Recessions continue to be a good time to start a business, but new entrepreneurs were less likely to hire employees last year than they were previously.

That's according to an index of entrepreneurial activity compiled by the Kauffman Foundation, a Kansas City-based organization that promotes and studies entrepreneurship. It found that 0.34 percent of American adults started a business every month in 2010, the same level as the year before. That's the highest level of entrepreneurship in the past 15 years.

The bad news is that fewer of these startups are hiring people. On a quarterly basis, only 0.10 percent of Americans started businesses that had employees in 2010, down from 0.13 percent in 2007. That's a sign that many new business owners were forced into entrepreneurs4hip last year by unemployment. These business owners are more likely to be sole proprietors than employers.

"Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees," said Carl Schramm, president and CEO of the Kauffman Foundation. "This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation."

Entrepreneurial activity increased for Latinos and Asian-Americans last year but declined for blacks and non-Latino whites. Nevada, Georgia and California led the nation in entrepreneurial activity, while West Virginia, Pennsylvania and Wisconsin had the lowest rates of entrepreneurship.

The biggest increases in entrepreneurial activity occurred in the 35-44 age group and the 55-64 age group.

Small-business index continues
upward climb

A monthly index of small-business indicators hit its highest level since December 2007 in February.

The index, which is based on a survey of National Federation of Independent Business members, gained 0.4 points to 94.5. The index is based on a scale where 100 represents business conditions in 1986.

"This is not a reading that characterizes a strongly rebounding economy," said NFIB Chief Economist Bill Dunkelberg, but it does show that "the future is looking brighter for a few more small-business owners."

Only 17 percent of small-business owners plan to increase their work force in the next three months, but that's a 5 percentage point gain from the previous month's survey.

Capital spending, however, remains weak, despite low interest rates and tax breaks designed to encourage investment in new equipment.

More than 20 percent of small businesses plan to raise prices, the highest percentage in more than two years.

Members of Congress scold
SBA on programs

Members of Congress criticized the Small Business Administration for creating new programs while proposing a $10 million reduction in funding for Small Business Development Centers.

SBDCs provide counseling and training to small-business owners at 900 locations across the country. The SBA proposes $103 million in federal funding for these centers next year, $10 million less than this year. The centers also receive funding from state and local sources. Some of the centers also will receive one-time grants totaling $50 million this year for specific programs aimed at helping small businesses grow.

Several members of the House Small Business Committee criticized SBA Administrator Karen Mills for proposing cuts to the SBDC program. These centers have "worked well in our part of the world," said Rep. Mark Critz, D-Penn.

Rep. Nydia Velazquez of New York, the committee's ranking Democrat, was troubled that the SBA is spending less on "programs that we know work" in order to fund seven new programs that were never authorized by Congress.

"I will be recommending that the funding requests for all pilot projects be either denied outright or made available to reduce fraud and waste in the SBA's programs," Velazquez said.

Advocacy office claims $15B
in cost savings

Small businesses avoided nearly $15 billion in additional regulatory compliance costs last year, thanks to input from the Small Business Administration's Office of Advocacy.

That's according to the office's annual report on the Regulatory Flexibility Act, which requires agencies to analyze the impact of proposed rules on small businesses. If the rules have a significant economic impact on small businesses, agencies are supposed to consider less-burdensome alternatives. It's the Office of Advocacy's job to make sure agencies follow this law.

In fiscal 2010, the office reviewed hundreds of proposed regulations to determine whether agencies followed the Regulatory Flexibility Act and solicited comments from small businesses about their effects. It sent about 40 letters to agencies commenting on their proposals.

This interaction between the office and federal agencies results in regulations that still meet the rules' goals while minimizing burdens on small businesses, according to the office. For example, small construction companies saved nearly $2 billion when the office convinced the Environmental Protection Agency to allow firms to use a less-costly method to control sediment discharges from construction sites.