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Posted at 01:01 PM ET, 11/10/2011

SBA tells young people to ditch the job search and start a business

Correction: An earlier version of this story incorrectly attributed the statement, “small businesses are not the best job creators because three-quarters of them do not have employees” to Scott Shane, a professor of entrepreneurship at Case Western Reserve University. That information is attributed to other sources.

More than 16 percent of people under the age of 24 are unemployed, and the U.S. Small Business Administration has a message for those among them who are sick of sending out resumes: Stop looking for a job and start your own business.

This week SBA Deputy Administrator Marie Johns is traveling the country with the organization’s Young Entrepreneur Series, a five-city tour that aims to shed light on resources for young entrepreneurs and tout entrepreneurial success stories.

“There is such a lack of awareness of the resources that are out there among young people,” Johns said. “We need to grow the economy and create more jobs in this country. We need everyone who may have a dream or an idea to go out and do it.”

The series began Monday in San Diego with a focus on veteran entrepreneurs, and Wednesday the SBA was in Ames, Iowa, speaking with rural would-be entrepreneurs. In each location, a panel of successful young business owners shared tips and answered questions.

For example, 29-year-old Misty Birchall of San Diego runs PubCakes, a bakery where the cupcakes are made with artisan beers. She’s now ready to open her first brick-and-mortar location, Johns said.

Johns also highlighted Ryan Poortinga, who graduated with a finance degree in 2008 but decided he preferred giving airplane tours of San Diego as the CEO of San Diego Sky Tours.

For the rural contingent, Johns said young people could find ways to capitalize on the “locavore” movement by starting food-based businesses.

But regardless of the possibilities for young entrepreneurs, some experts caution that entrepreneurship is not a solid path to job creation or a particularly wise move for young people with little real-world experience.

Scott Shane, a professor of entrepreneurship at Case Western Reserve University, said encouraging young entrepreneurs to start new businesses is not the best way to create jobs. Shane’s research has shown that experienced and knowledgeable business owners tend to create stronger, more lasting companies than out-of-work young people do.

“Unemployed people tend to not start as successful companies on average as people who are employed do,” he said. “You’re not going to get as many successful businesses with young unemployed people as if you put your money into encouraging entrepreneurship among employed middle-aged people.”

Shane said that’s because some of the greatest assets a business owner can bring to a fledgling company is an existing customer base and industry knowledge — something that a seasoned expert is more likely to have than a recent college graduate.

“Most people start businesses to pursue customers with similar products or services as their previous employers,” he said. “What helps to organize a business is industry knowledge, and that knowledge is learned by doing.”

What’s more, if a young person does manage to form a successful business, their new job may leave something to be desired. In addition to dealing with high failure rates, other studies have shown that entrepreneurs typically work longer hours, earn less and have fewer benefits than company employees. One 2004 paper by Dartmouth University economics professor David Blanchflower for the National Bureau of Economic Research painted this unhappy picture:

“The self-employed are especially likely to report that they find their work stressful; they come home from work exhausted; they had lost sleep over worry; felt unhappy and depressed; were constantly under strain and worked under a great deal of pressure.”

Johns acknowledged that “being a small business owner is not an easy road — it takes drive and determination.”

She encouraged young entrepreneurs to look into the SBA’s resources if they’re considering small-business ownership as a career path. Among other things, the SBA provides a free entrepreneurship program, access to microloans and counseling for young people.

Besides, she said, a start-up won’t necessarily be a person’s last job, but it might be a good first one.

“The company they start may last for a season,” she said. “It may be their life’s work, it may lead to other things. But it’s well worth the effort.”

The rest of the SBA’s young entrepreneurship series schedule is as follows:

  • November 17, Charlotte, N.C., Young Entrepreneurs at Historically Black Colleges and Universities and Minority Serving Institution
  • November 29, Tahlequah, Okla., Native American Young Entrepreneurs
  • December 1, Milwaukee, Wis., Apprenticeship to Entrepreneurship

By  |  01:01 PM ET, 11/10/2011

 
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