How are jobs really created?

With all of the hype surrounding the stimulus packages and the estimates of cost starting at  $200,000 per job, I think it’s time we all understand where jobs are actually created.

First and foremost government doesn’t create anything. The simply fund projects paid for by taxpayers to ceate the illusion of employment. Most of these are short term and add little or no value to the economy.

So where are jobs created? In 2009, large corporations shed 700,000 jobs, small business employment was down 20% and startups because of their 50% failure rate inside of five years are a net zero.

According to studies done by the Small Buisiness Administration office of Advocacy, and a recent study by the Blueprint Growth Institue virtually all job creation in the past twenty years has come from “high Impact” firms.

High Imact firms are defined as:

• Those that double sales and employment in the most recent 4 year period.
• Are 25 years old on average, not startups in most cases.
• Represent less than 4% of all firms.
• Exist in all regions of the U.S. and in all indistries.
• Take about 20 years to reach high impact.
• In the 4 years after reaching high impact only about 4% “die.”

A ranking of all 50 states on the percentage of high impact firms as compared to all firms in the state has Tennessee ranked 25^th and Mississippi 47^th. South Carolina leads the southeast at 4^th overall.

Clearly the answer is find a way to create more of this level of growth from existing companies in the region. The term being used today is “economic gardening.”

Economic Development groups and business incubators focus on startups and attraction of companies from other locations. Toyota’s plant near Tupleo was a great boost for Northeast Mississippi, but net job creation for the country was zero because of the corresponding plant closure in Fresno, CA. The same can be said for Winchester in Lafayyette County, these jobs were relocated from Illinois.

There is no focused effort to grow existing companies with potential in this or any other region.

I’ve been fortunate to be able to receive the benefit of the study results from the Blueprint Growth Institute where they have identified 7 critical factors that growth companies employ. In fact they studied all companies that went public since 1980 and found that 100% of the companies that reached $1B in sales employed at least 5 of the 7 essentials.

They also found that the companies reached $1B in sales on 3 trajectory paths, 4, 6 or 12 years and 100% of the time these companies launched their growth trajectory from the level of $50M in sales.

Of all of the companies that went public since 1980 only 387 (4%) reached $1B in sales, and those 387 companies accounted for:

• 63% of employment
• 64% of total market value
• 72% of revenue and taxes paid

Our challenge is to grow more companies to the $50M level with the essentials built in to faciliate growth beyond that level.

There isn’t any secret forumla but there is a process that can be dulpicated.