Microbusinesses play increasingly crucial role in California

 As the fifth largest economy in the world, California is home to heavyweight economic industries: Silicon Valley, the entertainment industry, agriculture, tourism, and more.

But anyone who lives here knows that there’s also a boom in the number of people who are starting their own microbusinesses. These are the people opening food trucks and e-commerce sites to sell their handmade goods, and the designers and consultants putting out their own shingles.

Together, these microbusinesses add up to a large and growing economic force.

Millions of people started their own business after COVID hit. Some did so out of necessity; most did it to chase their passion.

According to data from Venture Forward (a research initiative from GoDaddy), California has roughly 3.8 million microbusiness – with 67% in southern California, 23% in the Bay Area, 7% in the Central Valley, and 2% in the northern part of the state.

And the more microbusinesses there are in a community, the better the economy works — for everybody.

The data shows that unemployment falls and average household income – for all households, not just the business owners’ – grows when the density of microbusinesses increases in any given area.

Looking forward, microbusinesses are going to become an even more powerful force in the economy, given what we’ve seen many people do through the COVID pandemics.

Millions of people started their own business after COVID hit. Some did so out of necessity; most did it to chase their passion. But very few say they’re looking forward to going back to working full-time for someone else. My hunch is that more people will take this path.

The state needs to accelerate efforts to connect broadband to all households.

California is a leader when it comes to microbusinesses. We rank 5th in the nation in microbusiness density, almost twice the national average. Hotspots include West Hollywood and Malibu; Palo Alto and Oakland; and Ukiah and Mono County.

But we need to make sure that California supports these businesses. If people no longer have to live near their employer, they can work from anywhere. Many have done just that. The state’s population fell in 2020 and 2021, the only times this has happened in the state’s history. So what should the state do to keep this microbusiness ecosystem thriving?

Increase access to affordable broadband: As in the rest of the country, there is a digital divide when it comes to broadband. The state needs to accelerate efforts to connect all households, particularly in rural communities and communities that have been historically marginalized.

More than half of microbusinesses require less than $5,000 to get going, far less than the traditional small business.

Digital Skills training:  When surveyed by Venture Forward, microbusiness owners say they most urgently need help with marketing and skills training.

Access to capital: More than half of microbusinesses require less than $5,000 to get going, far less than the traditional small business. But most people don’t have that much cash lying around, and these are often people unable to get a loan. I support initiatives such as the $35 million California Dream Fund, which gives $10,000 loans to entrepreneurs who complete a training program. But we need to make sure programs like this one are widely accessible.

Portable benefits: It’s a significant  risk to start a microbusiness. Making benefits portable – so that workers could bring their health insurance with them to their next job  – will encourage Californians to take more risks as they follow their dreams.

By taking these steps, California can continue to foster and support a growing entrepreneurial community. These businesses are nothing short of amazing, and we should do all we can to make sure that California continues to be a leader in microbusiness creation and growth.
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Editor’s Note: Alexis Podesta served as Secretary of California Business, Consumer Services, and Housing agencies under Gov. Gavin Newsom and Gov. Jerry Brown.  A small business owner, she currently runs her own strategy and advocacy consultancy.  She can be reached at [email protected].