If a city were asked how it could develop a stronger small business ecosystem, what would it say? This question was posed to a group of small business stakeholders at a recent Living Cities Integration Initiative (TII) Learning Community devoted to improving small business development. Experts from leading institutions emphasized the importance of developing a proper typology of small business to maximize the contribution of the small business sector to the economic vitality of a region. Read more about the segmentation of small business types here. In response to the question above, site participants from Baltimore, Cleveland, Detroit, Newark, and the Twin Cities discussed the steps needed to develop a more systems-based approach that creates a supportive environment and then identified the specific tactics that could help small businesses directly.
Four steps identified to develop a stronger small business ecosystem included:
Take inventory and analyze “ecosystem” gaps . Participants mentioned the value of looking at their small business sector from an ecosystem perspective that identifies all of the stakeholders (capital providers, government, potential customers, technical assistance providers, and economic development agencies). This perspective then allows them to identify gaps, particularly needed services and the areas to cultivate coordination. From this assessment, several sites mentioned the need to increase support of micro-entrepreneurs, better engage government (procurement, permitting), and fill finance gaps.
Then convene your key players. Many sites saw the need to convene the myriad of small business service providers, lenders, city officials, and others to understand the wide range of needs and utilize the full scope of available services. Some identified the “one table” established by the Integration Initiative as a possible convening and organizing force that could then set in motion the development of a more coherent regional small business agenda.
Once convened, improve coordination . Every site mentioned the need to improve coordination within their small business sector, consistent with the wide diversity of small businesses and the constellation of actors and support services. Tim Ferguson of Next Street described the imperative to “connect the dots” for small businesses using an example of how a catering company was connected to a form of highly favorable financing (industrial revenue bonds) that it had no idea it was eligible for. Other sites found inspiration from the keynote speech of Rob Walsh, the Commissioner of New York City’s Small Business Services, where he described how his agency’s driving principle is to create a single entry point for the myriad of government services for small businesses such as permitting, procurement, and public/private resources through their web-site and satellite offices throughout the City.
Develop a small business champion to coalesce interest and provide leadership to put the moving parts together. Many sites believed city government could play an important role in providing leadership and voicing the needs of small business. It could also magnify important efforts such as Cleveland’s Jumpstart program that supports the region’s entrepreneurial ecosystem by raising funds for other support organizations and managing a network of incubators, accelerators, and investors.
Moving from systems level support, sites identified specific strategies to support small businesses directly which included:
1) Providing technical assistance and advisory services, particularly for established firms that have the potential to grow . These firms need very capable, professional and highly focused service providers such as Next Street which provides high-touch advisory services to entrepreneurs who lack the time to develop specific growth strategies to increase their “top-line” and “bottom-line”. Interise, another featured service provider, delivers an intensive training program nationally to its entrepreneurs through local partners. Key success factors include an engaged entrepreneur (achieved, in part, by paying a fee that vests commitment), building networks, developing metrics/goals for firms to target, and increased access to new sales opportunities.
2) Facilitating increased access and opportunity for procuring contracts from local government and other anchor institutions. Programs such as the Massachusetts’ State Office of Minority and Women Business Assistance, and the City of Cleveland address key barriers such as access to capital, the large size of procurement amounts, and enhanced access to bids. Their programs require: 1) the inclusion of sub-contractors to allow the smaller business access to contracts they could fulfill; 2) a certification program that improves the competitiveness of their bids; 3) and formal partnerships with capital and other service providers.
3) Government proactively engaging the small business sector to create value . Commissioner Walsh described the need to win over small businesses (whose default view of government is skepticism) by adding value from the first point of contact. He cited their efforts to streamline the permitting process online, creating a real “one-stop” shop experience at their business improvement district offices, and facilitating a “second-look” program for businesses denied credit.
Many more ideas and action steps were identified by the Integration Initiative participants that they will look to implement in the near future to support this critical sector. Small businesses are a vital economic and social force that create the bulk of all net new jobs, support vibrant place-making, generate wealth, and contribute to the tax base. To realize these benefits, stakeholders must recognize that an ecosystem supports this sector and develop strategies that align with the proper segmentation of small business.