In economic development, often the big deals are highly sought and get the most publicity when landed. But the lion’s share of businesses is small, which is defined by the Small Business Association (SBA) as “less than 500 employees.” There are 30.7 million small businesses in the U.S., which account for 99.9 percent of all U.S. businesses (SBA, 2019).
Microbusinesses (firms with 1-9 employees) are the most common, but they account for a relatively small share of employment. America’s 3.7 million microbusinesses made up 75.3 percent of all private-sector employers in 2013, but they provided 10.8 percent of the private-sector jobs according to the SBA’s report, The Role of Microbusinesses in the Economy.
When asked to define a small business, many people think of downtown, local restaurants, and mom and pop shops. These businesses contribute to your tax base, but they also are what makes your city unique. A recent survey revealed that in downtown Denton, Texas, bars and restaurants paid about 65% of all the alcohol sales tax in the entire city of 136,000 residents.
So how can economic developers support this business segment?
Step #1: Develop strong relationships
Your small businesses need to know who you are and what you could do to support them in times of need. If the recent pandemic taught us anything, it was that we need constant and clear communication with businesses to help them be prepared and resilient during the current, and future, crises. If they don’t know who to call and what questions to ask, they may flounder and fail.
Step #2: Treat them like the big guys
Your Business Retention and Expansion (BRE) Program should include small businesses. Look at the composition of your business community. Likely, it is mostly small and medium-sized companies with a few large employers. Your BRE should reflect that same ratio. Make a calendar and visit more small and medium businesses each month. It may take some time to build trust. You may have to get past the “I’m from the government and I’m here to help you” mentality.
Step #3: Expand opportunities
Small businesses can offer services and goods to government agencies and universities. Let them know that they can compete on procurement contracts with government and anchor institutions. Teach them how to use commonly used procurement platforms and educate them on the Historically Underutilized Business (HUB) Program.
Step #4: Connect them with education
Many state workforce programs will offer financial support for interns or even full-time employees, as well as reimbursement for education that will improve the small business owner’s operations. However, most entrepreneurs do not know how to access this information. Strengthen your relationships with your workforce representatives and invite them on your BRE visits.
The Bottom Line
Many economic developers will continue to think of big tax-revenue gains and economies of scale for job creation. However, the statistics show that city leaders should support small businesses with the same resources and enthusiasm as they do to attract and retain the “big guys.”
Interested in more tips to support your local businesses? Check out our blog, "10 Steps to a Successful Business Retention and Expansion Program."
Blog by Julie Glover