Businesses start private, fail or succeed, and, if successful, go public or get purchased by a public company. From Ford to Apple, Microsoft to Google, and Pepperidge Farm to Bare Naked, that”™s how it works.
Except when it doesn”™t.
The overwhelming majority of businesses in the U.S. don”™t, and will never, trade on a stock exchange. They won”™t be acquired. Earnings will never be publicly disclosed. The SEC, for the majority of business owners, is a college athletic conference, not a regulatory body.
Well, of course, you say. Moms and Pops answer to Uncle Sam in simpler ways than Fortune 500s. Private businesses are small. Good neighbors, but not global competitors. Useful, but hardly powerful drivers of our economy and society.
This is true, except when it isn”™t.
Actually, “private” doesn”™t equal “small.” Cargill, Bechtel, Mars (the M&M folks), Toys R Us and Amway are just a few of the private giants in the U.S. Behemoths like these are served by equally large, equally private professional services firms.
It is true, however, that private businesses tend to be much smaller in revenue and number of employees than public companies. An accounting firm is hundreds of times more likely to have five or fewer CPAs than to have 5,000. Most retail businesses have a single location. Yet, in aggregate, even these small private companies employ far more people than the public companies.
In Connecticut, business is overwhelmingly private, with the large majority of enterprises avoiding the traditional C corporation. Here, the S corporation, the L.L.C., the L.P. and sole proprietorships account for more than 75 percent of all business entities formed over the past 20 years.
Our private companies are highly diverse. Purdue Pharma L.P. is a multibillion-dollar pharmaceutical company whose products are used worldwide. Tauck, a much smaller business, is just as globally far reaching as Purdue Pharma ”“ but instead of delivering products, they provide experiences to travelers in the U.S. and throughout the world. The Mitchell family, which started in retailing in a tiny, second-floor space in Westport, now operates four high-end, high-fashion stores in Westport, Greenwich, Long Island and San Francisco. Subway”™s first sandwich was made to order in a small shop in Bridgeport in 1965. Now, more than 36,000 restaurants exist in 100 countries ”“ and Subway is still private.
The state of Connecticut, led by a new governor and legislative leaders that see economic growth as essential to the sustainable delivery of public services, has re-energized its efforts to help create jobs. They have created the First Five program of incentives for major employers and the Department of Economic and Community Development”™s Small Business Express and Connecticut Innovations”™ Innovation Ecosystem, which will commit hundreds of millions of dollars to entrepreneurship and small business growth. The governor has also appointed a Business Tax Policy Review Task Force to take a fresh look at how our tax code affects the competitiveness of our current mix of enterprises, both publicly traded and privately held.
In aggregate, private companies are the dominant economic force in our county. As we seek to recover economically, a most welcome broader awareness is growing among policy makers and the general public that in business, “big” and “small” are not synonyms for “public” and “private.” This awareness, as described above, is leading to constructive action and will, over time, produce powerful results.
Christopher Bruhl is president and CEO of The Business Council of Fairfield County in Stamford. He can be reached at cbruhl@businessfairfield.com.
