Words not only have meaning, they have power and connote emotion. Many business publications and writers still refer to small businesses as “mom and pop” firms–connoting tiny, relatively unimportant firms to our economy and employment. In 2014 I think it’s time to retire the phrase “mom and pop” in regard to small business and our economy. To paraphrase the comedian George Carlin, who made a living understanding the power of words, there are many expressions and sayings that we don’t examine. We just say them as if they make sense.
A “mom and pop” business is an expression that no longer makes sense. It’s antiquated, not respectful, and not supportive of entrepreneurs and small business development. As a community, we want to support all entrepreneurial and small business ventures and in doing so, there are better definitions we can use, backed by data, which reveal the importance and power of all small businesses to our economy.
As the director of the Small Business Development Center (SBDC) at the Wisconsin School of Business for 18 years, my staff and I have worked with thousands of businesses. We know firsthand that every business involves not only opportunity but risk: risk to the owner’s savings, livelihood, children’s education, potentially their homes; and risk to outside lenders, investors, and suppliers. The majority of small firms provide employment to others and with that, many owners take on some responsibility for their employee’s families. “Mom and pop” does not provide the respect small business owners deserve, nor does it recognize their risks, sacrifices, and their potential.
We can do better. I suggest we use words already in our vocabulary that help us understand the importance of all small businesses and the roles they play in our economy. Research performed by the Institute for Exceptional Growth Companies (IEGC) and YourEconomy.org looks at:
- Local market firms: Establishments that sell goods and services primarily within a local area.
- External market firms: Businesses that primarily sell goods and services to regions and countries beyond a local area.
Based on NAICS codes, the external market firms are export-oriented industries, bringing jobs and sales into the region. Typically these companies form a region’s economic base and can reveal what makes a particular region unique. The local market firms indicate circulating jobs and sales that are already in the region, including local market jobs and sales that are created due to the economic activity brought into the region by external market firms.
IEGC further breaks down firms into the Core Economy and Macro Economy. The Core Economy is a proxy for small firms (100 employees or less), and it excludes healthcare, government, military, education, and non-profit organizations. The Macro Economy includes firms of 100 employees or more and those industries not included in the Core Economy.[i]
In 2012-2013 in Wisconsin’s Core Economy, 85 percent of companies were local market firms that produced 82 percent of all Core Economy jobs or 1,313,709 employment positions, according to National Establishment Time-Series data from YourEconomy.org. Those local market companies produced $131,762,116,416 in sales, or 79 percent of total Core Economy sales.
By contrast, in 2012-2013 Wisconsin’s external market firms in the Core Economy were 15 percent or 54,759 establishments. These firms provided 290,081 jobs and $34,015,771,660 in sales.
These brief statistics give us a picture of the importance of local market firms to our economy. On an anecdotal level we see the importance reflected in the growing local foods movement and organizations such as Dane (County) Buy Local, which has 787 members and growing.
Our experience at the SBDC with small businesses shows that many owners start out as local market firms. Some have plans from day one to sell goods and services nationally and internationally. Some firms become external market firms as a function of growth and opportunities that were not apparent or within their reach early on.
We need both local market and external market small businesses to have a robust economy. Retiring the phrase “mom and pop” business recognizes and respects the role of both types of firms in our economy and their importance to employment. Words have power.
[i] Idella Yamben and Eric Steege, Center for Technology Commercialization at the University of Wisconsin Extension Division of Entrepreneurship and Economic Development. “Defining and Identifying Core-based Economies in Regions”