Small Business Ownership

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A new report has Arizona small business ownership near the bottom of all states. The Kauffman Foundation report ranked Arizona 49th in the nation and the Phoenix area 37th among the nation�s 40 largest metro markets. Rick Murray, CEO of the Arizona Small Business Association, will tell us more.

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Ted Simons: Is a new report ranks Arizona near the bottom of small business ownership, the Kauffman Foundation report finds that Arizona 49th in the country, in the Phoenix area, 37th among the nation's top 40 metro market. Joining us now is Rick Murray, CEO of the Arizona small business association to help us figure out what's going on. Good to see you again.

Rick Murray: You, too.

Ted Simons: Thank you. So Arizona, Phoenix, both lagging in small business ownership, why?

Rick Murray: I think what we can see, as we know, this is not any secret to anybody, that the climb out of the great recession has been difficult for Arizona, and for Phoenix, in particular, we were balanced on a housing market, mostly, and so, we have seen a much slower, gradual climb out of this, out of this recession, obviously, and to, even in a small business standpoint so what we're seeing is this mirroring, a lot of what we're seeing. We've been spoiled as a state, you know. We have seen a lot of highs and experienced the joys out of all of that -- but now, as we see, we're growing a point and a half, two points a year, and we're seeing that in the small business sector, as well.

Ted Simons: The Kauffman Foundation reports, studies small business activity, and they look at the share of adults owning small businesses and the number of small businesses at least five years old.

Rick Murray: Right.

Ted Simons: And I understand, obviously, almost everything is predicated on the fact that we got hit hard during that recession. Other folks seem to be doing better than us. What can we do better to get this going?

Rick Murray: We have a, really, a transient population. Certainly, with the great weather, we have people coming in for the winter and homes somewhere else so we see a lot of that type of ownership. And we have a lot of micro-businesses, so we know that a lot of these businesses may not be reporting as businesses, but as, under the personal income tax so I think that there is a lot of factors that say why that we may not have those, but we have 400,000 small business says, registered here in Arizona, so to say that we are lagging behind, I think that we are not having as many new startups, as some of these other states.

Ted Simons: Well, and as far as the startups are concerned, it looks like we're ranked 21st, and Phoenix is ranked 14th. So it looks like people opening these small businesses are doing ok, but it seems awfully -- is the nature of the beast, you mentioned a transient nature here, is that just what to expect in is a young state like this?

Rick Murray: I think that that's part of it. I think that the other side, we know that there is the access to capital, venture capital is hard to find here, and maintaining a small business. We know that the high failure rate of new businesses anyway, so when you add all those things, when you finally get to the end of the day, that growth is not what we're seeing from around the country.

Ted Simons: You mentioned venture capital, and this is something that we talked about, venture capital is lacking in Arizona. Why?

Rick Murray: I don't know. I think what we're seeing is a gradual migration into Arizona, from -- and interest from the venture capitalists, and what's fueling it is the tech industry. I think that there is some opportunity in that. And I think that typically what we see in the small businesses here in Arizona, is that they are not employers, and there is, maybe, five employees, ten employees or less. We're not talking about small businesses that we see other places. We're at 25, 50, to 100 employees, and we are a lot of small, small businesses. And so, I think that from a venture capital standpoint, they want more opportunity, and that comes with companies that have potential to grow big. We're seeing small businesses that really are putting somebody who says that this is what I'm going to do, for the rest of my career. And provide for me and my family and my couple of employees, as well.

And that's interesting because, obviously, those folks are doing something, and making a contribution, and but, it sounds like these micro-businesses may not be having that much of an impact on the community, and the state as a whole. And I would argue that they are. And that we have a lot of those here in Arizona, and that's what is helping, at least, you know, certainly maintain a good foundation in this economy. But again, do we want to have more employment? Do we want to promote more small business here? Absolutely. I think that the legislature is doing good things, and access to capital issues in regards to the crowd money, bill that we're successful with, and hopefully going to do more the next year, so making things available to small business, to be able to help them to grow, exporting, helping them to identify issues in exporting. There are businesses that have not thought about it so we need to help tomorrow to identify some of those opportunities. No longer are our neighbors, or our customers just around the neighborhood.
Ted Simons: Right, the critics, the legislature is being very interested and very nice to the corporations, the corporate tax cuts and the big boys. They take care of them, and I know some small business owners, and they are not happy with what's focused on them.
Rick Murray: When there are tax breaks for the corporations, where does that end up -- what's the fallout of that? It ends up falling out on more small businesses because we don't take that tax break, and so, certainly, there needs to be a bill paid, and that certainly sometimes does fall on the -- not only on the small business owner but the individuals, as well.
Ted Simons: So when critics say that it caters to the big corporations on the backs of small business, some truth in that?
Rick Murray: Slight. It certainly -- they see that small business is a, certainly the legislature understands that you know, 60% of the business, 70% of the business here is driven by small business, and they see that need, as well, out there, so it is a delicate balance when we talk about corporate tax relief as well as small business tax relief.
Announcer: And the nature of the beast, of Arizona, we do have a change to our mentality, we're big with big box, and as you mentioned we're big with the micro-businesses, as well. There is a gap in between, how do you fill that gap?
Rick Murray: We have we have got to promote the opportunity here in Arizona, great place to live, the tax structure for small and large business is good. We have a favorable climate from our policy and regulation standpoint, so we need to do a better job of promoting that, and we're doing that, and I think that the folks like, like the commerce authority, gpac, they are doing a great job in approaching companies from Texas and from California, and we know that California, their tax rate is a lot higher than ours so there is a lot of opportunity to say, and we're seeing a lot of that success over the last couple of years, and that's really helping to fuel some of the growth, as well, so we see a lot of opportunity on the future, and I don't think that -- we're satisfied where we are at but we certainly will be looking for some more opportunity.

Ted Simons: We better not be satisfied with being ranked 49th in anything.

Rick Murray: That's right.

Ted Simons: Rick, good to see you. Thanks for joining us.

Rick Murray: Thank you, Ted.

Rick Murray: CEO of the Arizona Small Business Association

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