If Your Community Wants Job Creation, You Must Focus on Small Businesses.
Many American communities are facing challenging times with unemployment, slow job creation, and the loss of jobs due to automation. However, research shows that if job creation is important to your community, your best path to growth lies with small businesses. Small businesses account for 64% of net job creation in the private sector. In difficult economic times, small businesses contribute even more. After the last recession, the share of net new jobs attributable to small businesses grew to 67%.
Can One Economic Development Organization Serve Hundreds of Businesses?
Serving local businesses through economic development organizations has always been a big challenge. There may be hundreds or thousands of small and medium-sized businesses in your community but just a few economic development staff to serve all of them. This ratio makes it impossible for overworked and understaffed economic development organizations to personally help all of these local businesses with customized assistance for each company. No matter how amazing the economic development professionals are, they are still humans that can’t work 24 hours a day and serve hundreds of businesses at once.
The good news is that there is help for economic developers because SizeUp can serve as many businesses as your community has and can take work pressure off of economic developers.
How Economic Development Organizations are Empowering Their Local Businesses.
Smart communities are empowering their local businesses to succeed with information. This levels the playing field so that their small businesses can access the same types of intelligence that big companies use. This enables local businesses to make smarter decisions through data, upgrading the ability of small businesses to be more successful and grow as modern companies.
Organizations like the Colorado Springs EDC, Town of Gilbert in Arizona, Jackson Chamber in Tennessee, and the Small Business Development Center at Dallas College in Texas are just a few examples of those who recognize the importance of fostering an online strategy to support local businesses. This approach makes their community a better place, with more successful businesses that foster job growth and taxes that create quality amenities, including parks, libraries, schools, public safety, and more.
These places are actively enabling their small businesses to make data-driven decisions for success using an online service called SizeUp LBI (Local Business Intelligence). By implementing the service on government, chamber of commerce, Small Business Development Center, and library websites, communities are able to help their local businesses make better decisions. They help these companies know things about themselves they would never otherwise know without access to this powerful business intelligence.
Access to this kind of online market data changes the playing field for small business owners. SizeUp LBI addresses these critical changes with four market intelligence tools: Business and Industry Analysis, Competitive Intelligence, Advertising Analysis, and Demographic Analysis.
New Business Failures Can Be Reduced Through Preparation
It is common to hear the failure rate of new businesses is high, but the data is insightful because it tells you when businesses tend to fail. 20 percent of businesses fail in the first year, but an additional 30 percent fail in years 2, 3, 4, and 5 (Source: US BLS). 30 percent divided by 4 years equals an average of 7.5% of businesses failing each of these years. If 7.5% is a predictable/natural rate of business death, then 12.5% of businesses (1 out of 8 of all businesses) are failing in the first year due to “lack of preparation in one way or another” (Source: Entrepreneur Magazine). Being better prepared than the bottom 1/8th of all businesses puts an entrepreneur in a much higher likelihood of success. Economic developers are positioned to directly reduce this rate of failure.
If 1/8th of business failures can be mitigated through preparation, then economic developers can have a significant impact in reducing this failure rate. EDOs can prepare entrepreneurs with the information, training, and infrastructure needed to move out of this bottom 1/8th of businesses that fail quickly in their first year. Entrepreneurs can us SizeUp to create a business plan and interactively test their business assumptions based on real data for their industry and location.
A reduction of new business failure also has long-term benefits to local economies because each business that survives the first year produces a larger total pool of businesses surviving into every future year.
If 12.5% of all businesses are dying for the preventable cause of a lack of preparation and access to resources, it logically follows that an astounding 63% of first-year business failures can be mitigated and reduced through the direct engagement of economic developers implementing proactive programs designed to reduce the failure rate.