Small firms anything but

The former head of the U.S. Small Business Administration has heard small business described as the "heart" of the economy and the "backbone" of the economy.

But Hector V. Barreto certainly knows it's anything but small.

The former SBA administrator told a group on Thursday that the sector's impacts are huge. The 25 million small businesses in the U.S. produce 52 percent of the country's gross output, account for perhaps 70 percent of net new jobs, produce new technologies and are 97 percent of U.S. corporate activity in international trade.

"There's nothing small about them, and they really are the engine that fuels the economy," Barreto said at one of several events presented by Zions Bank, the state's leader in SBA lending.

Still, many small businesses fail. Half do so in their first four years.

But they do not fail because of having bad ideas or not wanting to work hard or not wanting to succeed, he said.

"Of course not. As all of you know — many of you have your own businesses — entrepreneurs are some of the most courageous, boldest, committed, passionate people that you're ever going to meet. But the reason many of these businesses don't make it is because they don't know what they don't know. It's not their fault."

In some cases, a business will have a great idea but not enough capital, which he described as "the oxygen a small business needs."

Small businesses also need "capacity," which can mean anything from help with loans, understanding employee needs or understanding the need for financial controls. They also need "contracts."

And SBA, he said, addressed capital, capacity and contracts during his five years at the agency. SBA's average loan amount is smaller — many small businesses needed less than the $250,000 average SBA loan when he took over — and the agency was involved in more training and more one-on-one matches between interested sellers and qualified buyers by the time he left.

And once businesses are operating, one element they must have is a set of contingency plans for when trouble hits. Barreto, author of "The Engine of America: The Secrets to Small Business Success from Entrepreneurs Who Have Made It," noted that the founder of Staples, with the help of employees, was able to persevere after his first store was destroyed by fire.

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