The purpose of this study is to review the literature, both nationally and in Virginia, that has attempted to determine demand from small businesses for entrepreneurship and small-business management training. Sources include William Dennis' significant research of national small business problems and priorities, new research findings from the National Council for Urban Economic Development (CUED), the Virginia Community College System, Virginia's Small Business Development Center, regional chambers of commerce, and research by the Northern Virginia Regional Partnership.  It is from these data sources that small business needs are articulated and the conclusion drawn that strong interest and need for this training and education does exist.

National Data

 

Perhaps one of the most useful research studies on needs assessments of small businesses across America is from the Education Foundation of the National Federation of Independent Businesses (NFIB). The fourth edition of  Small Business Problems and Priorities (Dennis, 1997), like its predecessors, is a powerful research study detailing problems of small businesses and the perceived priority of these problems as rated by small business owners.

 

The survey for Dennis' research was based on a random sample of 15,000 (out of 600,000) members of the National Federation of Independent Businesses (NFIB). Membership in the NFIB represents 10 percent of the employers (of both small and large businesses) in the United States. The findings were based on the responses from 3,471 small-business owners throughout the United States, representing a 23 percent response rate.  Seventy-five potential business problems were assessed by these owners and each was given a rank from "Critical Problem" to "Not a Problem."  The responses provide a mean score, which was used to rank each problem to establish priorities.  The ten top small-business problems identified in priority ranking were:

 

1.       Cost of health insurance

2.       Federal taxes

3.       Cost of workers' compensation

4.       Unreasonable government regulations

5.       FICA issues and cost

6.       Cost of premises or facilities

7.       Federal paperwork

8.       State taxes

9.       Frequent changes to Federal tax laws

10.   Cash flow

Timing of this latest survey is interesting to note.  Dennis' previous survey (1991), conducted at the height of the recession, noted more problems such as cash flow, poor sales, poor earnings and the like.  Because the 1996 survey was conducted during an expansion period in the economic cycle, perceived problems and priorities noted were significantly different.

 

Although the study did stratify the population by several factors, such as size of business, location, industry, legal form, years in business, and the like, the major problems identified were mostly related to type of industry and population density of location.  For example, retailers were concerned about minimum-wage levels while contractors were more concerned about applications for permits.  However, the study concludes that owners are more likely than not to share problems across industries.

 

Whether the location of the business is rural or urban appears to impact directly the concerns indicated.  Finding qualified employees ranks high for urban small businesses while energy concerns and environmental regulations have higher priorities with rural small businesses. 

 

An important aspect of this study, as it relates to needs assessments of small businesses, is in the grouping of the 75 problem areas into clusters.  These arbitrary assignments are designed to lump problems into categories such as finance, information, management, regulation, and the like. Some problems appear in multiple clusters, while others lie outside the scope of these categories.  The problems identified in each cluster mirrored the national concerns of small businesses.  These data provide valuable information for noncredit curriculum development by focusing on problems that remain the same regardless of industry or location. (Dennis, p21).

 

The survey data indicate that small businesses in the South Atlantic region are less dependent upon a few customers than are other regions and that seasonality is also less of a problem.  However, locating qualified employees ranked 7^th and was deemed a "critical problem" by 28% of the respondents.  Employee retention, training employees, and other employee-related problems were ranked significantly high. 

 

The top-ten problems identified in this region by rank order include:

 

1.       Cost of health insurance

2.       Federal taxes on business income

3.       Unreasonable government regulations

4.       FICA costs and issues

5.       Workers' compensation costs

6.       Property taxes and rent costs

7.       Locating qualified employees

8.       Federal paperwork

9.       Cash flow

10.   Frequent changes to federal tax laws and rules

 

Since there are few significant differences between the responses of states located in this region, it is safe to assume that small business problems and priorities in Virginia are represented by the mean averages from the region.

 

 

Virginia Data

 

There were three primary sources for these data. The National Council for Urban Economic Development (CUED, 1997) provided a research report to the Virginia Chamber of Commerce entitled Promoting Growth in Emerging Companies in Virginia.  CUED conducted over 40 in-depth interviews with Virginia economic development and business professionals to determine strengths and weaknesses of these programs in assisting Virginia's emerging businesses.  Secondly, a 250-piece postal mail survey was sent to Virginia's small businesses to learn of their experiences with small-business services and support. The third component of this research involved examining efforts in both neighboring and competing states in their successful efforts in promoting small-business growth.

 

CUED's findings suggest that there is a new economy emerging in Virginia, which stems from knowledge-based firms.  The prosperity of Virginia will depend upon how the Commonwealth assists in creating climates for growth and success for these emerging small firms.  These companies will thrive on innovation, creativity, and quality.  In short, these emerging companies are the new breed of entrepreneurial ventures.

 

Among the critical factors identified in this report in supporting small and emerging business growth are:

 

·         Availability of capital, especially seed funding

·         A trained workforce, both university trained and skilled technical assistance

·         Technical assistance to technology based firms

·         Technology transfer mechanisms

·         Proactive business environments

 

This research found that Virginia is not proactively and aggressively courting small and emerging businesses in its economic development programs as much as it is more mature businesses.  Researchers discovered that Virginia's training assistance programs target relocating and expanding businesses and leave little to the small business segment. Furthermore, the report notes that one under-recognized resource in economic development is the Virginia Community College System and its 23 community colleges scattered throughout the Commonwealth.

 

Additionally, the study recognizes the need for small-business training in the essentials of planning, launching and managing a small enterprise.  Solid business-plan development skills are a requisite for all emerging ventures, especially those in information technology.  Entrepreneurs interviewed in this research indicated a strong desire and need for available, affordable entrepreneurial training programs in areas such as business plan writing, financial planning, finding capital, marketing, and communicating business ideas.

 

Responses in this research also indicate the lack of knowledge of available technical assistance and training for entrepreneurs.  When asked which services they were familiar with as listed in the questionnaire, many replied that they were unaware of any such services.  Providers and users are not communicating, and the resulting information gap is a significant marketing problem for community colleges.  The study also found that even given the placement of Small Business Development Centers (SBDCs) within the community colleges, the link between technical assistance providers and users is generally weak.

 

The Northern Virginia Regional Partnership Workforce Development Survey for the 2^nd Quarter 1998 determined that, among other factors discovered, regional high technology companies are experiencing serious employment shortages; 22,987 vacancies existed among Northern Virginia's technology firms during the reporting period.  The most sought-after skills are in programming and data base administration.  More than 70 percent of the respondents indicated interest in partnering with local educational institutions in filling job vacancies, training, and retraining.   Needs identified through this survey include supervisor/management training, computer literacy training, job-specific technical contract training, and human relations skills (Stough, R., 1998).

 

Needs assessments are not new to Virginia. In 1993, the Virginia Chamber of Commerce identified five areas (that included coordinating workforce training and education programs to meet specific needs of Virginia employers) in offering programs to assist small businesses with competitive financing alternatives. Additionally, in 1994, the Business Sector Advisory Councils of Opportunity Virginia, a strategic-planning initiative in Virginia, recognized six important economic development factors that included training programs designed for each locale, attracting more minorities and women into Virginia businesses, and an emphasis on technology transfer to the workplace (Jackson, 1996).

 

The Virginia Community College System (VCCS) in 1994 created Virginia Works, which is a program designed to redirect the Virginia community college effort towards the needs of business and industry in workforce development. Virginia Works has established selected, specialized services for business and industry through its “Institutes of Workforce Excellence.”  Unique training needs of each community college region are identified and addressed by the local community college.  Regional partnerships with various stakeholders in each service region, including community college leaders, were established and continue to work together to further the development of Virginia's workforce.

 

A survey of Virginia community college presidents revealed the following data (Jackson, 1996).  Between 1995 and 1996, over 3,000 employers received workforce training through contract and open-enrollment courses at Virginia's community colleges.  Individual community colleges provided various degrees of training to companies employing between four and 1,500 employees.  Northern Virginia Community College served over 200 employers during this period. 

 

Jackson's survey results indicated that there is a growing number of specialized centers and services being established in response to changing needs of communities and businesses.  There appears to be a high level of partnership activity between community colleges and their local industries, and this includes curriculum development and support.

 

During this same period, Virginia community colleges delivered workforce noncredit courses to nearly 68,000 individuals and, by 1997, the VCCS served over 90,000 individuals (House Document No. 85).  Twenty-two colleges offered training in ISO 9000 certification while fifteen colleges offered training in ISO 14000 certification.

 

Jackson provided each of the 23 Virginia community college presidents with an analysis of that region's customer perceptions of the college's workforce training service programs.  This survey targeted businesses employing more than 25 employees but fewer than 500. This survey was conducted by the VCU Survey Research Laboratory with data of employee size furnished by the Virginia Employment Commission.

 

Jackson's survey excluded small businesses employing fewer than 20 workers, which is estimated to be approximately 60 percent of all small businesses in Virginia (Small Business Profile, 1998).  However, his conclusions are still valuable for needs determination since the vast majority of responses from all regions of Virginia were from those firms employing between 25 to 99 employees. His findings for training and education needs include:

 

·         Computer and computer literacy

·         Supervision/management training

·         Human relations skills

·         Licensure and certification courses

 

Importantly, the study discovered that there are significant gaps in the types of training provided by Virginia's community colleges: a lack of specific training and course timeliness, lack of industry-specific training, and lack of on-site training. College degree credit and public funding were not very important issues to small businesses.

 

There have also been several attempts in various locales in Virginia to determine training and education needs of local small businesses.  The Federal Reserve Bank of Richmond (1997) initiated a study, Survey of Small Business Owners; Assessing Capital and Other Resources, which was designed to determine the needs of small businesses relative to capitalization requirements.  The partial results from this study indicate:

 

1.       80 percent of respondents founded their own business.

2.       Sources for financing their business include credit cards, business earning, commercial loans, family loans, and loans against personal assets.

3.       Insufficient collateral or no personal loan guarantee offered were the two top reasons for loan rejections.

Perhaps respondents’ remarks gathered on the surveys reveal the real needs of small businesses.  These responses ranged from questions on what programs are available to assist small businesses in financing operations to the need for guidelines in structuring multi-source business financing.  One interesting comment was, "How can I get past a bad credit history and still get a loan?"  Although the survey was oriented to financial needs of small businesses, it does provide additional curriculum information as to what small businesses need in education and training.

 

The Fredericksburg Regional Chamber of Commerce and the Rappahannock Region Small Business Development Center conducted a regional (Spotsylvania and Stafford Counties, Virginia, and the City of Fredericksburg) needs-assessment survey.  The purposes of the assessment were to determine some general concerns of small business owners, identify small-business training needs, and to identify business research uses and needs. Surveys were mailed to nearly 500 small-business owners, and a random sample of 30 from the returned surveys was analyzed.  Major concerns and problems included:

·         Cash flow

·         Customers

·         Personnel

·         Competition

·         Marketing

·         Sales

·         Time Management

 

Other general concerns included marketing strategies, human resources, local economy and government rules and regulations.

 

Additionally, it was noted that 63 percent of businesses use training seminars with 40 percent very satisfied with training and 17% satisfied.  Nearly 77 percent of businesses prefer single-session, daylong training emphasizing needs in marketing research and planning, advertising and sales promotion, and strategic planning.

 

Various Small Business Development Centers (SBDC) scattered across the state have conducted their own local needs assessments. Business start-up counseling is a high-need priority for small businesses.  For example, the 1997 Counseling Report from the Virginia Small Business Development Center indicates that Counseling in Business Start-ups represented 42 percent of total cases counseled. This was followed by Sources of Capital, 21 percent, and Marketing/Sales, 18 percent. The SBDC at Wytheville Community College reports that nearly 70 percent of its counseling is with start-up companies (Wytheville Community College Objectives).

 

In analyzing the Virginia SBDC Training Report for 1997, which includes input from all of Virginia's SBDC organizations, nearly 2,573 individuals received training for a total of 27,655 contact hours.  Pre-business Planning ranked number one, 38 percent of the courses offered, followed by sessions on Marketing and Sales at 12 percent.  The balance of offerings is scattered among topics ranging from Veteran Outreach to Minority and Women-Owned Businesses.

 

In 1998, the Greater Richmond Chamber of Commerce initiated a survey of its small-business membership to determine education and training needs. The question was posed, "What concerns your business most?"  The highest-ranked response was Marketing with 20 percent of the responses, followed by Cash Flow (13 percent), and Competition-Domestic with 13 percent.  Government regulations were rated fourth at 10 percent.  When asked which government agencies, rules or regulations most impeded the business, Payroll Taxes received 17 percent of the responses, Employee Benefit Regulations at 11 percent, and OSHA and Wage Reporting 10 percent each.

 

The survey also asked which seminar topics are of interest to business owners.  Not surprisingly, 19 percent of the respondents indicated a strong interest in Marketing while an additional 13 percent suggested Advertising.  Sales as a topic came in third, followed by Networking and the Internet with all three topics ranked at 11 percent each.  Business-Plan Development was ranked sixth with a 9 percent response rate.

 

Needs Assessment

The starting point for any community-oriented education program is the development of a needs assessment. Nelson and Piland (1982) note that a properly designed needs assessment will fulfill these functions:

 

1.       identify business interests, needs, and concerns,

2.       provide a network of key people in the community who will serve as resources, and

3.       give guidelines to identify future small-business programs. 

 

This assessment is crucial in identifying training and education needs in the local community, primarily in noncredit activities.

 

Survey instruments need to be designed and disseminated to all local small businesses within the service region of each community-college campus. Partnering with the local chamber of commerce is one means of developing a mailing list.  Service organizations, such as Rotary or Lions Clubs, are excellent sources for mailing lists.  Another source is the local Small Business Development Center (SBDC).

 

Once the survey results are received and evaluated, and the needs in the business and campus communities established, the final program can be designed.  The needs assessment is the critical success factor in designing the program’s content.  This initial approach to identifying what the customer wants and needs is market-driven education and training, and represents a departure from the traditional approach of offering programs and waiting for the "customer to buy."  This new approach is entrepreneurial for both credit and noncredit programs and is relationship-focused (developing lasting relationships within the community).

 

Summary of Findings

 

From Dennis' research (1997), the problems and priorities facing Virginia small businesses are costs of operations and overhead, government regulations, finding qualified employees, and cash flow. The National Council for Urban Economic Development (1997) research notes that seed funding, technical assistance and transfer of technology, a proactive business community, business plan writing, financial planning, finding capital, marketing, and communications are the priorities of emerging businesses in Virginia.  The Northern Virginia Regional Partnership  study reinforces the need for continued collaboration with local educational institutions for workforce retraining.

 

From Jackson's studies (1996) of business needs in Virginia, conclusions drawn are that Virginia businesses need computer and computer literacy training, supervision, human relations, licensure and certification.  Chambers of Commerce and SBDCs found training needs in business plan development, cash flow management, customers, personnel, competition, marketing, and time management.  The SBDCs are spending the majority of their training and counseling efforts in business start-up activities.

 

The most significant finding, however, is the apparent lack of communications between the community colleges and the small business community; these institutions must inform their constituents of the various training and education programs offered by the colleges.  Communicating program offerings is especially important in rural regions where the primary source for entrepreneurship and small-business management training programs will come only from the community college.

 

References

 

Dennis, W., Jr. (1996). Small business problems and priorities (4^th ed.).  National Federation of Independent Businesses (NFIB).  Washington, DC:  NFIB Education Foundation.

 

This work is the fourth compilation of perhaps the most extensive survey of small business owners across America.  Each survey lists problem areas and respondents are asked to rank the problem from "Critical Problem" to "Not a Problem."  Industry, size, location of business, and sales change are just a few characteristics that separate respondents into various categories. (NOTE:  The 5^th edition was expected to be released in May 2000).

 

House Document No. 85 (1998).  Noncredit education for workforce training in Virginia. Report of the Joint Subcommittee to the Governor and General Assembly of Virginia.  Richmond:  Commonwealth of Virginia.

 

An outstanding public document detailing the workforce needs of Virginia, this report became the basis for legislation passed in 1998 for workforce development programs coordinated by the Virginia Community College System.

 

Jackson, J.  (1996).  Workforce training and service needs of  Virginia businesses:  a survey for the Commonwealth of Virginia.  Unpublished doctoral dissertation, George Mason University, Fairfax, Virginia.

 

A survey was undertaken to determine workforce needs in Virginia, with businesses of 25 or more employees as the subjects of the study.  Jackson also wanted to know the quality of the workforce, availability, organizations providing training, barriers to getting assistance, and requirements for special technical training.

 

National Council for Urban Economic Development (1997).  Promoting growth in emerging companies in Virginia; a report to the Virginia chamber of commerce.  Washington, DC.

 

This report to the Virginia Chamber of Commerce details the need to recognize a new economy emerging in Virginia, which is focused on new technologies.  The argument is excellently advanced that the success of this new economy depends upon the success of new emerging businesses that thrive on innovation, quality, and ideas.

 

Nelson, R. , Piland, W. (1982).  Organizing small business programs in community colleges.  Illinois University, Urbana Department of Vocational and Technical Education.  (ERIC Document Reproduction Service No. ED 219 517)

 

Developed as a manual for use primarily by the vocational activities in Illinois community colleges, this article delves deeply into the rationale, the need, the contents of a suggested program, and the benefits derived.  Basic design is to facilitate small-business development and community development.   Appendices include sample questionnaires, a bibliography on small business and entrepreneurship, a timetable for implementation, and sample evaluation forms.

 

Small Business Profile (1998).  Office of Advocacy, Small Business Administration, Washington, D. C.

 

Annual report on U. S. and Virginia small business activities (heavy on statistics). The importance of the role of small businesses in economic growth is highlighted.

 

Stough, R., Trice, M. (1998).  Northern Virginia regional partnership workforce development survey 2^nd quarter 1998.

 

Report details the training needs of Northern Virginia high technology firms.  Significant shortages of computer related skills are identified and strategies are looked at for assessing these shortages, including partnering with local educational institutions.