C. Support small businesses and entrepreneurs
Small businesses are a critically important component of the region’s economy. Statewide, micro-businesses (<4 employees) and sole proprietors together comprise 86% of all business establishments; employ 30% of non-government workers; and were responsible for 30% of net new jobs from 1994 – 2004. Although many economic development plans and programs fail to address the significance or needs of very small businesses, the impact of these enterprises will continue to grow in coming decades. In many sectors, the nature of professional work is changing, from a growth-oriented corporate culture to a network of contractors and opportunistic alliances. In this new paradigm, economic growth is realized through the multiplication of many small enterprises, not the expansion of a limited number of firms. Business consulting, information technology, arts and culture, and design are all examples of sectors where entrepreneurs can be successful on a small scale with very limited capital needs. Many entrepreneurs in these fields may eschew the increased overhead, rent, and capital costs that accompany growth in favor of informal partnerships with other small businesses, tailored to specific opportunities.
MetroFuture supports the growth of small businesses in a variety of ways. The land use plan emphasizing development in city and town centers will yield office and retail spaces more conducive to small businesses than are conventional office parks and commercial strips. Town and village centers also offer greater opportunities for the networking and collaboration that small businesses thrive on, so long as the zoning is supportive. Economic development policies and programs can also help to support small businesses; first by acknowledging their significance and addressing their needs, such as technical assistance in a variety of areas: business planning, cash flow, marketing, and law. Like every enterprise, small businesses also need access to capital, though often in smaller amounts than larger companies; new models of lending and new sources of capital are critical to ensure that these businesses can thrive. More streamlined procedures for international transactions will help the many small enterprises that do business overseas, especially immigrant and transnational entrepreneurs, and small import/export operations.
8) Develop economic development plans that support small businesses
One key step to supporting small businesses is to acknowledge their importance in economic development plans. Many economic development professionals are focused on attracting or retaining corporate employers, which provide economic benefits that are easy to define. Support for small businesses and entrepreneurs is often harder to define, and it may be harder to measure the outcomes.
Additional research is necessary to develop a better understanding of micro-businesses and sole proprietorships in Metro Boston. Research topics might include: in what sectors are these entrepreneurs most common? How do they structure their contractual relationships with other businesses? How are they affected by tax programs and incentives? What are the economic impacts of these businesses? Such research could be conducted by academic institutions (such as Salem State College, which has already been looking at the issue) or industry associations, in cooperation with state agencies.
Based on this research, public and private partners (including MAPC) can develop a set of best practices for municipal economic development staff to help inform their planning efforts. The research results can also help to support ongoing discussion with state agencies to modify policies as necessary.
8.a The Massachusetts Office of Business Development should support additional research on micro-business and sole proprietorships in Metro Boston
8.b Institutional and industry partners should develop strategies and municipal best practices to support small businesses
9) Facilitate access to capital for small businesses
Many segments of the small business market often require small loans (less that $30,000) that are not a priority to many mainstream financial institutions. Micro-businesses and sole proprietorships with few assets to collateralize may find it very difficult the secure the capital necessary to take advantage of certain opportunities. Innovative lending models and new incentives for conventional lenders are necessary to create the access to capital that will allow the small business sector to thrive.
Community-based lending programs and microlending already play a critical role in providing access to capital for small businesses. Many community development corporations (CDCs) and other nonprofits operate lending programs through which public funding and private grants are loaned to small businesses. Various other microloan programs are operated by small community groups (such as Main Street organizations), funded by private donations, developer mitigation payments, or other sources. Even some venture capital investors include small business loans in their portfolio through instruments such as the New Markets Venture Capital program.
While these programs exist, small businesses may face a variety of challenges in accessing capital through these alternative mechanisms. Entrepreneurs may not be aware of community lending programs, there may be no such programs in their vicinity, or they may meet linguistic or legal barriers to borrowing. Some programs may simply not have enough money to loan out to all applicants. Borrowers may need technical assistance in order to utilize funds effectively.
There are existing strategies that can be used to overcome these barriers. Regional community lending and microloan programs are necessary to serve small businesses beyond the reach of CDCs and existing programs. Conventional lending institutions should provide their expertise to help strengthen community lending programs and should make it standard practice to refer unsuccessful loan applicants to those programs. State-level lending assistance must reach deeper into communities with large numbers of immigrant entrepreneurs to make them aware of opportunities. Community lending programs should collaboratively develop protocols for program evaluation in order to document the importance of these programs and identify best practices.
9.a MAPC, the Massachusetts Association of CDCs, and academic institutions should establish a “community lending research agenda”
9.b The region’s philanthropic institutions should collaborate on development of a regional microloan program
9.c Congress should restore the Community Development Financial Institutions Fund and the Micro Loan program to 2001 levels, or establish comparable programs
9.d The Executive Office of Housing and Economic Development should establish a program to provide targeted financing outreach to small businesses owned and operated by immigrants.
9.e The Legislature and the Governor should invest in successful and proven programs such as the Enterprise Center at Salem State College
10) Expand access to appropriate technical assistance, business services, and training
Small businesses often have a great need for technical assistance and training. By necessity, entrepreneurs must “multi-task” at nearly every aspect of their business; in doing so, they often find themselves far from their area of expertise, lost in the weeds of finance or contract negotiations.
In order to help small businesses overcome these challenges and thrive, the region needs to expand access to technical assistance, training, and business service programs; and it needs to do so in a way that recognizes the important distinctions between different types of enterprises and entrepreneurs. Design and media professionals may face intellectual property issues that are irrelevant to retail merchants. Immigrant business owners may have different expectations and needs than private consultants with corporate experience. Technical assistance programs are often predicated on misplaced assumptions that undervalue the skills and abilities of the people who are seeking those services, and misunderstand their cultural sensibilities. The problem is often compounded because representation from the entrepreneur community is not involved in designing the support services.
The programs of concern here take a variety of forms: training programs build small business capacity in specific skills or content areas; technical assistance provides targeted support for specific efforts or initiatives (such as a business plan); business services include professional advice such as auditing or legal counsel for lease negotiation.
A more effective technical assistance system for small businesses requires a variety of actions: service providers, entrepreneurs, and the public sector should collaborate on the design and coordinated delivery of these programs; service providers through develop a common program evaluation methodology in order to document success and define best practices; more public funding is needed to support these programs.
10.a The Massachusetts Office of Business Development should develop a region-wide inventory of technical assistance programs in order to increase access and reduce redundancy.
10.b MAPC should identify a candidate organization to develop a technical assistance program assessment methodology for community organizations
10.c As part of the Immigrant Research Agenda, MAPC and allied organizations should develop “best practices” for delivery of technical assistance to immigrant entrepreneurs
11) Support unconventional work locations: home offices, live/work spaces, and business incubators
Micro-businesses and sole proprietorships generally have little need for conventional office and industrial spaces. Many work out of their own home or studios; others share office space with other small businesses. A new generation of “virtual” business incubators (such as the Enterprise Center at Salem State College) serve as resource facilities where member businesses access services, meeting space, and training, without necessarily having their desk at that location.
Despite the interest in home-based businesses and support facilities, barriers remain due to land use controls and lack of resources. Many municipalities still have zoning prohibitions on home offices. Zoning may also inadvertently discourage the creation of small studio and office spaces in town centers, due to dimensional requirements, parking standards, use limitations, or other constraints. While a good supply of artist studio and live/work space is only one component of the larger creative economy strategy, it can help to catalyze urban revitalization built around creative activities.
11.a MAPC should seek funding and collaborators to develop and disseminate “best practices” for municipal regulation of home-based businesses and live/work spaces
11.b Public institutions of higher education and chambers of commerce should seek opportunities to replicate the Enterprise Center model in other portions of the region
12) Provide financial services that operate smoothly in a transnational milieu
A quarter of Massachusetts businesses do business outside of the United States. However, there are many barriers to smooth transnational financial transactions, especially for smaller businesses conducting smaller transactions at branch locations of their financial institution. These barriers may be a drain on economic growth and may prevent small businesses from fully participating in the global economy. While federal regulations on international money transfers are beyond the scope of this recommendation, financial institutions need to improve services in order to facilitate international transactions, especially for small businesses.
The barriers to international transactions may also prevent immigrants from fully participating in the region’s economy. Current market research on immigrants challenges conventional wisdom about immigration. A new, transnational way of life is emerging that immigrants create for themselves. Many immigrants pursue financial and investment goals for themselves and their families in the United States, while at the same time planning or sustaining investment projects with family or business associates back home.
12.a MAPC and allied organizations should investigate international money transfer as part of the “Immigrant Research Agenda”
Post new comment