It is so very important. And I will go as far as I can and then
I will excuse myself. So thank you for that.
The hearing will now come to order.
Today, we will explore the importance of education and
training for small business owners and entrepreneurs, and
highlight examples of the private sector imparting knowledge to
growing small businesses around the nation.
Half of all small businesses fail within five years after
opening, and recent research has shown that newly formed small
businesses are creating fewer jobs than in the past. Analysts
cite a lack of general business acumen, and an inability to
adapt to rapidly changing economic environments as a reason for
the challenges they so often face. Since historically, small
businesses have been responsible for over two-thirds of new job
creation in this country, it is critical that we ensure our
nation's entrepreneurs are receiving the educational and
training opportunities that provide the knowledge, and in turn
the confidence, they need to grow.
Education for those looking to start or grow their
businesses comes in many forms. Whether it is through a
classroom environment, online course, mentorship provided in an
incubator or accelerator, or networking through peer-to-peer
programs, small businesses are using these avenues to gain the
knowledge, expertise, and personal connections to help them
grow their businesses and hire more employees.
There are numerous examples of the private sector stepping
up around the country to provide both established, and
fledgling small businesses with the information they need not
only to survive, but to also grow and create jobs. Today, we
will hear about some of these initiatives and how they assist
our nation's job creators.
We are fortunate to have here with us some of the leaders
that help to address the critical knowledge gap facing small
business owners and entrepreneurs, as well as an entrepreneur
that has participated in and benefitted from such efforts. I
look forward to learning first-hand from our witnesses today
about how their work has helped to stimulate economic growth
and create jobs around the country. Thank you very, very much
for being here.
I now recognize the ranking member for her opening
statement.
Ms. CHU. Thank you, Mr. Chair.
Today's hearing will provide insights into a variety of
private sector initiatives to train and mentor entrepreneurs
and small business owners across the country. We will also hear
how these efforts are contributing to our nation's economic
growth and job creation.
In today's hearing, we have representatives from big and
small companies, as well as the nonprofit sector. I look
forward to hearing about your programs and how we as
policymakers can learn from your successes and failures to
continue supporting small businesses, the growth engines of our
economy.
Initiatives that support small business owners and
entrepreneurial development are essential to promoting economic
and development growth. Historically, the United States has
experienced job growth primarily due to business startups. In
the last 30 years, new firms have generated an estimated three
million new jobs every year. In fact, small businesses that are
less than five years old create two-thirds of all net new jobs.
As the nation continues its recovery from the Great
Recession and the labor market remains weak, it is vital to
support policies in the public and private sectors that support
entrepreneurs and small businesses. If entrepreneurs have the
support tools and resources that they need, they will grow to
the point where they can generate job opportunities for the
millions of unemployed Americans.
We all note that being an entrepreneur and starting a
business is difficult because it entails having a good idea,
finding capital, and taking a huge risk. Obstacles exist at
every stage of business, but they are particularly acute at the
earliest developmental stages. These challenges include
financing, capital access, and uncertainty over regulation and
taxes.
Thankfully, those willing to take the risk can take
advantage of a number of technical assistance and
entrepreneurial development opportunities provided by the
federal government and also by the private sector which we will
be hearing about today. I am excited to have the Corporation
for Enterprise Development here to discuss their efforts to
help low and moderate income entrepreneurs formalize their
businesses and gain access to tax credits, financial
incentives, and credit products.
Their Self-Employment Tax Initiative (SETI) has helped over
12,000 entrepreneurs prepare their taxes at little or no cost.
Considering the complexities of the tax code, this program
offers much needed assistance to entrepreneurs who do not have
the means to pay a professional to file their taxes.
We also have Goldman Sachs today to talk about their 10,000
Small Businesses Initiative, a program designed to help small
businesses with practical business and management education, as
well as access to capital and business support services. For
the last three years, I have invited a representative from the
10,000 Small Businesses Initiative to my annual small business
workshops to talk about this very successful program and how
entrepreneurs in my district can benefit from it. This is a
great program that gives small businesses a unique opportunity
to network, receive top-notch training, and direct access to
top business executives.
There are also programs that leverage federal dollars with
the private sector to help entrepreneurs. One of my favorite
programs is the Small Business Development Centers, which
provide small businesses with training and counseling for free.
SBDCs receive funding from the Small Business Administration,
but do have to form partnerships with the private sector to
receive matching funds. Last year alone, SBDCs in 900 locations
across the country provided assistance to 210,000 small
businesses. Continuing federal and private support for
businesses like this and programs like this are vital to our
economic recovery and future economic growth.
With this in mind, I am looking forward to today's hearing
which will provide insights into what CFED, Goldman Sachs, and
other private sector companies are doing to help entrepreneurs
and small businesses grow and succeed.
Thank you, Chairman Rice, for convening this hearing, and I
yield back.
Chairman RICE. Thank you, Ms. Chu.
If Committee members have an opening statement prepared, I
ask they be submitted for the record.
I would like to take a moment to explain the timing lights
to you. You will each have five minutes to deliver your
testimony. The light will start out as green. When you have one
minute remaining, the light in front of you will turn yellow.
Finally, at the end of your five minutes it will turn red. And
we will have a little leeway in there.
I ask that you try to adhere to the time limit, but again,
there will be some flexibility.
I want to thank you once again before I start introducing
you for being here. This is such an exciting and critical time
in Washington. A lot of things come together that affect small
business, a lot of things that will affect our competitiveness
worldwide. With the continuing resolution, the potential with
ObamaCare getting ready to kick in, with the debt ceiling
coming in, with all these things coming together all at one
time, it is an exciting time to set up our country for
competitiveness and to set up our country for the future. So
thank you again for being here at this really critical time in
our nation's history.
Our first witness is Dina Powell, Global Head of Corporate
Engagement at Goldman Sachs and President of the Goldman Sachs
Foundation, where she leads its 10,000 Small Businesses
Program. Prior to joining Goldman Sachs, Ms. Powell served as
assistant secretary of state for Educational and Cultural
Affairs and was deputy undersecretary of state for Public
Diplomacy and Public Affairs, after serving as assistant to the
President for Presidential Personnel at the White House. She
also serves as a member of the J. William Fulbright Foreign
Scholarship Board, the Board of Trustees at the University in
Cairo and the Vital Voices Global Partnership, and is a member
of the Council on Foreign Relations. Ms. Powell, you are a very
busy lady, and we look forward to your testimony.
STATEMENTS OF DINA POWELL, MANAGING DIRECTOR, GOLDMAN SACHS;
STEPHEN MORGAN, CHAIR, BOARD OF TRUSTEES, MY OWN BUSINESS,
INC.; DAMIEN STEVENS, FOUNDER AND CEO, SERVOSITY; KIM PATE,
CHIEF EXTERNAL RELATIONS OFFICER, CORPORATION FOR ENTERPRISE
DEVELOPMENT.
STATEMENT OF DINA POWELL
Ms. POWELL. Thank you, Mr. Chairman.
It is really an honor to be here today and to join you and
Ranking Member Chu and members of the Subcommittee, including
Congressman Schweikert, Congresswoman Meng, and Congressman
Schneider.
We are really honored to have the opportunity to testify
today about the 10,000 Small Business Initiative. Goldman Sachs
proudly launched this effort alongside a coalition of
individuals and institutions who are committed to economic
growth and job creation in our country. These include our co-
chairs of the Advisory Council. Our CEO at Goldman Sachs, Lloyd
Blankfein; Berkshire Hathaway CEO, Warren Buffett; and Harvard
Business School professor, Dr. Michael Porter. They lead an
advisory council that includes Dan Danner of the National
Federation of Independent Businesses, Marc Morial, head of the
National Urban League; Javier Palomarez is head of the Hispanic
Chamber; and former education secretary, Margaret Spellings.
Together this coalition built 10,000 Small Businesses, which is
an integrated program that offers proven tools that small
business owners need to grow their businesses.
This $500 million commitment provides entrepreneurs with
three key resources. The first is a practical, high-quality
business education. The second is growth and working capital.
And finally, the third, and often mentioned as the most
critical, is business advising, networks, technical assistance,
and mentors. We believe it is this integrated framework
bringing all three pieces of the puzzle together that help
small business owners in one program.
We also know that we have tested this program in a global
marketplace. This framework has been born out of a program we
ran globally, called 10,000 Women, a $100 million investment
that was seeking to reach female entrepreneurs in 43 countries
with business education, mentoring, and links to capital. We
are very proud that this month marks the graduation of the
10,000th woman in the program. We were able to apply many of
the lessons of this global program and the measurement and the
results that we took away to building our domestic effort here
in the United States. In just three years, we have invested in
an infrastructure, we validated our model, and we have launched
the program in 15 markets across the country. Now, 10,000 Small
Businesses is active in these markets. It is designed for
existing small businesses poised for growth. In each market, we
built a separate and distinct entrepreneurial ecosystem to
provide local services, and the partners include respected
community institutions, like community colleges, community
development, financial institutions, local chambers of
commerce, local community groups, and mayors and local
officials committed to supporting their small businesses.
In the interest of time, I will respectfully refer you to
my written testimony for the full program description, but I
would love to use my remaining time with you to tell you three
lessons we have learned along the way and some of our results
to date.
First, as my bosses always tell me at Goldman Sachs,
measurement is crucial. We rigorously track the performance of
our businesses at regular intervals when they complete the
program. We are pleased to report that just six months after
graduation, more than 60 percent of the participants are
reporting increased revenues, and nearly half are creating net
new jobs. Additionally, we were surprised by one metric. We
assumed that we would have a high attrition rate initially
because these are very busy small business owners and this is
an intense time commitment and you cannot graduate without
completing it all and having a growth business plan submitted.
We were surprised and pleased to see that nationwide we have a
99 percent completion and graduation rate.
One example of success is in Ranking Member Chu's district,
Ada Chan from Pasadena, California. Ada runs Fresh Events
Company, an event planning firm. Ada's revenue has grown 22
percent since joining the program, and while she was in the
program she was named ``The Small Business Person of the Year''
by the SBA in Los Angeles, and she was referred by you inviting
us to the session where she applied for the program. So thank
you very much for that, Congresswoman Chu.
Our second lesson is that public-private partnerships are
critical, and I am so honored to join my fellow panelists
because that is, I think, the message that you will hear from
all of us. No one institution can do it all and our
partnerships have included, as I mentioned, these local
community organizations but many members of Congress and others
who, as you have, have nominated small business owners. We even
had Speaker Boehner a few months ago meet a roundtable of
graduates from Ohio, and he gave them some tough lessons of
being a businessperson himself.
A couple of years ago, I was honored to have the
opportunity to join Ranking Member Velazquez in her district in
Brooklyn to tour one of our small business owner's sites, Mike
Dimarino, who has a tool and die fabrication business in
Brooklyn. Mike succeeded very well as our first cohort at La
Guardia Community College, and then he nominated Andy Dimarino,
his brother, who is in Congresswoman Meng's district. Andy got
into the program and taught us one of the best lessons, and we
have seen this example over and over again. He actually merged
with a fellow classmate, another landscaper in New York, and
now together they are competing for much larger bids throughout
the city.
This is that important example and the third lesson and
final lesson learned, the impact of peer-to-peer learning. We
see that businesses enter the program and they often say to us,
``I feel like I am an island all by myself,'' but when they
enter the program, they immediately build a network of support
and create a tangible marketplace together. In fact, 70 percent
of our graduates are either doing business together or
referring business to each other.
We are really looking forward to scaling this program
across the country, and we are honored to use the occasion of
this prestigious hearing, Mr. Chairman, to announce today that
we are launching a national expansion of 10,000 Small
Businesses. We are now beginning to accept applications for our
first ever national cohort. Any qualified business across the
country may apply. Accepted participants will take the full
program at Babson College, and we could not be more excited to
encourage you to nominate your constituents.
So I just want to say in closing, on behalf of our partners
and all of the people at Goldman Sachs, it has been a humbling
and inspiring experience to work with Americans across the
country, these small business owners dedicated to job creation
and growth.
Thank you so much, and I will be pleased to take your
questions.
Chairman RICE. Thank you, Ms. Powell. And thank you so much
for what you are doing for American business. We appreciate it
very much. It sounds like you are doing great things.
Our next witness is Dr. Stephen Morgan, chairman of the
Board of Trustees of My Own Business, Inc., an organization
that provides online training courses to those looking to learn
how to start or grow a business. In addition to his role at My
Own Business, Dr. Morgan currently serves as the president of
the University of the West in Rosemead, California, and was
previously president of the University of La Verne for 26
years.
Dr. Morgan, we thank you for being here and look forward to
hearing your testimony.
STATEMENT OF STEPHEN MORGAN
Mr. MORGAN. Thank you, Chairman Rice and Ranking Member
Chu. It is a pleasure for me to have my paying job in your
district. Thank you very much. Other members of the Committee,
it is a great opportunity for us to discuss small business
creation, ownership, and most importantly, success.
I am particularly appreciative of the opportunity to be
here as I am the volunteer chair of the Board of Trustees of My
Own Business, Inc., a Los Angeles-based nonprofit organization
providing free educational tools and training via the World
Wide Web to support successful businesses around the world. As
you will know, much of the success of our country comes from
the fortitude of new business creation, often started by those
who seek to create new opportunity for their families, and that
has been particularly true during these very difficult years
since 2008.
Please allow me to share with you a story about how our
organization came to be. On April 29, 1992, verdicts were
rendered in a controversial case involving the 1991 beating of
Rodney King. The toll of the riots that followed was
devastating. More than 50 people were killed, over 4,000 people
were injured, 12,000 were arrested, and a billion dollars worth
of property was damaged.
Southern California entrepreneur, Phil Holland, founder of
the Yum Yum chain of donut shops in California, watched in
dismay during those riots. Having already successfully
published The Entrepreneur's Guide and The Moonlight
Entrepreneur, Phil decided that he wanted to go into the riot-
torn area to teach those who were in that community how to
start their own business. And for the next three years, Phil
drove weekly to Compton, California, to teach those courses.
The final session of the class was taught in Spanish, and
eager, small business owners came by the busload from across
Los Angeles to hear Phil Holland's presentation.
Then, in 1994, Phil Holland created My Own Business, Inc.,
(MOBI), a 501(c)(3) public charity, and he began to build a
website so people everywhere could take advantage of a free
curriculum designed to share with them the dos and don'ts of
starting their own business. The free website courses include
quizzes on all subjects contained in the curriculum, business
plan templates, 75 video presentations by business experts, and
a final examination and certificate of completion for those
scoring over 80 percent on the quizzes. MOBI's Growing a
Business course includes practical business training
specifically focusing on 15 topics necessary for expanding a
business.
For the past 20 years, MOBI has offered this free business
training to nearly 35 million people who have visited the MOBI
website. Since the launch of the web-based MOBI curriculum,
469,000 have completed the courses and nearly 31,000 have
applied for the certificate of completion. The MOBI website is
viewed monthly by an average of 235,000, resulting in 4,000
students' completion the MOBI courses each month.
In a 2010 study, involving 5,000 MOBI graduates conducted
by the UCLA Anderson Graduate School of Business, 22 percent of
the respondents indicated their businesses would have failed if
they had not studied the topics offered in the MOBI curriculum.
Of the 5,000 MOBI graduates responding to the survey, 56
percent have actually started a business, and 77 percent of
those who started a company were still in business. Nearly 60
percent of the respondents reported that they had been in
business for more than two years, and nearly one-third reported
that they planned to hire at least one new employee within the
next 12 months.
Three important partnerships have strengthened MOBI's
outreach since its founding in 1994. First, for more than 10
years, MOBI has provided its courses to the World Bank. The
second important partnership continues with Cisco Systems,
Inc., which primarily has used the program in its
internationally-focused Cisco Entrepreneur Institute. The third
partnership that MOBI engaged in was with the Small Business
Administration. For a number of years until 2006, a link to the
MOBI Starting a Business course was provided on the SBA
website.
It has been a pleasure for me to have had this opportunity
to share the extraordinary service and contributions of Phil
Holland, an American entrepreneur who sought to significantly
give back by helping others achieve similar success, and all
free of charge.
Thank you very much.
Chairman RICE. Thank you very much, Dr. Morgan. It sounds
like you are doing big things. Thank you for being here.
Our next witness is Damien Stevens, founder and CEO of
Servosity, a growing technology company located in the NEXT
Innovation Center in Greenville, South Carolina.
Prior to starting Servosity, Mr. Stevens founded Utopia
Net, which was the number one ranked web development company in
the upstate area. He also previously founded GSA Technology
Council in South Carolina, a community of IT professionals. Mr.
Stevens is both a high school and college dropout, but he has
been asked to teach at the very same college he dropped out of
and has served in advisory capacities for other colleges and
universities.
Mr. Stevens, we look forward to your testimony.
STATEMENT OF DAMIEN STEVENS
Mr. STEVENS. Thank you, Mr. Chairman. I appreciate that.
I want to thank you and the members of the Subcommittee for
the opportunity to be here and testify at today's hearing. I am
Damien Stevens, the founder and CEO of Servosity.
Servosity provides backup and disaster recovery as a
service to a national network of partners or technology
companies that service small and medium-size businesses. I
wanted to talk a little bit about the story that we have had in
our growth.
In 2008, I joined NEXT Upstate and began learning from
other entrepreneurs at events such as their CEO Roundtable.
Before joining NEXT Upstate, I made all the mistakes myself
without the benefit of learning from others, specifically other
entrepreneurs, and the challenge is unique to high growth
companies.
NEXT Upstate is an organization that attracts and grows
high impact, technology companies by developing the
entrepreneurial ecosystem needed by these companies and
connecting companies to the ecosystem.
In 2009, Servosity moved into a small office in the NEXT
Innovation Center, a collaborative workspace formed by a group
of entrepreneurs and the Greenville Chamber, which houses
multiple high-growth companies. Upon moving into this office, I
came into contact with Michelin Development and learned of
their low interest loans they offer to small businesses. After
being turned down the first time, I persevered and was
fortunate enough to be approved for $100,000 loan for my small
business after applying the second time. This capital gave us
the bridge to grow from the company we were to the company we
wanted to be, to that next level. That gave us the ability to
grow to the point we were able to attract and secure private
investment.
In 2011, and again in 2012, Servosity attracted private
investment capital. In 2012, Servosity announced its expansion
into a 3,200 square foot new headquarters at the NEXT
Innovation Center in Greenville, South Carolina, and our
intention to add 30 jobs in the next 18 months. We started off
this year with four employees and have 12 now, and we are
currently growing and hiring. These jobs are just the
beginning; we have the opportunity to employ hundreds of people
over the next few years. These jobs we are adding are for
software developers, system engineers, support engineers,
sales, account management, and business development. The
average earnings are $80,000, and some positions are
significantly higher. Those earnings are more than double the
average prevailing wage in South Carolina. Not only are we
creating jobs in the knowledge economy, we are creating
meaningful high-paying positions with nearly unlimited growth
potential for employees.
Without the next ecosystem, I would not have learned from
other entrepreneurs. I would not have met with Michelin
Development to have the opportunity to secure that growth
capital. I would not have been able to grow to the next stage
to secure private investment capital, been introduced to
potential investors, nor would we have attracted the top tier
talent to required to grow a fast paced technology company.
Thank you for your valuable time today. I enjoyed being
able to share a very small part of our entrepreneurial journey.
I would not be here today without the help from so many others.
I am so blessed. Thank you.
Chairman RICE. Thank you, Mr. Stevens, for your
contribution to small businesses in this country.
I will now yield to Ms. Chu, who will introduce our final
witness.
Ms. CHU. I have the pleasure of introducing Kim Pate. She
is the Corporation for Enterprise Development's chief external
relations officer. She is responsible for the biannual Assets
Learning Conference, which brings together over 1,000 leaders
in the asset-building field to discuss ways that assets can
help create prosperity and expand economic opportunity for low-
income people.
Kim also coordinates strategic events, partnerships and
communications across CFED's priority areas of work, including
asset building, entrepreneurship, tribal state, and local
economic development, and affordable home ownership.
Prior to joining CFED, Kim was a deputy director of the
national projects for Wider Opportunities for Women in
Washington, D.C., which is a multiple strategy, women's
employment organization that is recognized nationally for its
skill training models, technical assistance, and advocacy for
women workers. Kim holds a law degree from the University of
California, Los Angeles School of Law, and a B.A. in Political
Science from Stanford University.
Thank you for being here, Kim Pate.
STATEMENT OF KIM PATE
Ms. PATE. Chairman Rice, Ranking Member Chu, and Member Mr.
Schweikert, thank you so much for this opportunity to testify
on behalf of efforts to support entrepreneurs and specifically,
small and micro businesses. We applaud this Subcommittee's
focus on this sector.
The Corporation for Enterprise Development was founded in
1979 to support entrepreneurs, and ``enterprise,'' you may say,
is our middle name.
Microbusinesses--those with four or fewer employees--
account for nearly 90 percent of all U.S. businesses. So that
means that roughly one in six South Carolinians and
Californians own and operate a microbusiness. This figure is
representative nationwide. Microbusinesses contribute to
community revitalization, and Mary Gatch, of South Carolina,
who started DwellSmart as a retail shop offering
environmentally healthy products is a great example of this.
After winning contracts with large green companies,
DwellSmart needed a location with a warehouse space and a
loading dock to be able to meet all of the demand. They found
an unused building in an area of redeveloped downtown
Charleston, and with a Charleston local development corporation
loan, DwellSmart rehabilitated the property and led to more
revitalization in the area.
According to the U.S. Small Business Administration,
business created by low-income entrepreneurs have high survival
rates ranging from 57 to 90 percent. This is higher than the
rate for all small businesses. Microbusinesses contribute to
American economic growth and vitality. On average,
microbusinesses create 2.9 full and part-time jobs per
business. Small changes to enhance the capacity of such a large
and productive sector could reap major dividends.
Another microbusinesses example comes from CFED partner
PACE in Los Angeles. Deborah Stern attended PACE's
entrepreneurial training program while starting a business
making tamales. She won a PACE award of $5,000, which she used
to hire two employees and rent a kitchen. Her restaurant, La
Guera Tamalera in the Silver Lake neighborhood of Los Angeles
has become an area favorite.
Recognizing the importance of microentrepreneurship as a
critical strategy, CFED launched the Self-Employment Tax
Initiative in 2005, and we had three goals. First, build assets
for low-income households; second, create jobs, and third;
increase tax revenue by bringing more self-employed into the
formal tax system. Most of SETI's local partners are volunteer
income tax assistance or VITA programs, and these VITA programs
provide free tax support to low and moderate income taxpayers.
There are nearly 6,000 VITA community-based sites throughout
the country. For example, in Horry County, South Carolina, you
can find VITA programs at several libraries. In California,
VITA assistance is offered through the Monterey Park
Bruggemeyer and at El Centro de Accion Social in Pasadena. VITA
is a good example of successful public-private partnership. In
South Carolina, California, and the rest of the country, the
VITA sites represent local community efforts supported by
federal grants, state and local funds, and philanthropy all
coming together.
According to a 2012 National Community Tax Coalition (NCTC)
report, VITA helped more than three million taxpayers claim
$2.2 billion in tax refunds, while saving the federal
government 5.5 million in reduced processing costs. So while
VITA assists some low-income entrepreneurs, IRS restrictions on
allowable VITA activities have prevented many self-employed
earners from receiving any assistance at all.
Recognizing that VITA's narrow scope meant that sites were
turning away microentrepreneurs with few other options, NCTC
led an effort with CFED and the IRA to build on CFED's SETI
program. In 2010, we launched the Schedule C VITA Initiative
with 16 pilot sites that have served business with up to
$25,000 in expenses. In its three years of operation, the
Schedule C VITA initiative has not only brought thousands of
low-income entrepreneurs into the VITA system, it has done so
without reducing tax filing quality.
Our current research is examining how other systems, three
key federal policy systems--tax, but also workforce and post
secondary education--are supporting or failing these
entrepreneurs. And while this research will reveal new forms
worth considering, this Subcommittee need not wait to act in
support of microentrepreneurs. As you may know, in the previous
Congress, Ranking Member Chu proposed one significant step
forward, the Entrepreneur Startup Growth Act. And this
legislation, which is based on CFED's SETI program, would have
provided additional support for microentrepreneur tax-filing
assistance. The $1.5 million authorized by this legislation
could support hundreds of local VITA sites to serve thousands
of entrepreneurs.
So in conclusion, Chairman Rice, Ranking Member Chu,
members of the Committee, I would like to thank you again for
inviting me to testify today. We at CFED are eager to work with
the Subcommittee to expand economic opportunity, create jobs,
and support microenterprise. We would be happy to answer any
questions. Thank you.
Chairman RICE. Wow, what a very impressive panel. I sure
appreciate what you all do. I do not think there is anything
more important than job creation and economic development and
you are right at the heart of it, and I so appreciate what you
do.
Ms. Pate, I have to correct you on one thing. You said
Horry County, South Carolina, H-O-R-R-Y. I was the chairman of
that county and my wife said, ``I am not the First Lady of
Horry County. It is Horry County, thank you very much.''
Ms. PATE. Duly corrected.
Chairman RICE. She would be very upset if I did not correct
you on it. You know, I was a tax lawyer and a CPA in my real
life for 25 years, and I think one of the biggest problems that
businesses face is uncertainty. I think if they do not know
what the rules are--it is hard to play the game if you do not
know what the rules are. And so I think Washington is one of
the biggest creators of that uncertainty. Here we have been
operating under a continuing resolution for years. We have not
had a budget for years. We are considering the adoption of a
continuing resolution for a few months to get past this, that,
and the other. We have got this healthcare law getting ready to
hit on January 1st. I do not think anybody really knows the
effect of that. People say they do but I do not think anybody
really knows the effect.
What I am curious about is from your perspectives, I am
getting a lot of calls in my congressional office about these
things. How is the uncertainty around the Affordable Care Act
affecting the small businesses that you represent or work with?
Ms. Powell?
Ms. POWELL. Thank you, Mr. Chairman.
You know, for the past three years we have heard a lot of
different challenges from small business owners, and I think
that it affects certainty--and many of those challenges relate
to workforce issues.
Maybe I will just backup a second though because you
mentioned something about yourself and your career prior to
being a member of Congress serving for 25 years as a successful
tax lawyer. I cannot tell you the amount of legal issues small
business owners face, and that is probably an area, whether it
affects regulation around healthcare or employee relations or
access to capital, that they know the least about and there are
the fewest programs out there for them. I am sure your law firm
in South Carolina used to do pro bono work. We have been so
pleased to see a number of law firms around the country come to
us and say, ``Can we work with your small business owners?'' So
we now, in every single region that we operate, have law firms
like Weil Gotshal, Latham and Watkins, many, many, doing an
entire legal clinic. And I do think one of the areas that our
small business owners will certainly ask about are many of the
regulations that affect their workforce. And so I think that is
something we are hopefully preplanning for by giving them an
outward connection to these lawyers.
Chairman RICE. I had a fellow in my office yesterday who
owned two franchise auto service and he had 40 employees and he
did not want to open a third one because he would go over 50
employees. Are you hearing things like that?
Ms. POWELL. You know, we are hearing a number of challenges
but I cannot say it is specifically that. I mean, I will tell
you the truth, when you get into 10,000 Small Businesses, you
are really focused on whether or not you are going to be able
to grow your business. That is one element. But as Ms. Pate was
talking about, the largest growth opportunity in terms of job
creation are coming from small businesses--four, five, six
employees--but they could get to 40, could get to 100. And I
think that there are so many challenges that we hear. Do you
know what the biggest one is? All I do is work in my business,
not on my business. I do not know how to be a CEO. I do not
know how to make contacts. I do not know how to address all
these legal issues. So I would say we are hearing a whole
bucket of different issues.
Chairman RICE. Thank you.
Dr. Morgan, another thing I am hearing from a lot of
people, particularly in the service business, is that they are
cutting their employees back to 29, 28 hours a week. Are you
hearing a lot of that?
Mr. MORGAN. What we see is that entrepreneurs have a
passion. They are driven to start their own business, and that
passion is a powerful fuel. And once they get into their
business, there is a great deal of red tape that the small
business owner faces. And the uncertainty of future
legislation, whether it be ObamaCare or whether it be other
legislation, is what really concerns them, because most of them
do not have a staff. They may not have an attorney on retainer.
They may not have an accountant on retainer. And it is the
answers to those questions that puzzle them and trouble them,
and certainly they think about that before they hire people or
expand their business beyond a certain level.
Chairman RICE. Mr. Stevens?
Mr. STEVENS. I appreciate that, Mr. Chairman.
I can at least speak for our company. We are not at the
size that we have to worry about being 50 employees or
something related to healthcare additional complexities, but
that uncertainty has created issues for us. We want to focus on
growth, delivering the best service to our customers and not be
concerned with the uncertainty. So I know from our perspective,
uncertainty has been a problem, and the way that we addressed
it is we are working with a co-employment firm and essentially
we get to give them the headaches of dealing with the
healthcare issues. And whether we are at 12 or whether we are
at 112 employees, we have a predictable path and cost structure
to get there. So that was our way of trading uncertainty for
certainty, and it certainly has its costs and expenses. I can
tell you, obviously healthcare costs continue to rise and are a
big issue for a small business. And for the first several years
we were unable to offer healthcare. Financially, it just was
not feasible. We would have had to hire less people or not
grow. And I am thankful to say that we do offer, of course,
healthcare today and that has been a big issue on our minds.
Chairman RICE. And Ms. Pate?
Ms. PATE. I think that Ms. Powell pointed out a really
important need in the field, which is that entrepreneurs are
finding themselves surrounded by questions of legality, red
tape, taxes, et cetera, and this is another thing for them to
be worried about. So what we----
Chairman RICE. And do you agree that most of that comes
from Washington, D.C.?
Ms. PATE. Well, to the extent that this is the seat of
government authority and power, a lot of it is coming from D.C.
And so especially the entrepreneurs who are rural, who are
disconnected from cities, who do not understand the government
process or the legal processes are feeling very concerned about
the viability of their businesses with all of this change. So
what a lot of successful programs like PACE in Los Angeles are
doing is looking at integrated service delivery so that they
are providing access to taxes, which is a moment that you can
grab people in and say, ``And by the way, are you familiar with
the Affordable Care Act and the changes? Are you familiar with
regulations related to your food business,'' et cetera. So it
is like we are meeting the entrepreneurs where they are, with
every need that they may have.
Chairman RICE. It is hard to be familiar with regulations
that have not been written yet. You have to have ESP.
Ms. PATE. Yes. Or good lobbyists in Washington.
Chairman RICE. I am a big fan of Michael Porter. You
mentioned him earlier. An expert in national competitiveness.
And he is a firm believer that our tax code makes us not
competitive worldwide.
What do you all think about that? Do you think we need tax
reform? I do. I am curious.
Start with you, Ms. Powell.
Ms. POWELL. Well, can I say one thing about Dr. Porter? I
think he sees a number of things that the United States could
improve on to be way more effective.
One of the reasons we were really honored he was a co-chair
of the program is that over 15 years in running the Initiative
on Inner City Competitiveness, he actually did an analysis that
showed these inner cities, these urban communities are really
not just the right thing to do in terms of an investment but
they are the smart, economic, strategic thing to do because
they are underserved populations that do not have access to
capital, that do not have access to job growth. And he tracked
businesses for 15 years and found that 70,000 jobs came
directly from those communities when the business owners were
served. And I think that was something that was new because it
was really data that showed there is growth opportunity, not
just a good thing to do in terms of investment.
I could not speak directly to the tax reform issue, Mr.
Chairman, but I do think that the most important thing we have
learned is that we need to be bringing stories to you of your
constituents and the small business owners that we see. And
increasingly, our small business owners know now where to go as
they come into our program or some of the programs here, that
their voices matter to you and that they need to be talking.
Certainly, in our legal clinics, taxes come up quite a bit.
Chairman RICE. Thank you, Ms. Powell.
Dr. Morgan?
With all due respect to CPAs and attorneys, Mr. Chairman, I
would like to say that the entrepreneurs who start small
businesses would like to spend as little time and as few of
their resources on those services as they possibly can and move
forward with growing their business and being successful
entrepreneurs.
Chairman RICE. So you are thinking a simpler tax code would
be a good thing?
Mr. MORGAN. So my belief is that if we can simplify the tax
code and other laws that are coming down or that are out there
in uncertainty land, the easier it will be for entrepreneurs to
be successful, particularly in challenging economic times.
Chairman RICE. I completely agree with that. I think we can
compete with anybody worldwide, but the government stands in
the way.
Mr. Stevens, what do you think about that?
Mr. STEVENS. Mr. Chairman, I agree. I think Dr. Morgan put
it well that all things being equal, simplicity is better. As a
small business, and as one that speaks with a number of
entrepreneurs, uncertainty and complexity are the enemies of
growth. We need to focus on innovating and creating jobs and
serving the customers and delivering what we do an spend less
time on uncertainty and tax issues and other things.
Chairman RICE. Comply with government red tape.
What do you think, Ms. Pate?
Ms. PATE. I think that entrepreneurs that do not understand
the tax code have three choices. One is to just figure it out
themselves. The second is to hire a commercial tax preparer.
And the third is to not file. If they do it on their own, the
chances are that they will make mistakes and they will incur
liabilities that they are not prepared to pay. If they hire a
commercial preparer, they may be paying exorbitant rates or----
Chairman RICE. That is clearly--as a tax lawyer, let me say
that is money well spent.
Ms. PATE. Yes. Yes. Assuming they can afford it, right? It
may be out of their ability, right, as brand new businesses.
And third, not file. And if they do not file, we know what
happens then. They are contributing to the tax gap and they are
making themselves unqualified for any support through the tax
code and also for earned income tax credits, child tax credits,
and other benefits they may be eligible for.
Chairman RICE. Well, I completely agree with you. I think
our businesses can compete with anybody, but the government has
got a noose of red tape around their neck and we have got to do
everything we can to loosen that and make the road ahead as
easy as we possibly can. We do not need to be an obstacle; we
need to be somebody that encourages and makes it easier for
business.
Thank you very much. Next up will be the ranking member,
Ms. Chu. And I am going to leave now. I cannot thank you enough
for being here and what you do to encourage business and jobs
in this country. Thank you.
Ms. CHU. Thank you.
I am going to yield to Congressmember Schneider, because he
is under time pressure due to a competing committee. So
Congressmember Schneider.
Mr. SCHNEIDER. Thank you very much. And I thank you for
letting me jump ahead of the line, so to speak.
If any of you in your small business or small businesses
you advise can try to find a way to be in two places at one
time, we all would be so grateful.
Speaking of grateful, let me say thank you for what you all
are doing. I spent my career as a small businessman mostly
advising other small businesses. I know the companies you are
dealing with. In particular, I know startup companies are
dealing with so many challenges. For a lot of them it is their
dream. They are going to cobble together all the pennies and
nickels and dimes that will get them to there, and every single
penny they spend is crucial and it can be the difference
between success and failure. And so much of what they are
facing they are facing for the first time. So to have guidance
is also crucial. But they cannot afford the guidance
oftentimes, whether it is a CPA or an accountant, or in my
case, a strategy consultant. These small companies do not have
the resources to reach out to people who are providing those
for a fee. And whether it is a volunteer organization or a
group like 10,000 Small Businesses from Goldman Sachs or what
you are doing, Ms. Pate, is critical because these companies
grow. They start out. Maybe it is a barber shop or a
delicatessen or even a food cart, and they start out with that
but their aspirations are to be something great and you provide
them the pathway. So let me just again say thank you for what
you are doing.
In that context, some questions I would love to explore.
In today's environment--and Mr. Stevens, I left you out as
a small businessman, so maybe I will start with you on the
question--there are things I think the government does do to
help, and yours is a technology business, things like 179, the
accelerated depreciation, how important is something like that
as you decide where to put your money to grow your business?
Mr. STEVENS. Thank you. I appreciate that. That is a great
question.
That has been help for us, the section 179. I know other
business owners say it has been the deciding factor whether or
not to invest further. For us it has not been. We have been
fortunate enough to grow dramatically either way, and really
before growth, even if it was not ideal from a tax or other
perspective, but I have spoken with many entrepreneurs where
that influenced their ability to invest in their business, buy
additional equipment, do the other things they wanted to do,
which later led to additional job creation. And without that
credit they would have either not done it or put it off another
year or another two years.
Mr. SCHNEIDER. Great. Thanks.
From your experience, the rest of the panel, are you seeing
things like that, other things the government does that helps
the client companies you are working with?
Ms. Powell?
Ms. POWELL. Thank you for the question.
Ranking Member Chu described one that we have been very
proud to partner with, which are the SBDCs. These local small
business development centers are working with hundreds and
hundreds of small businesses and they are bringing them in and
assessing their needs, and then being able to refer them to one
of our organizations or many of the other programs out there.
So we have a large nominating partnership with them across the
country. And what I think they are also trying to do is one of
the things we have learned is that 10,000 Small Businesses is
not a lecture format. We put every cohort in growth business
groups, and so they actually, as I mentioned earlier, have this
peer-to-peer learning and they are teaching each other or they
are relying on each other. They are like living case studies of
challenges. The businesses may be extremely diverse, but the
challenges are common. And one of the most interesting things
we have seen is how they then recommend government contracting
programs. They teach some of the minority-owned businesses--
women-owned businesses, and other minority-owned businesses to
apply for that status, which would surprise you, Congressman,
how few businesses out there know there is this referral
network that is created. So I would highlight the SBDCs and
just the opportunity in some of the government programs to
build these networks in communities across the country.
Mr. SCHNEIDER. Great.
Dr. Morgan?
Mr. MORGAN. Congressman Schneider, we refer our students to
many of the federal government websites, and particularly to
the SBA for assistance in starting their businesses and in
funding their businesses. And moving ahead with the challenges
of understanding the laws and the rules and regulations. So you
are absolutely right. There are many resources available
through the federal government for our small business
entrepreneurs.
Mr. SCHNEIDER. So I see I am down to my final 30 seconds,
so let me just close with a comment. And again, a
congratulations. The other Committee I am balancing is Foreign
Affairs, so congratulations on 10,000 Women. That is an
incredible program Goldman does and is a thing that I think
everyone in the United States should be proud of.
With small businesses, the idea of partnerships, the
public-private partnerships where government works with
nonprofit organizations like what you are doing, with private
companies like what Goldman Sachs is doing to help drive the
engine. Sixty-five percent of the jobs in this country are
created by small businesses. Fifty-five percent of the jobs are
in small businesses because some of those small businesses grow
to be large and it moves the numbers. If we are going to have
another American century, it is going to be on the innovation,
creativity, and entrepreneurial spirit of the companies you are
helping. So again, thank you for all that you do.
Mr. SCHWEIKERT. [Presiding] Thank you to the gentleman from
Illinois.
Ms. Chu, can I extend you a courtesy, if you would like to?
Ms. CHU. Thank you, Mr. Chair. I appreciate that.
Well, Ms. Pate, your organization's SETI has awarded more
than $500,000 to 40 organizations to offer tax preparation
services. If these services were not available to small
businesses, the microbusinesses, where would these individuals
go for tax preparation services?
Ms. PATE. There is not a lot out there for them, frankly.
As I mentioned before, if they choose to do their taxes on
their own they may have trouble with that. We only at this
point have 16 pilot sites in this VITA initiative with the IRS
and NCTC, and what we are finding is that over 50,000 of the
people who go through these VITA Schedule C programs return to
get their taxes done the following year, so we see a lot of
interest and need through just these 16 pilot sites, so we can
only imagine what would happen if this was available on a
broader scale, and it is possible that that could happen
through VITA. But we also need efforts like the Entrepreneur
Startup Act that you introduced last congressional session
because it would create much more ability for more than just
VITA programs to provide free and low-cost tax preparation. It
could be done at a state agency level. It could be done at a
local agency level. It could be done in a public-private
partnership. There are many, many opportunities to expand this
model of free and low-cost tax preparation far beyond VITA and
make it not as dependent, frankly, on the VITA pilot that we
have been pursuing.
There are a lot of microenterprise development
organizations that get funding from the small business
programs, including the program for investment in
microentrepreneurs, women's business centers. You mentioned the
SBDCs and also the microloan programs that are trying to serve
entrepreneurs best as they can but their focus has necessarily
been on lending and training and technical assistance and not
so much in the tax field because you must have specialty and
expertise as we know. So we need to focus on making
opportunities much more plentiful for tax preparation than they
currently are, and the way to do that would be to create some
legislation that would enable that.
Ms. CHU. Thank you for that.
Also in your testimony you mentioned PACE, an organization,
of course, with which I am very familiar because it is in Los
Angeles, and you talked about a business that received a grant
from PACE for $5,000 which it used to launch a restaurant. From
a program-wide perspective, how successful is the PACE program
in cultivating long-term successes like that of the restaurant
owner and what could we learn from it?
Ms. PATE. So PACE is a wonderful example of one of these
integrated service delivery approaches that I mentioned
earlier. So they provide workforce training. They provide
business development training, financial education, individual
development accounts which are matched to savings accounts. And
in the fiscal year 2010 through 2011, and cumulative, they had
a number of successful outcomes. First, they served 3,526
entrepreneurs; they started 142 new businesses; 400 businesses
were either stabilized or expanded; 542 total businesses were
assisted; 981 jobs were created; $108 million in sales or gross
revenue was obtained; and $9 million in tax revenue generated
for local government by businesses assisted through PACE. So
these are outcomes that are pretty stunning for a nonprofit but
they are not unusual. There are a number of other
microenterprise development organizations throughout the
country as evaluated by the field program at the Aspen
Institute through their Microtracker Program where the data
suggests that since the Great Recession, microenterprise
development organizations have increased their lending by 25
percent and the number of individuals assisted by 15 percent.
Outcomes data collected in 2011 from 1,200 microentrepreneurs
served by 23 organizations demonstrate the power of these small
businesses to produce jobs for their owners and for others, and
many of these small business owners are disadvantaged otherwise
in the labor market. So they were having a hard time getting a
job, so creating their own job was their best option.
Ms. CHU. Thank you.
Ms. Powell, how do small businesses find out about the
10,000 Small Business program, and what is the best way to
reach out to these small businesses so they know about it?
Ms. POWELL. Well, first, we appreciate champions like you
who refer them to applying, and then that is where I think our
community partners really come in, whether it is the NFIB, the
local chambers, Hispanic chambers. One of the things that was
really important to Goldman Sachs as a firm was that this is
not just our effort, but rather it is this consortium of
institutions who are committed across the country. It is also
why when we go to a market we are not trying to have a generic
imprint but rather a customized local imprint that is developed
along with the local community because that is how we can
ensure that it will really build a capacity that can last. So
we have a lot of advertising for the program the SBDCs recruit.
The community college in each district puts out calls for
applications, and today, with the launch of the national
program we hope people will go to our website, gs.com/
10000smallbusinesses, and learn how to apply from throughout
the country for this program.
Ms. CHU. And what businesses are the ideal fit for your
program?
Ms. POWELL. Well, we are really hoping that Damien, that
Mr. Stevens will apply, because he is a perfect target. As you
can tell, he has had a proven track record. He already has 12
employees and when he said earlier that he was looking for
access to networks, I think that is what we could really
provide. I think he would be able to pitch Servosity very well
to other small business owners in the program. But really, it
is businesses that have been operating a couple of years, at
least four employees, that are poised for growth, and that we
believe this program can really make a difference in.
Ms. CHU. And you have worked with community colleges to
ensure that business owners get training. So far what has
Goldman Sachs learned about the capacity of community colleges
to educate entrepreneurs?
Ms. POWELL. Well, thank you for that question. We have been
really impressed with the community colleges that we have
worked with throughout the country. Community colleges, as you
know, are one of the most important platforms now in higher
education in the United States, particularly when you have a
program where adult learning is central to it. And so they are
experts in adult learning, in short-term programming,
continuing education, but importantly, they are often the
bedrock of a community, and immigrants and a very diverse set
of individuals feel very comfortable going to a community
college. What we learned though was that while they had a lot
of workforce training programs, and that is certainly an
expertise of community colleges across the country, they did
not necessarily have entrepreneurship centers or centers where
you are not learning to train for a specific job that someone
created but rather you want to learn how to create jobs through
your business and grow your enterprise. And so I think that is
what we believe is the lasting piece of the infrastructure we
have invested in which are these entrepreneurship centers. More
than 200 community college professors have been trained through
10,000 Small Businesses. All of the community colleges have
access to the curriculum. And then we are very pleased now that
we are leaving a legacy of local case studies in each of these
communities. So we have been impressed with their dedication.
The final thing I will say is that community colleges are
entrepreneurial themselves. No offense to the four-year
institutions that we are also proud of. I will say we see them
being incredibly entrepreneurial and this is a program where
you have to start from scratch, you have to get the results
back, and make adjustments to make it even better, and we have
been really, really pleased to see it. And we are honored to
have Walter Bumphus who is the head of the Association of
Community Colleges, on our advisory council helping us kind of
implement these lasting learnings across the country.
Ms. CHU. That is very impressive, and I am sure you are
going to see multiplier effects from training so many
professors in the community colleges.
Dr. Morgan, it is so impressive that MOBI was able to
develop its program on its own. Does MOBI work in tandem with
the SBA's entrepreneurial programs? And considering your
extensive experience training small businesses, what are some
of the things that similar SBA programs could do better?
Mr. MORGAN. Well, as I mentioned, MOBI was on the website
of the SBA until 2006, and then there was a disagreement about
intellectual property rights for the MOBI curriculum. And the
MOBI board did not want to give up the ownership of their
intellectual property rights, so the SBA removed us from their
site. But we would like very much to continue to work with the
SBA. We have a curriculum. We update that curriculum. In fact,
we will soon be relaunching our website before the end of the
year with a more modern, up-to-date curriculum and with new
video. And we are also looking at technology and how do we
continue to expand MOBI's force around the world. So we would
like to be in partnership with the SBA. We do refer our
students to the SBA on a regular basis for the services that
they provide so well.
Mr. SCHWEIKERT. As you will learn, we have lots of bells
and buzzers. I have been here three years and I still have not
figured out which bell means what.
[Recess]
Ms. CHU. I will ask then a couple more questions and yield
to the chairman.
The other thing I was very impressed by, Dr. Morgan, was
you talked about the fact that you had classes that were taught
in Spanish and that prompted eager small business owners to
come by the busload from all across Los Angeles. Can you share
with the Committee what kind of difference language access has
made for non-English speaking entrepreneurs and what training
in other languages benefit the business community and job
creation?
Mr. MORGAN. Well, we have just launched our
myownbusiness.org/espanol, and it is the website in Spanish for
Spanish-speaking patrons of MOBI. And we have now 16,000 people
per month looking at that website and beginning to utilize it.
So we want to continue to expand our MOBI base and we want to
continue to convert it into additional languages so that all
people can access it and make use of our curriculum.
Ms. CHU. Very good.
Mr. Stevens, based on your testimony it sounds like the
NEXT Upstate provides an ecosystem for high growth
entrepreneurs to learn from each other and grow. What sort of
information and education were you able to receive from your
fellow entrepreneurs that you were not able to receive
elsewhere?
Mr. STEVENS. Yes, thank you, Ms. Chu.
This particular ecosystem has really been fundamental in
our growth, and I guess as Ms. Powell pointed out as example,
the community colleges did not have an entrepreneurial program.
A lot of those resources to learn how to go from point A to
point B and then point B to point C were not there and the NEXT
ecosystem emerged really with entrepreneurs and the Greenville
Chamber to become its own economic development initiative but
driven by and chaired by the entrepreneurs. And so the
entrepreneurs decide what happens, what is needed. The
committee decides what we need as entrepreneurs. And so it
changes. Things change. When the Affordable Care Act came up,
we brought in people to speak about that. When taxes become an
issue, we have people speak about that. Legal issues, growth
issues. So just about anything you could mention, we have
brought in speakers to help educate. We have had CEO
roundtables to help peer-to-peer facilitation. And we have even
had special groups formed to address certain issues that only a
subset of the group is interested in.
Ms. CHU. Thank you. I yield back.
Mr. SCHWEIKERT. Thank you, Ranking Member Chu.
And for My Own Business we have actually handed out that
website many times at many of the different forums. Can I
actually solicit a couple questions and give me some education
here?
If you were--we will call it a microbusiness--and are we
comfortable with the definition under 10 or do you prefer your
definition of under four?
Ms. PATE. Under 10 is fine.
Mr. SCHWEIKERT. Okay. Under 10. In today's world, in the
United States, what do you think your single, biggest
difficulty is?
Ms. Powell?
Ms. POWELL. Difficulty if you are a microenterprise?
Mr. SCHWEIKERT. Yeah. So you are the 10-person plumbing
business or little retail business. Because where I am trying
to lead to is my understanding from what we have picked up from
national datasets is access to capital. I have amazing
appreciation for education on how to do that but loop it back
in. I mean, does anyone disagree with being able to find money?
Ms. POWELL. Well, thank you for asking that, Mr. Chairman,
because that is why our program believed that you cannot--in
order to spur the most growth and to support these businesses
most effectively, you have to have three legs of the stool--
education, capital, and mentoring and networking. And that is
why we actually committed, of the $500 million, $300 million
was committed to capital. And a very specific kind of capital
if I may describe it. We are actually providing that capital to
a nonprofit lending platform called Community Development
Financial Institutions. Those are lenders who are trying to
give access to capital to the business owners you are
describing.
Mr. SCHWEIKERT. Can I back up just a tiny bit on you? We
have also had some of the folks from--is it Samuel Adams
Brewery--come talk to us and the amounts of money they have
been putting out in the street in microlending to small
businesses.
Ms. POWELL. This is not microlending.
Mr. SCHWEIKERT. Well, I think they go up to 10,000.
Ms. POWELL. Yeah, we go up to 750,000, the average loan for
us. And so we are above the space. I think that is what is
important, is there is a lifecycle of a small business owner.
So you might start out as a four-person Mexican restaurant and
you can grow into a catering business, et cetera.
Mr. SCHWEIKERT. I am with you on the--where I am trying to
get to is okay, we have had a conversation here of there is
some platforms, though you believe it needs more growth and
more government sponsorship, of tax preparation help, of
mentoring and education. You are actually sort of covering all
there with both the mentoring and access to capital, and trying
to teach. I have done these classes where you teach folks how
to write a basic business plan. One of my great passions and
concerns is there are a lot of wonderful actors out there in
the community. Goldman Sachs, what they are doing is at a
completely different scale than much of what we see, but if I
turn to Dr. Morgan and say your website for the Phoenix market
or the LA market, can you have on there everything? Here is the
website for the Department of Revenue. Here is how you file
your form online. Here is your health license at the county.
Here is how you get your tax ID number. Here is how you make an
app for this. Are we seeing any unifying force out there that
is bringing all those options together? So if I am that really
busy entrepreneur and do not get to have time to go sit in
class and sit with my mentor, at least I have access to
information that also leads me to that capital and leads me to
that information?
Ms. POWELL. Well, I do think you are hitting on something
that is a great need, Mr. Chairman, and I think one of the best
things that this Committee hearing is doing is bringing all of
us who are doing different pieces of the work together. And I
do think that is an opportunity for this Subcommittee, frankly,
to bring together more of the public-private partnerships,
showcase them together, and have us frankly not only work more
together but find ways to advertise our work in a more
comprehensive method.
On the capital piece, for example, the work that Ms. Pate
is doing is helping microlenders. We hope that the work that we
are doing, what we call small and medium-size borrowers who do
not have access to capital, and then there are other forms at
the end of that lifecycle when you have--when Damien breaks 100
employees and can go access a large commercial bank loan, that
capital is we hope increasingly available. What we are trying
to do is target markets where capital does not now flow to
those borrowers.
Mr. SCHWEIKERT. Well, we are going to come back and talk to
that because I still think we are hitting very close to sort of
a revolution in access to capital with crowdfunding, if the SEC
ever finishes its rule sets and some of these other things out
there.
Dr. Morgan, if I right now lived in wherever in the United
States and wanted to go online and have a single porthole
telling me my access to information, my regs, my filings, my
access to money, does such a thing exist, and are you trying to
get it there?
Mr. MORGAN. Mr. Chairman, you ask a question that our board
has spent time discussing because to our knowledge there is not
that location, that website where you can get all of that
information. And we have talked about a continuing education
program for our entrepreneurs, for our graduates, so that we
can continue to have a discussion where the entrepreneurs share
that kind of information. As they seek it out, they would put
it on a website. They would put it----
Mr. SCHWEIKERT. So you would crowdsource the information?
Mr. MORGAN. So we would crowdsource the information;
exactly.
Mr. SCHWEIKERT. Okay.
Ms. Pate, in your watching the world, do you see such a
porthole with that information coming together?
Ms. PATE. Thank you for that question, Mr. Chairman.
There are organizations at the national level, like the
Association for Enterprise Opportunity (AEO), that are working
to create these kinds of platforms in partnership with the
private sector.
Mr. SCHWEIKERT. Can I ask you just a one-off question?
Ms. PATE. Sure.
Mr. SCHWEIKERT. If you were to think about all the
different groups that are out there trying to help small
businesses, and those that we have created here in government,
but also those I have created from my university, my community
college, my NFIBs and all the other groups, I mean, just off
the top of my head I bet you I can name two dozen.
Ms. PATE. And that does not even count the local
organizations that are providing that kind of one-stop shopping
for their clients.
Mr. SCHWEIKERT. I am trying to think of the
microentrepreneurs that you and I have all met in our political
lives. They are wonderful people. Their lives are so incredibly
busy. Time is in many ways their most precious commodity. And
my fear is our attempt to help, one of the most powerful things
we could all do is sort of narrow that portal.
Ms. PATE. So may I make a suggestion? Years ago, when I
first came to D.C., I was part of a Clinton administration
intra-governmental task force on microenterprise, and it
brought together the Department of Treasury, the Department of
Labor, the SBA, the Department of Education, all of the
relevant agencies on a monthly basis, and we all came
together--nonprofits were invited to the table, as well as the
private sector--to talk about how to be more cohesive and
aligned in the way we deliver services to the field.
Mr. SCHWEIKERT. From just a personal standpoint, I believe
actually Dr. Morgan may actually have the solution and that is
the crowdsourcing of information. Whenever we build
bureaucracies to try to help us do it they mean very well but
they do not move fast enough, and then you get people who fuss
over who owns this copyright, who does not do this, or you do
not get to be on the website. There has got to be a better way
to do it because if you have the 800 pound gorilla, like
Goldman Sachs--excuse me, 800 pound helper--it is a very
friendly, it is a cuddly gorilla. Those sorts of resources and
talent for all these groups that--I used to be treasurer of a
very, very large county and just the number of businesses that
would come in every day trying to understand where they get
their licenses, what are their tax liabilities and those
things, and we found when we built really strong, powerful
websites they stopped calling because they got the information
easy and we stopped burning their precious time.
And the last bit of my rambling here, I really believe with
what we all did in bipartisan fashion now two years ago in the
Jobs Act--there are things we are going to have to find a way
to clean up and fix because there are problems in the design
and we need still for the SEC to finish its rule sets, but the
future crowdfunding where it may be the tiny little bakery, it
may be up to the million dollars, there is a revolution coming
for raising money. Will we have the backbone to educate our
small entrepreneurs out there how to access it?
With that, my friend from New Jersey, you are up.
Mr. PAYNE. Thank you, Mr. Chairman and Ranking Member Chu.
I appreciate this opportunity to ask my question.
The panel's testimony is very encouraging and I applaud
your effort to support entrepreneurs and small businesses.
I notice that several testimonies reference the use of
government program or resource supplement to supplement your
efforts or attract additional private dollars. This is also
encouraging as we work to support and strengthen these
programs. So my question is, several of the testimonies also
spoke to efforts of supporting low-income or disadvantaged
business owners. Can anyone speak to the challenges that have
been identified facing this particular population and your
company's efforts to address them? And does anyone have
suggestions on what we can do at the federal level to better
support these businesses?
Ms. Powell?
Ms. POWELL. Thank you very much, Congressman Payne, and we
are honored to have a number of your constituents who have
graduated from 10,000 Small Businesses, and actually, a number
of them who came through nominations from Marc Morial and the
National Urban League in the area.
I think that one of the learnings from 10,000 Small
Businesses, particularly because we are implementing our
program through community colleges, and I was referencing
earlier the fact that these academic institutions draw from the
community and often do have a higher percentage of
disadvantaged communities. Our businesses, our 10,000 Small
Business graduates are actually 50 percent women- or minority-
owned businesses, and this is something that we have been
extremely proud of, although we are open for all businesses to
apply. But I think what is happening is that this particular
program and the suite of services it is providing is needed in
communities where there are very hard-working, passionate small
business owners who are saying, ``I just need a little bit of
knowledge, some capital, and mentoring support and I will do
the rest of the work. I will make the business grow.''
I will give you one example, if I may, which is Saudia
Davis. Saudia is a graduate from our first cohort in the New
York/New Jersey area. Saudia has started a company called Eco-
Cleaning in honor of her grandmother, who sadly died of cancer
as a result, she believed, of the carcinogens in the chemicals
she used as a housekeeper for more than 25 years. So she wanted
to start a commercial cleaning company that used eco-friendly
products. She had started the business, had been operating for
two years, got into 10,000 Small Businesses, learned how she
needed to train her workforce better, write a growth business
plan, pitch, become a minority-owned business so that she could
compete for other contracts. I am so proud of her and the
results she has had. She has created more than 15 new jobs.
American Express named her as one of the Make Mine a Million
business owners. She accessed capital from Seed Co. Financial,
her first loan from a CDFI in New York that is one of our
nonprofit lending partners, and she is just doing terrific. She
has become a role model in the community. So we have so many
examples where if you provide access just to the tools, these
extraordinary small business men and women will do the rest of
the work.
Mr. PAYNE. Absolutely. I totally agree with you because in
a lot of situations we find just a little technical knowledge,
you can see the spirit. You can see that they are ready and
willing and the effort is there but they do not have the
technical knowledge. There are certain small aspects that they
need to make them successful, so I really applaud a program
such as that.
Anyone else? Dr. Morgan?
Mr. MORGAN. Congressman Payne, thank you for the question.
Our program started in Compton, California by Phil Holland,
and Phil knew that that was an area with a high profile of
minority population and a lower socioeconomic community, and he
has been absolutely committed from day one that our program
will be offered free of charge so that there is no barrier to
people accessing the education necessary to start your own
business. And one of the major emphases of our website is how
to develop a business plan that will help our entrepreneurs
compete for capital in the capital market. So MOBI will
continue. It is being funded by estate plans from Mr. Holland
long into the future so that it continues to be accessed free
of charge by any person who wants to start their own business.
Mr. PAYNE. Thank you, sir.
Ms. Pate?
Ms. PATE. Thank you, Representative Payne.
We, at CFED, have focused for the last 45 years on low-
income and minority communities, women, people with
disabilities, and eradicating some of their barriers to
starting their own businesses. So we fight very hard at the
federal level to promote year after year funding for the Small
Business Administration programs that are surveying this
population. However, there is never enough funding through
these programs and they are not, frankly, reaching some of the
hardest to serve, most disadvantaged entrepreneurs. And what we
are hopeful is that through the work of groups like MOBI and
others, 10,000 Entrepreneurs, et cetera, that we can begin to
raise the level of awareness that programs are out there and
that they are having this kind of wonderful impact and maybe
get more funding in the market for these groups. I do know that
the work of the NAACP, in addition to the work of CFED and the
Northwest Area Foundation will be producing next week in the
Northwest a series of informational conversations about
African-American asset building and entrepreneurship in
particular, and I am helping to lead that effort. So we will be
unearthing what we think will be some barriers to accessing
those services and getting a better sense of, well, who are
serving entrepreneurs of color and women? And what are some of
those gaps, and how can we begin to close them?
Mr. PAYNE. Well, I appreciate and commend all your efforts.
It is my constituents that are looking for these opportunities,
and it is a leveling of the playing field. I am not looking for
people that are just going to show up, but we know that there
are so many people that have the entrepreneurial spirit but
just have not had the training and understanding of it. First
generation entrepreneurs. They do not come from a history of
that, their father and their grandfather. So this little push
and this help in getting this population ready and prepared
helps the nation because if they are able to build these
businesses, then they do not have to look on the other side for
the help that they need if they are not successful. So this
helps the nation become stronger in serving its population, and
I commend all your efforts. Thank you. I yield back.
Mr. SCHWEIKERT. Thank you, Mr. Payne.
With that, I think we are going to shut down. Although I
will tell you I was all giddy when I heard MOBI was here. Now,
for those my age it is a very popular musician. I am very fond
of him.
Mr. MORGAN. I am sorry to have disappointed you, Mr.
Chairman.
Mr. SCHWEIKERT. Yeah, it is okay. I think he would be
creeped out to have a conservative republican as one of his
fans anyway.
But with that I want to thank you for your participation
today. The testimony given to us and the examples of the
private sector providing small business with the knowledge that
they need to achieve and maintain success. Through your
efforts, entrepreneurs are gaining the skills they need to
adjust to the steep learning curve that comes with starting
their own business in today's challenging environment. It has
been an honor for the Committee to have you here. Be prepared.
There may be some other questions and some other members here
who are not here who may reach out to you and ask for your help
for some input.
I ask unanimous consent that members have five legislative
days to submit statements and supporting materials for the
record.
Without objection, the hearing is now adjourned.
[Whereupon, at 11:29 a.m., the Subcommittee was adjourned.]
A P P E N D I X
Testimony from Dina H. Powell
Director of Corporate Engagement, The Goldman Sachs Group, Inc.
President, The Goldman Sachs Foundation
House Committee on Small Business
Subcommittee on Economic Growth, Tax, and Capital Access
September 19, 2013
Chairman Rice, Ranking Member Chu, Members of the
Subcommittee, thank you for the opportunity to testify before
the subcommittee regarding Goldman Sachs 10,000 Small
Businesses and the critical issues of supporting small business
growth and job creation in the United States.
As you know, the success of small businesses is critical
for a strong national economy. According to the U.S. Small
Business Administration and Bureau of Labor Statistics, over
the last two decades small businesses have been responsible for
creating 2 out of every 3 net new jobs and currently employ
roughly 60 million Americans, half of the private sector
workforce.\1\ But despite general improvement in the nation's
overall economic condition, challenges persist for many small
businesses.
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\1\ http://www.sba.gov/sites/default/files/
FAQ--Sept--2012.pdf
So, with this in mind, and based on the success of Goldman
Sachs 10,000 Women--our global effort of supporting women
entrepreneurs in developing and emerging economies which will
serve its 10,000th women this year--we launched 10,000 Small
---------------------------------------------------------------------------
Businesses in 2009.
10,000 Small Businesses, or 10KSB, is a $500 million
initiative to help small businesses in the United States by
providing entrepreneurs through an integrated program a
practical business and management education, as well as access
to capital and business support services. The program is based
on recommendations from leading experts that greater access to
this combination of education, capital and support services
best addresses barriers to growth. The large network of
national and local implementing partners that we work with are
what make this program a success.
The program is currently operating in fifteen sites: the
metro areas of Chicago, Cleveland, Houston, Long Beach, Los
Angeles, New Orleans, Philadelphia, New York and Salt Lake
City, and in a number of states with a capital-only offering,
including Virginia, Kentucky, Montana, Oregon, Tennessee and
Washington. In these capital-only states, the program's
partners focus on making capital available in underserved rural
areas which may lack the presence of commercial banks.
10KSB is designed for small businesses poised for growth.
Applicants must demonstrate a commitment to growing their
businesses and crating jobs within their communities. Business
owners targeted include, but are not limited to those with:
revenues between $150,000 and $4 million; in operation for at
least two years; at least four full-time employees; and a
business model that could scale to create more jobs.
10KSB provides comprehensive support for small businesses
owners. Based on a high quality curriculum designed in
consultation with industry experts--principally Babson College,
the U.S. News and World Report number one ranked undergraduate
business school for entrepreneurship for 17 years running--
10KSB enlists community colleges to deliver business training,
local mission-driven capital providers to make small business
loans, and local non-profit partners to provide technical
assistance and business support services. In addition, Goldman
Sachs employees and senior management are actively engaged in
various aspects of program delivery.
For the educational component, The Goldman Sachs Foundation
is contributing $200 million to fund business owner training at
partner community colleges, and faculty training and technical
assistance to help build our partners' capacity. Business
owners receive a practical education that focuses on skills
they can apply immediately. The 360 degree approach--business
training, access to capital, one-on-one businesses advising and
exclusive networking opportunities--that help each participant
develop a tailored business growth plan that they begin to
implement even before completing the program. Because of this
personalized training, the program is able to serve businesses
within a highly diverse set of industries ranging from
construction, food service and security to technology,
marketing and health care.
For the capital component, $300 million has been allocated
nationally for a combination of lending and philanthropic
support to non-profit Community Development Financial
Institution (CDFI) Loan Funds and other community-based
lenders. The investment will increase the amount of growth
capital available to small businesses in underserved
communities and expand the capacity of mission-driven lenders
to deliver financing and technical assistance to small
businesses. Goldman Sachs partners with CDFI loan funds and
other nonprofit lenders due to their ability to flexibly
underwrite capital to businesses which typically don't qualify
for bank financing. The CDFI funds not only provide capital,
but also provide extensive technical assistance to help these
businesses become ``bank-able''. The loan funds provide loans
in amounts less than what conventional banks like to offer--the
average loan size is $200,000 and can often be made as an
unsecured loan for working capital. In addition, to help our
capital partners serve the many deserving businesses, Goldman
Sachs provides a loan loss reserve. Separately, 10KSB provides
grants to fund the capital partner's operational capacity to
increase their lending generally.
The program's strength is derived from a network of over 80
partnerships designed to maximize its reach and results. This
includes the leadership provided by the program's Advisory
Council co-chaired by Goldman Sachs Chairman and CEO Lloyd
Blankfein, Berkshire Hathaway Chairman and CEO Warren Buffett,
and Dr. Michael Porter of the Initiative for a Competitive
Inner City and Harvard Business School. Furthermore, local
partners at each site, including both public and non-profit
sector participants, are empowered to implement the program in
serving the local small business population. This is the
linchpin on which the program's effectiveness relies. Our
partners help the program from the design to implementation to
recruitment of businesses depending upon their particular
expertise. The program aims to bring together local
organizations with similar goals to work together in new ways
and develop cooperative relationships that will last for years
to come. In working with our partner across the United States,
the program is building capacity and cooperation within local
small businesses and entrepreneurship ecosystems. These
national and local organizations, together with Mayors and
other government leaders in the communities in which we
operate, are working together to support this program, small
business development in their communities, and are building
relationships that will long outlast this program.
Across the United States, 10KSB works. To date, over 1,600
small business owners have participated in the program. The
education component maintains a 99% graduation rate, and just
six months after graduation, 63% have reported increasing their
revenues and 47% have reported creating net new jobs. The
program is creating a strong network of small businesses as 76%
of graduates end up doing some form of business together,
keeping more money within the local economy. In addition,
approximately $56 million has been funded to over 265
businesses for growth capital, of which 75% are located in low
and moderate income levels, and 50% are Women/Minority Business
Enterprises.
The following examples illustrate participating businesses'
success across the country:
Rhys Powell is the founder and President of Red
Rabbit, a company that provides alternative and healthy
meals for school children. He founded the company in
2005 and operates the business from Harlem, New York.
Rhys joined 10KSB at LaGuardia Community College in
2011 to enhance his proficiency in managing the
business operations, hone his negotiations skills and
gain a framework to plan strategically for growth.
Since joining the program, he has reported an increase
in revenues by 300%, winning six new contracts totaling
almost $1 million from different schools across New
York City, and hiring 90 new employees since starting
the program.
Payal Kamdar is the founder of VSolvit, which
provides geospatial and information technology
consulting services and solutions to government and
private sector clients. Founded in 2006, VSolvit LLC is
an award winning 8(a), HUBZone, Woman Owned company.
Payal joined 10KSB at Long Beach City College in 2011
and credits the program with enabling her to think
simultaneously across multiple dimensions to drive
VSolvit's growth. Since graduating from the program,
VSolvit has reported increasing revenues over 500% and
growing from 17 to 120 employees. VSolvit was recently
awarded a 5 year, $53 million software development
contract with the U.S. Navy. VSolvit was also selected
as the US Department of Agriculture (USDA) Woman Owned
Business of the Year in 2011 and Payal was selected as
the 2012 Small Business Administration (SBA) Region IX
Minority Small Business Person of the Year and 2013 Los
Angeles Minority Business Person of the Year. VSolvit
has also begun work on a breast cancer initiative by
mapping diagnosis rates, then identifying areas where
lag time of diagnosis is above the national average,
which then allows teams to send mobile health units
into those areas to bring diagnosis timing in line with
averages.
Ryan Walsh is the Vice President of Walsh Electric, a
family-owned and operated electrical contracting
company based in Staten Island, New York. The company
provides electrical contracting services to the
residential, commercial, and industrial markets both in
the public and private sectors. Ryan joined 10KSB at
LaGuardia Community College in 2012. Since joining the
program, Walsh Electric has reported growing from a 44
person organization with $4 million in sales to an
organization that employs 127 people and is on track to
$25 million in sales. In addition, Ryan has reported
that Walsh business has secured a significant credit
line used to replace aging tools, equipment, and
vehicles. Lastly, Walsh is in the final stage of moving
from their original office to a new facility that is
450% larger--and which they will own.
Angelica Rivera is the co-owner of Colmex
Construction, a family-owned contractor for residential
and commercial construction and renovation. Colmex
specializes in working with nonprofit organizations.
She formed Colmex Construction with her husband in
2008. In 2011 she joined 10KSB at Delgado Community
College in New Orleans to improve her company's cash
flow and learn more ways to pursue capital effectively.
Since then, Angelica reports that Colmex has added 16
new jobs and increased revenues over 400%.
These four businesses are not alone in their success and we
are pleased today to announce that small businesses owners from
every state will now have the opportunity apply to be part of
the 10,000 Small Businesses program.
In the coming months 10KSB will launch our first ever
national cohort of the 10KSB education program, designed to
serve business owners from across the county who do not live in
the metropolitan areas of one of our nine education sites. The
program will be held at Babson College just outside Boston,
Massachusetts and be a combination of an accelerated classroom
experience coupled with online learning. Participants will
travel to Babson for two intensive 4-day sessions separated by
a few weeks of online coursework. The program will be at no
cost to small business owners so that all of the most deserving
small businesses can participate. 10KSB is accepting
applications now at www.10ksbapply.com for the class that will
begin in January. The application deadline is October 18th and
we hope that members of the committee and their colleagues in
Congress will help us get the word out to their constituents
and maximize the number of entrepreneurs that can take
advantage of this opportunity.
Thank you once again for the opportunity to testify.
Tesimony of Dr. Stephen Morgan
Chair, Board of Trustees
My Own Business, Inc.
Before the U.S. House of Representatives Committee on Small Business
Subcommittee on Economic Growth, Tax and Capital Access
September 19, 2013
Thank you, Mr. Chairman, and Members of the Committee, for
providing this opportunity to discuss small business creation,
ownership and, most important, success.
I am particularly appreciative of the opportunity to be
here as I am the volunteer Chair of the Board of Trustees of My
Own Business, Inc., a Los Angeles-based nonprofit organization
providing free educational tools and training via the World
Wide Web to support successful businesses worldwide. Our web-
based program is licensed by CISCO for its training programs of
small businesses around the globe, as well as by the World Bank
in its Small and Medium Enterprise (SME) outreach worldwide.
Given the years of experience we have in creating a strong
educational toolkit, we would like the Small Business
Administration to also appropriately apply our educational
program to its support of America's entrepreneurs. We have
previously supported their initiatives in this regard.
As you well know, much of the success of our country comes
from the fortitude of new business creation, often started by
those who seek to create new opportunity for their families.
And, it is particularly pursued as an option for those who have
faced job loss in recessions such as the one we have
experienced. For my organization, we believe it is important
that those who strive to create a new business and contribute
to the growth of our economy should be successful. We seek to
provide a solid foundation and valuable tools to ensure their
success, and to help them avoid the most common mistakes.
Please allow me to share with you a story about how our
organization came to be: On April 29, 1992, verdicts were
rendered in a controversial case involving the 1991 beating of
Rodney King. The toll of the riots that followed was
devastating: More than 50 people were killed, over 4,000 people
were injured, 12,000 were arrested, and $1 billion worth of
property was damaged.
Southern California entrepreneur, Phil Holland, founder of
the Yum Yum chain of donut shops in California, watched in
dismay at the fires burning and the businesses lost and
wondered what he could do to give hope. Having already
successfully published The Entrepreneur's Guide and The
Moonlight Entrepreneur, Phil decided he might help by
encouraging residents to start their own businesses as a way of
rebuilding the neighborhoods and communities most affected by
the crisis. He began by teaching a free class in one of the
most riot torn areas, Compton, California. For the three years
following the riots, Phil drove to Compton one evening each
week to teach his class in how to start your own business. The
final session of the class was taught in Spanish and eager
small business owners came by the bus load from across Los
Angeles to hear Phil Holland's presentation.
Then in 1994, Phil Holland created My Own Business, Inc.,
(MOBI) a 501(c)(3) public charity and began to build a website
so people everywhere could take advantage of a free curriculum
designed to share with them the dos and dont's of starting
their own business. Phil and his Board of Trustee members have
recruited educators, entrepreneurs and business executives to
develop the curriculum and share their strategies for
successfully starting and growing one's own business. Today the
website provides two free courses: Starting a Business and
Growing a Business. Successful completion of the online
curriculum results in valuable information for those wishing to
start their own business or grow the business they have already
successfully started and a Certificate of Completion issued by
My Own Business, Inc.
The free website courses include quizzes on all subjects
contained in the curriculum, business plan templates, 75 video
presentations by business experts, a final examination and the
Certificate of Completion to those scoring 80% and above on the
final examination. MOBI's Growing a Business course includes
practical training specifically focusing on fifteen topics
necessary for expanding a business, including how to prepare
for growth and how to maximize skills in evaluation of growth
opportunities. Students taking the Starting a Business course
may purchase an accompanying textbook for $39.50 but it is not
required for completion of either course offered on the
website.
For the past twenty years MOBI has offered this free
business training to nearly 35 million people who have visited
the MOBI website. Since the launch of the web based MOBI
curriculum, 469,000 have completed the courses and nearly
31,000 have applied for Certificates of Completion. The MOBI
website is viewed monthly by an average of 235,000, resulting
in 4,000 students completing the MOBI courses each month.
In a 2010 study involving 5,000 MOBI graduates conducted by
the U.C.L.A. Anderson Graduate School of Business, 22 percent
of the respondents indicated their businesses would have failed
if they had not studied the topics offered in the MOBI
curriculum. Of the 5,000 MOBI graduates responding to the
survey, 56 percent have actually started a business, and 77
percent of those who started a company were still in business.
Nearly 60 percent of the respondents reported that they had
been in business for more than two years and nearly one-third
reported that they planned to hire at least one new employee
within the next twelve months.
Three important partnerships have strengthened MOBI's
outreach since its founding in 1994. First, for more than ten
years MOBI has provided its courses to the World Bank. The
second important partnership continues with Cisco Systems,
Inc., which primarily has used the program in its
internationally-focused Cisco Entrepreneur Institute. The third
partnership that MOBI engaged in was with the Small Business
Administration. For a number of years until 2006, a link to the
MOBI Starting a Business course was provided on the SBA
website.
Behind the scenes, we are continually updating our site to
ensure that the MOBI curriculum is up to date, that the
technology used to deliver that curriculum is state of the art,
and that the website will be easily accessible to as many as
possible. The MOBI website will be re-launched before the end
of this calendar year. A sample of the new website can be seen
at MOBI's Spanish website, www.myownbusiness.org/espanol.
It has been my pleasure to have had this opportunity to
share the extraordinary service and contributions of Phil
Holland, an American entrepreneur who sought to significantly
give back by helping others achieve similar success...and all
free of charge. We hope My Own Business, Inc. will continue to
be a valuable tool in ensuring the success of America's small
business and of those in economies interacting with the United
States around the world.
My Own Business Organizational Background:
Today Phil Holland continues to serve as the Chief
Executive Officer of MOBI, reporting directly to the Board of
Trustees. The Board consists of 13 independent Board members
including business executives, practicing professionals, small
business owners and educators. MOBI, as a not for profit
organization, is funded by gifts and licensing agreements. Mr.
Holland and his wife Peggy give significant amounts each year
to fund MOBI and they have included MOBI in their estate plans
to provide an endowment to help fund My Own Business, Inc. in
perpetuity. MOBI's current annual operating budget is $325,000,
$260,000 of which comes from contributions, $50,000 from
licensing agreements and $15,000 from the sale of the non-
required supplemental textbooks.
Testimony of Mr. Damien Stevens
Founder & Chief Executive Officer
Servosity
Before the U.S. House of Representatives Committee on Small
Business Subcommittee on Economic Growth, Tax and Capital
Access
Mr. Chairman and members of the Subcommittee, thank you for
your time and the opportunity to testify at today's hearing. I
am Damien Stevens, Founder & CEO of Servosity located in
Greenville, SC.
Servosity (http://www.servosity.com/) provides Backup and
Disaster Recovery as a Service to a network of technology
companies all over the United States. In a location better
known for manufacturing and textiles, we are a fast growth
technology company that is competing at a national level.
In 2008, I joined NEXT Upstate (http://
www.nextupstatesc.org/) and began learning from other
entrepreneurs at events such as the CEO roundtable. Before
joining NEXT Upstate, I made all the mistakes myself, without
the benefit of learning from other entrepreneurs and the
challenges unique to high growth companies.
NEXT Upstate is an organization that attracts and grows
high impact, technology companies by developing the
entrepreneurial ecosystem needed by these companies, and
connecting companies to this ecosystem.
In 2009, Servosity moved into a small office in the NEXT
Innovation Center (http://www.greenvillenext.com/), a
collaborative workspace formed by a group of entrepreneurs and
the Greenville Chamber which houses multiple high growth
companies. Upon moving into this office, I came in contact with
Michelin Development and learned of their low interest loans
they offer to small businesses. After being turned down the
first time, I was approved for $100,000 after I applied for the
second time.
This capital gave us the bridge to grow the company to be
able to secure private investment. In 2011 and again in 2012;
Servosity attracted private investment capital.
In 2012, Servosity announced its expansion into 3,200
square fee at the NEXT Innovation Center in Greenville and
intent to add 30 jobs in 18 months. We started off this year
with 4 employees and have 12 people now and we are currently
growing and hiring. These jobs are just the beginning; we have
the opportunity to employ hundreds of people in the next few
years.
The jobs we are adding are for software developers, system
engineers, support engineers, sales, account managers and
business development. The average earnings are $80,000 and some
positions are significantly higher. Those earnings are more
than double the average prevailing wage in South Carolina. Not
only are we creating jobs in the knowledge economy, we are
creating meaningful, high paying positions with nearly
unlimited growth potential for employees.
Without the NEXT ecosystem, I wouldn't have learned from
other entrepreneurs, met with Michelin Development to help with
growth capital, been able to grow the next stage to secure
private investment, been introduced to potential investors, nor
would we have attracted the top tier talent required to grow a
fast pace technology company.
Thank you for your valuable time today, I enjoyed being
able to share a small part of our entrepreneurial journey. I
wouldn't be here today without help from so many others.
I am so blessed.
Written Testimony of Kim Pate
Chief External Relations Officer, CFED
Submitted to:
U.S. House of Representatives Committee on Small Business
Subcommittee on Economic Growth, Tax and Capital Access
Subcommittee Hearing:
``Private Sector Initiatives to Educate Small Business Owners and
Entrepreneurs''
September 19, 2013
Rayburn House Office Building, Room 2360
Chairman Rice, Ranking Member Chu, and Members of the
Subcommittee on Economic Growth, Tax and Capital Access, thank
you for the opportunity to testify on behalf of the Corporation
for Enterprise Development (CFED) regarding efforts to engage,
educate, and empower small business owners and entrepreneurs.
As the impact of the Great Recession continues to ravage
communities from South Carolina to Southern California, we
applaud the Subcommittee's focus on supporting small businesses
and enterpreneurs--the true engines of innovation and
opportunity in our economy.
About CFED
CFED--the Corporation for Enterprise Development--was
founded in 1979 on a bedrock belief in the power of America's
entrepreneurial spirit. ``Enterprise,'' you might say, is our
middle name.
Enterprise development has been integral to our work over
the last thirty-five years. CFED's first major publication was
entitled ``Revitalizing the American Economy through New
Enterprise Development.'' In the mide-1980s, CFED launched the
Self-Employment Investment Demonstration to test strategies for
empowering low-income workers to gain a foothold in the middle
class through entrepreneurship and self-employment. In the
1990s, CFED was an early advocate for Individual Development
Accounts (IDAs), which empower low- to moderate-income families
and individuals to save and invest in buying homes, paying for
college, and starting their own businesses.
Today, CFED's work takes place in three overlapping areas:
programs, research, and policy. As a field builder we provide
technical assistance and training to hundreds of nonprofits
across the country and we invest in social enterprises to help
these organizations create pathways to financial security for
millions of Americans. As a leading expert on household
financial security, CFED conducts cutting-edge research on
strategies that build and protect assets for low-income
families, expanding the evidence base in support of actionable
strategies that empower financially vulnerable families. And as
a leading national advocate, CFED coordinates a grassroots
network of local asset-building organizations--the Assets and
Opportunity Network--and promotes federal, state, and local
policies to expand economic opportunity.
Importance of Supporting Microbusiness
In our nearly thirty-five years of work expanding economic
opportunity through programs, research, and policy, we at CFED
have been surprised again and again by the creative and
economic power of America's micro-entrepreneurs. Far from a
niche market, microbusinesses--those with four or fewer
employees--account for nearly 90 percent of all businesses in
the country. Roughly one in six South Carolinians and
Californians own and operate a microbusiness. This figure is
representative nationwide.
Microbusinesses can contribute the revitalization of entire
communities. Mary Gatch of South Carolina started DwellSmart as
a retail shop offering products that promote healthy,
sustainable living--from building products to baby clothes.
While enjoying modest profitability in the store, DwellSmart's
online sales were skyrocketing. After winning the distribution
rights of two large green-oriented companies, DwellSmart needed
to immediately move to a location with sufficient warehouse
space and a loading dock. The company found the perfect spot in
an unused building in an area of downtown Charleston that was
experiencing revitalization and redevelopment. With the
assistance of a Charleston Local Development Corporation (LDC)
loan, DwellSmart made a significant investment in
rehabilitating the property using eco-friendly and sustainable
products.
In a nation seeking economic recovery through job creation,
supporting microbusinesses like DwellSmart is an important
solution. According to the U.S. Small Business Administration,
businesses created by low-income entrepreneurs have high
survival rates, ranging from 57-90 percent--higher than the
survival rate for all small businesses.
Despite the small size of microbusinesses, the sector is a
significant contributor to American economic growth and
vitality. On average, microbusinesses create 2.9 full- and
part-time jobs per business. Cumulatively, these
microentrepreneurs and self-employed individuals amount to
millions of firms and even more jobs. These microbusinesses and
the self-employed represent new transfusions of ideas, talent,
competition, and entrepreneurial energy into the overall
economy. Small changes to enhance the capacity of such a large
and productive group could reap major dividends.
At the individual and community level, microbusiness and
self-employment can serve as a ladder out of poverty and into
economic stability for some of the most disadvantaged
populations. Microbusinesses that survive, grow, and become
profitable, enhance household income and reduce families'
reliance on public assistance. These low-income entrepreneurs
gain a sense of security, new skills and managerial capacity,
build new support networks, and increase self-esteem.
Another example of microbusiness success comes from CFED
partner Pacific Asian Consortium in Employment (PACE), a Los
Angeles-based workforce, community, and business development
organization. Deborah Stern attended PACE's entrepreneurial
training program in June 2008 while starting a business making
tamales. She won a PACE award of $5,000, which she used to hire
two employees and rent a kitchen. From there, Stern attracted
media coverage and cultivated loyal fans. Today, her business
is more successful than she ever dreamed: she opened a
restaurant, La Guera Tamalera, in the Silver Lake neighborhood
of LA, which has become an area favorite. Stern has had
remarkable success, but she is not wholly unique among PACE's
clients: in 2010, 65% of returning microbusiness tax clients
had increased their household income.
Self-Employment Tax Initiative
Recognizing the importance of micro-entrepreneurship as a
strategy for expanding economic opportunity, CFED launched the
Self-Employment Tax Initiative (SETI) in 2005 with three goals:
1) Build assets for low-income households
2) Create jobs by growing and expanding
microbusinesses
3) Increase tax revenue by bringing self-employed
into the formal tax system
To accomplish these goals, SETI has awarded more than
$500,000 to 40 community-based organizations that offer free or
affordable tax preparation assistance to low-income, self-
employed taxpayers. These local partners have helped SETI
identify, test, and refine promising practices for using the
tax filing process as a means of fostering small business
development.
Most of SETI's local partners are Volunteer Income Tax
Assistance (VITA) programs, which provide free tax support to
low- and moderate-income taxpayers. There are nearly 6,000
community-based VITA sites throughout the country. In Horry
County, South Carolina, you can find VITA programs at the
Chapin Library, the North Myrtle Beach Library, and the
Surfside Beach Library. In Monterrey Park, California, VITA
assistance is offered through the Monterey Park Bruggemeyer
Library. Down the road in Pasadena, you can find VITA at El
Centro De Accion Social.
VITA is a brilliant example of a successful public-private
partnership. In South Carolina, California, and the rest of the
country, these VITA sites represent local community efforts--
supported by federal grants, state and local funds, and
philanthropy--to engage low-income taxpayers and ensure that
they get a fair shake from the tax system. According to a 2012
National Community Tax Coalition (NCTC) report, VITA helped
more than 3 million taxpayers claim $2.2 billion in tax refunds
while saving the federal government $5.5 million in reduced
processing costs.
Expanding VITA to Support Micro-Entrepreneurs
VITA represents an excellent opportunity to engage and
empower micro-entrepreneurs. Frustrated by the complexity of
the business tax code, many of these entrepreneurs are left
with few options for learning about and accurately completing
their tax filings. The inaccessibility of low-cost or free tax
preparation assistance and the complexity of the tax code
compel many self-employed people to seek tax assistance from
costly commercial preparers. Those small business owners who do
not seek--or cannot afford--help from commercial tax prepareers
may choose not to file taxes at all.
While the existing VITA program assists some low-income
entrepreneurs, IRS restrictions on allowable VITA activities
prevent many self-employed earners from receiving any
assistance. For example, VITA sites are restricted to preparing
Schedule C-EZ only, and self-employed taxpayers must have
expenses below $5,000.
Recognizing that VITA's narrow scope meant that sites were
turning away micro-entrepreneurs who had with few other
options, the National Community Tax Coalition (NCTC) led an
effort with CFED and the IRS Stakeholder Partnerships,
Education and Communication (IRS-SPEC) team to build on CFED's
SETI program. In 2010, this partnership launched the Schedule C
VITA Initiative. Through this initiative, sixteen pilot sites
across the country are now able to serve a wider range of low-
income entrepreneurs, including businesses with up to $25,000
in expenses, as long as they meet certain other qualifications
such as no net operating losses, no inventory, and limits on
business use of the home, among others.
In its three years of operation, the Schedule C VITA
Initiative has not only brought thousands of low-income
entrepreneurs into the VITA program, it has done so without
reducing tax-filing quality. According to SPEC's own reviews of
the sixteen VITA sites, nearly 95 percent of Schedule C returns
reviewed by SPEC staff at participating sites were found to be
accurate. As the initiative continues next year, it will
continue exploring methods for expanding VITA assistance for
micro-entrepreneurs.
Next Steps to Expand Support for Micro-Entrepreneurs
What does this mean for federal efforts to support micro-
entrepreneurs?
CFED is currently exploring additional federal policy
reforms that would effectively support micro-entrepreneurs. Our
research is examining how three key federal policy systems--
workforce, postsecondary education, and tax--support or fail to
support these low- and moderate-income entrepreneurs. Later
this year we will release our report detailing recommendations
for reforms that would significantly expand the ways in which
federal policy supports the growth and success of these
entrepreneurs.
While this research will reveal new reforms worth
considering, this Subcommittee need not wait to act in support
of micro-entrepreneurs. In the previous Congress, Ranking
Member Chu proposed one significant step forward: the
Entrepreneur Startup Growth Act. This legislation, based on
CFED's SETI program, would have provided additional support for
micro-entrepreneur tax filing assistance. The $1.5 million
authorized by this legislation could support hundreds of local
VITA sites to serve thousands of micro-entrepreneurs.
Conclusion
Chairman Rice and Ranking Member Chu, I would like to thank
you again for inviting me to testify on behalf of CFED. We at
CFED are eager to work with the Subcommittee to expand economic
opportunity, create jobs, and support micro-entrepreneurs. I
would be pleased to answer any questions you and the other
members of the Subcommittee may have.