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Small business drives Treasure State’s economy

In Montana, small business is big business.

About 98 percent of the businesses in the state are categorized as small, and those firms create the vast majority of new jobs.

By BETH BRITTON
Tribune Business Editor

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Editor’s note:

This is a preview to a yearlong series on small business. Starting next Sunday and continuing monthly through the end of 2003, the Tribune will examine issues of importance to established business owners and anyone considering starting a business. Topics will include business planning, financing, customer service, marketing and day-to-day management. Kicking off the series next week is topic No. 1 — The Idea Stage: Developing an idea and researching its potential success.

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Small business is the backbone of the state’s economy, despite a rural nature that offers some unique challenges to entrepreneurs. The overall climate for business in Montana, according to some officials, is overcast. But they’re working to change that.

"It’s a tough business climate in Montana, but that’s changing and it’s changing rapidly," said business owner and state Rep. Joe McKenney, R-Great Falls. "If you really have the desire and dream to go into business for yourself, you can do it in Montana."

McKenney opened Legends Sports Pub & Grill, 1121 5th St. S., last summer.

"In Great Falls, a challenge we have as small business owners is the stagnant economy of the past 20 years. We have virtually the same population," McKenney said. "So starting a new business, unless it’s a totally new idea, means competing with existing businesses. Being in an area with a stagnant population makes it very difficult."

Other statewide issues facing small business include the capital gains tax, workmens’ compensation costs, the cost of transporting freight and the rising cost of health insurance, he said.

"Most of Montana’s uninsured are employed and working in small business," he said. Benefits, including health insurance, are needed as recruitment and retention tools, he added.

In response to business concerns, McKenney, the chairman of the House Business & Labor Committee, said he is working on legislative issues involving health care tax credits, work force development and regional development centers.

Montanans are increasingly turning to entrepreneurship as a viable option, said Suzie David, the director of the Great Falls Small Business Development Center.

"In Montana, small business is driving the economy — that’s where the jobs are," she said. Most businesses start out very small, and they are the creators of new jobs. In the United States, two-thirds to three-quarters of all new jobs are created at the country’s small firms, according to the U.S. Census Bureau. In Montana, that percentage is much higher.

Generally speaking, the U.S. Small Business Administration defines small businesses as those with 500 or fewer employees. Some industries, including construction and farming, are ranked according to their sales.

For Rick Evans, the president of the Great Falls Area Chamber of Commerce, a small business in Montana is one that employs 10 or fewer. Of the chamber’s 700 members, about 400 fit that description, Evans said.

"They do everything that larger employers do, and the challenge is finding expertise," he said. "To me, that is what small business faces."

David agreed that the challenging issues facing business remain the same — no matter what the number of employees.

A daunting amount of paperwork, rules and regulations is what business owners encounter, and David said there is a growing number of resources to help even the smallest businesses maneuver through the maze of requirements.

"Small business owners are so busy running their businesses, they don’t know the requirements," she said. "But there’s lots of places people can turn for help."

Small business resources

In addition to the statewide system of Small Business Development Centers, David said counseling and resources are available at colleges and universities, Montana Job Service offices, local libraries, the SCORE (Service Corps of Retired Executives) program and the Internet.

Philip Belangie, the micro-business training officer for the Montana Department of Commerce, said a lack of formal business training is one of the major challenges facing business owners.

"You have all these people who have a vocation, but they don’t necessarily understand key pieces to business," he said. One of the programs Belangie coordinates is the NxLevel program, designed to teach both new and established business owners the skills needed to succeed.

"There’s a big difference between the dream and putting the numbers down," he said.

Even the best of dreams often don’t translate into successful businesses. The SBA’s Office of Advocacy, in a study in the early ’90s, found that 66 percent of small businesses remain open at least two years — 34 percent fail. Half of all businesses stay open at least four years, and 40 percent remain open for at least six years.

Failure rates are similar statewide, said Montana Chamber of Commerce President Webb Brown. Last year, on a Center for Enterprise Development report card, Montana ranked ninth nationwide for business starts and 21st in the nation for business failures, he said.

"We have a real entrepreneurial spirit here, but there’s a gap between that and the success of a business," Brown said. "It’s tough here to continue that success."

Deb Kottel, the dean of the University of Great Falls’ College of Graduate Studies, said there exists in Montana a disconnect between ideas and implementation.

"In Montana, because of the rural nature of the state and the isolation, there doesn’t seem to be as many alliances or mentoring opportunities," Kottel said. People bring their talents and interests to a business, but too often they fail to plan for other tasks, including accounting and budgeting.

What concerns Kottel, however, is that many business owners don’t feel that Montana is a business-friendly place.

Kottel said the state’s tax structure, regulations and red tape are perceived by some as anti-business, and many business owners simply do not feel appreciated.

More support needed

Ann Desch, the director of the state Small Business Development Centers at the Montana Department of Commerce, said more needs to be done at the state level to ensure business success.

"I think we need to invest more in this state in research and development, workforce development and education," Desch said. "We’re way behind other states in our investment in economic development to make a better climate for business, and all those big issues trickle down to small businesses."

On a positive note, Desch said, because most of Montana’s businesses are small, there is tremendous opportunity for Montana because of the nimbleness of small companies to respond to smaller markets.

"I see so much potential here; there are tremendous intellectual assets, lots of people with fantastic ideas and a great work ethic," Desch said. "More and more, small companies are doing more in the economy."

http://www.greatfallstribune.com/news/stories/20030216/localnews/996474.html

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