The American Business Revolution
30 years ago, huge corporations dominated the business world. Read about the seismic shifts that turned America into a nation of entrepreneurs.
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The late 1970s were a time of bright miniskirts, mirrored disco balls and platform shoes. But the wild changes taking place 30 years ago weren't all in music and fashion.
Inside office suites, workers were learning to type memos into their Altair personal computers while hoping to become an important cog in a big, corporate wheel. But as the 1980s arrived, career goals were shifting for those who found cubicle life stifling and who were bold enough to take risks.
An entrepreneurial age was coming, fueled by social change, new sources of capital and new technologies. While some jumped at the chance to start a business, others were pushed by mass corporate layoffs, mergers and growing anxiety about job security.
Whatever the reason, entrepreneurship has become a popular aspiration. A September 2005 Baylor University study reports that since 1980, more than 5 million jobs have disappeared from Fortune 500 companies, while 34 million new jobs were created at small businesses. Also, the number of small businesses increased from 14.7 million in 1977 to nearly 32 million last year, according to IRS tax returns. Today, one in 12 adults is actively involved in starting a business, and more than 60 percent of 18- to 29-year-olds say they aim to own their own business.
Donald F. Kuratko, executive director of the Johnson Center for Entrepreneurship and Innovation at Indiana University in Bloomington, perhaps summed it up best in the Baylor study: "Entrepreneurship," he wrote, "has emerged over the last two decades as arguably the most potent economic force the world has ever experienced."
Power to the Business People
So how did we go from a nation of corporate drones to a nation of entrepreneurs? It couldn't have happened without the changes brought about by the civil rights and women's movements of the 1960s, says Carol Kuc, president of the National Association of Women Business Owners. New laws opened doors for women and minorities who had previously faced high hurdles to business ownership, particularly when it came to funding.
Women, for instance, were scorned by skeptical bankers who discounted their income. "You could get pregnant and stop working," Kuc recalls one banker telling her in the late 1960s. It was also difficult for a woman to get a credit card on her own or to establish a credit line separate from her spouse's until the Equal Credit Opportunity Act guaranteed that right in 1974. Credit cards soon became a vital source of business capital for women wanting to strike out on their own, Kuc adds.
Similarly, nonwhite loan applicants often got the cold shoulder until the Community Reinvestment Act of 1977 required financial institutions to serve all segments of their communities. These laws were a major force in smoothing the road to business ownership for previously disenfranchised groups.
The result? "There was a huge movement of women and people of color into business ownership in the 1970s and 1980s," Kuc says.
Today there are more than 10 million women-owned businesses. Approximately 57 percent of women business owners have a business line of credit, and 82 percent report they have a satisfactory banking relationship. For the past two decades, women-owned businesses have grown at twice the rate of all businesses, the Center for Women's Business Research reports. "At this growth rate, women will be the majority of business owners [fairly soon]," says Kuc. "We still have a ways to go, but the walls aren't as high."
For minorities, the creation of the federal Office of Minority Business Enterprises in 1969--now the Minority Business Development Agency--helped foster growth in minority-owned businesses, says John F. Robinson, president and CEO of the 350-member National Minority Business Council. The creation of "set-asides" in federal contracts opened what had been an all-white boys' club to minority business owners.
In the 1960s, many minorities operated tiny, usually one-person businesses, often started on a shoestring by people shut out of good jobs by discrimination and lack of education. As affirmative action spurred the admission of more minorities to colleges and universities, these new grads left school better equipped to become big-time entrepreneurs.
They often first worked at major corporations, Robinson says. Then, armed with both business experience and more sophisticated education, they set out to start their own businesses. The results were stunning; the number of minority-owned businesses exploded, growing more than 600 percent since 1977. Current lists of top-earning minority businesses include companies with revenues that top $1 billion.
One big opportunity for minority businesses: As the U.S. minority population increased, major corporations grew more concerned about reaching these consumers, so they often turned to minority-owned firms for help with everything from product design to marketing. The growing black and Hispanic populations were also a gold mine for entrepreneurs who understood subcultures Fortune 500 firms were ignoring. One example is Russell Simmons' hip-hop music, media and fashion empire, Rush Communications, founded in 1990.
The Impact of Technology and Education
While equal opportunity was fueling an entrepreneurial boom, the world of small business was changing in other ways as well.
Until the 1970s, franchising had been a rather limited and expensive route to business ownership. And before 1979, when the Uniform Franchise Offering Circular went into effect, it was also an industry rife with scams.
Today, there are more than 2,500 franchise companies, with business models that span 80 industries, from accounting to weight control. While most franchises used to involve operating a store, many franchises now can be started part time or from a kitchen table for $50,000 or less.
Home businesses, in general, began to evolve as well. As personal computers and printers got cheaper, home businesses of all kinds were able to grow from modest, usually one-person operations into sophisticated, high-earning businesses, says Rudy Lewis, president of the National Association of Home Based Businesses.
One of the cheap ways to get into business--often from home--had always been direct mail. In the 1970s and '80s, shipping, paper and printing costs were low, recalls John Schulte, president of the National Mail Order Association. The catalog industry boomed, going from $29 billion in sales in 1980 to $109 billion in 1999.
As paper and mailing costs soared, another option appeared: the internet. From the mid-'90s on, it was cheaper than ever to connect with buyers across the country or the globe.
Home businesses saw explosive growth, from about 6 million in 1984 to 23 million today, Lewis says. But the size and sophistication of home enterprises is even more impressive. With internet communications and research at their fingertips, he says, global businesses are routinely being run from home. Lewis' own home based companies do training in 20 countries, import eyeglass frames from China and develop condominiums, among other things.
"[Home businesses] accelerated in the late 1990s and 2000s and really became fashionable," Lewis says. "It used to be I'd say I had a home business, and people would look at me weird. Now they say, How can I do it?"
As more entrepreneurs began launching new enterprises, colleges and universities sensed a hunger for information. The institutions soon created courses and whole new training centers to help this new generation of entrepreneurs learn business skills. From the first MBA entrepreneurship program launched at the University of Southern California in 1971, entrepreneurship education grew fast.
By the early 1980s, more than 300 universities had courses in entrepreneurship and small business, the Baylor study found. Early entrepreneurship centers found an immediate and enthusiastic audience, says Rudy Lamone, founder of the Dingman Center for Entrepreneurship at the University of Maryland, which opened in 1986. "We were just overwhelmed with phone calls and requests to come speak and to help solve entrepreneurial problems," he recalls. Networking breakfasts and workshops initiated by Dingman in the Baltimore/Washington, D.C. corridor were mobbed, as hundreds of new and would-be business owners sought to learn from and do business with each other.
Today, more than 2,200 entrepreneurship courses are offered at nearly 1,600 schools nationwide, according to the Baylor study.
College campuses weren't the only places entrepreneurs could go for help, either. For instance, the SBA's Office of Women's Business Ownership, added in 1979, began testing the idea of women's business centers in 1988 to help women achieve business ownership. The initial half-dozen centers were so successful that nearly 100 centers now operate nationwide.
Whether you start a business in a skyscraper with big-money backers or in your bedroom with money from your savings accounts, you'll be able to pursue your dream of business ownership free from much of the conformity, prejudice and technological barriers of the past. There's no telling where the passion and drive of the next generation of entrepreneurs will take American business next.