The Rise of Stability Entrepreneurs

I recently learned of some interesting small business research work being led by Laura Freschi, Tim Ogden, and Jonathan Mordoch of New York University’s Financial Access Initiative.  They studied how small business owners are faring in a host of countries (Colombia, Ethiopia, Indonesia, Kenya, and Nigeria) using a unique technique of small firm diaries and regular weekly visits to assess what it’s really like to be an entrepreneur in these challenging times.  The study also focused on more established businesses, which they refer to as “stability entrepreneurs,” as opposed to microenterprises or fast-growing gazelle businesses.

Their report contains lots of fascinating insights.  Not surprisingly, these business owners face great uncertainty and volatility, operating in often seasonal businesses with little to no trained support or assistance. Faced with these constraints, small business owners pursue strategies that help cope with uncertainty and manage risks.  These firms emphasize stability, and are often reluctant to hire new workers, raise new capital, or make major investments without assurances of a quick and tangible ROI.  Managing volatility is Job 1.

While the term “stability entrepreneur” may be new(ish), these types of businesses are common in most of our communities—abroad and here in the US. Yet, our programs and services are often poorly designed for this market segment where stability may be more important than growth—at least in the short term.  Let’s consider a few examples.  Many firms fear hiring new full-time employees, yet would benefit from part-time or gig worker support.  Yet, most economic development programs focus on supporting full-time employment. Similarly, many small business finance programs are focused on supporting revenue and job growth, yet these firms might benefit from short-time loans cash infusions that reduce market volatility.   The authors are not calling for the end of traditional incentives and small business support programs, but they are advocating for efforts that recognize the everyday uncertainties facing small business owners.