A guide to helping small companies profit from new economic-development programs.
How small companies are profiting from new economic-development programs
In the past 10 years, state and local governments all over the United States have created hundreds of programs to help small growing companies. Most entrepreneurs don't yet know about these programs -- but a few are finding out and are getting a leg up on their competitors in the process. If you know where to look, you may be able to find low-cost capital, technical assistance, even help in opening up international markets. -- M. E. M.
Q: What's the definition of a contradiction in terms?
A: "I'm from the government, and I'm here to help you."
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Most people who run their own companies might not laugh at the joke -- too true to be funny, and all that. Then again, most people who run their own companies haven't met Sandra Suran.
Suran is a government bureaucrat -- sort of. Until the spring of 1988 she was a highly successful business professional, a partner in the Portland, Ore., office of Big Eight accounting firm KPMG Peat Marwick. But she was worried about her state's economy. Oregon's future, Suran believed, depended on smaller companies; after all, companies with fewer than 100 people employed some 70% of the state's work force. But she also knew that Oregon's businesses had an above-average failure rate. What, she wondered, could the state do to improve that?
To find out, Suran resigned from her job and became the state's first small-business advocate. For a start, she raised more than $200,000 in cash and services from Oregon corporations to study the small-business economy and what it needed from state government. Next she surveyed close to 400 small Oregon companies and conducted some 300 meetings and focus groups of entrepreneurs. She also researched the government programs designed to assist them. What she learned surprised her.
Oregon, it turned out, didn't need more programs to help growing companies. Among federal, state, and local governments, there were hundreds of useful programs available. One program would bring efficiency experts to rural companies at no charge. Another would help pay for turnaround consultants at troubled companies. But few people knew about these or any of the others. "There are huge amounts of resources available," Suran says. "The problem is that any one person can hold only a few of those in their head at any one time." Small companies had enough trouble keeping track of the regulations they had to obey, never mind keeping track of how governments could help them. In her focus groups, she remembers, the constant refrain was, If you don't do anything else, simplify government.
Like the chief executive officers Suran interviewed, most entrepreneurs see government as baffling, frustrating, and hostile. There's evidence aplenty for that view. But it misses what Suran discovered -- all the government-assistance programs small companies can use. Those programs aren't unique to Oregon; on the contrary, they have been proliferating in many parts of the country. They represent something of a quiet revolution in the way public officials think about developing their economies. While no one was looking, state and local governments in the 1980s discovered the importance of growing companies.
Just look at the numbers. According to the Washington, D.C.-based Corporation for Enterprise Development, all but 4 states now provide some type of small-company financing; 28 offer publicly funded venture or seed capital. Twenty-five states fund new-business incubators designed to help start-ups through the difficult early stages. Forty-six have Small Business Development Centers to provide management assistance. Thirty award grants for state-of-the-art research and development. Indeed, the Small Business Administration's newest edition of The States and Small Business contains more than 400 pages of program listings (see "Where to Go from Here," page 7). And that doesn't even count programs at the local level -- where, Robert Davenport of the National Development Council says, growth has been just as dramatic.
A decade ago none of this was true. Then, only a few states even had small-business offices. Economic development mostly meant persuading big companies to locate (or keep) their facilities in your district rather than someone else's. Such smokestack chasing is still common, of course: the political payoff for landing a big plant is too alluring for most elected officials to resist. But many states and localities are realizing that helping small, indigenous companies grow is a wiser use of public resources.
Part of this change can be traced to the popularity of economist David Birch, who was the first to stress the importance of growing companies in job creation. And part stems from policymakers' experience in the early 1980s, watching large corporations lay off thousands of workers at a time. Perhaps it's not surprising that two early leaders in entrepreneurship promotion were the governors of Pennsylvania and Michigan, whose economies were suffering from the problems of Big Steel and Big Auto. If a state couldn't count on its major employers, what else could it do but help small companies? Then too, maybe it has dawned on public officials that smokestack chasing is a zero-sum game. "Fifteen years ago economic development meant, Let's attract a big company," Davenport says. "It was a lot of money spent, and there weren't a lot of positive payoffs for the nation as a whole. Now, communities are saying, We'll grow our own garden."
Such sentiments aside, what do government officials know about helping growing companies? Often, not much. As Suran found, all that those companies really ask from government is fewer hassles. So why don't bureaucrats just skip the direct assistance and do small companies a favor by making their lives simpler?
