Nurturing local business: Another economic development approach

by Mike Kroll

The Zephyr, Galesburg

Ask anyone in Galesburg what the biggest community need is and you will be told jobs. Since the 1980s this community has seen thousands of good middle-class jobs leave the area with the closure or relocation of a long list of major employers and the response has been to seek out and entice other major employers to come to Galesburg. While a small number of new employers have moved to Galesburg none have been sizable and they have contributed relatively little in terms of new middle-class jobs. What job growth this area has experienced has been from expansion of existing employers such as the BNSF (whose workforce has fluctuated considerably both up and down over the time period) and Galesburg continues to lack significant numbers of well-paid job comparable to those that have been lost.

Clearly the attempts at attracting mid- to large-size employers have been a bust despite serious expenditures of local resources and regardless of how creative the search has become. Numerous trips to China along with reciprocal hosting of Chinese delegations have resulted in a sister city agreement but no jobs and American manufacturing operations are too busy outsourcing production or moving to low-cost foreign locations to even give the Galesburg area consideration. This experience is hardly unique to Galesburg. Across the state of Illinois and the midwest manufacturing jobs have been flowing away in pursuit of ever cheaper labor.

During Governor Rod Blagojevich's first term he restructured and renamed the state's economic development operation and launched some new projects aimed at stimulating job growth in Illinois. One of those projects was the Illinois Entrepreneurship Network (IEN) composed of 18 Entrepreneurship Centers scattered regionally across Illinois. One of those centers is located here and called appropriately enough the Galesburg Entrepreneurship Center, staffed by Cat Garza and retired local banker Dick Johnson. Perhaps owing to the economic realities of west central Illinois two other centers serve the region with offices in Quincy and Macomb.

The state-funded program typically works with local economic development and education providers to offer an array of services to both existing small businesses and those contemplating a small business startup. Working “...with clients who have the vision and potential to become a high-growth enterprise” entrepreneurship centers provide “Experts, networks, tools and other opportunities transform your business into an appealing investment for lenders” according to the state website. At the state level much of the emphasis is placed on assisting businesses and potential startup secure financial assistance from both public and private sources.

That is why a key goal is to facilitate each client's development of a business plan that is critical in securing bank financing for most small businesses but also helps focus the entrepreneur's thinking on the challenges and realities of the business idea. A business plan forces you to put your business idea in writing and make a convincing case for its probable success. This can be a productive exercise even if obtaining bank financing is not a short-term goal because the process helps to identify the strengths and weaknesses of the business idea.

“Writing a business plan isn't a lot of fun and many clients resist this step only to discover just how useful it can be. Few new business ideas survive the preparation of a business plan without modification and sometimes putting it all down on paper helps us face hard realities. Our dreams aren't always realistic, but that doesn't mean they can't become so with a little more work and planning,” explained Cal Garza. “Two of the major reasons many new business fail are under-capitalization and a failure to really understand their marketplace.”

If small cities and towns in rural Illinois are to survive without importing manufacturing jobs they have to learn how to generate new jobs themselves. They need to realistically appraise the strengths and weaknesses of their community, the available resources and the potential marketplace. By necessity most such startups don't begin by employing hundreds of workers but if they succeed and grow their loyalty to the community that helped nurture them is far greater that a manufacturing operation that is lured to that same community by incentives that can be matched or exceeded by some other disparate community. In many cases existing small local businesses already possess valuable skills and experience that can be leveraged into growth that will support more local employees with a little bit of help. Officials at the Department of Commerce and Economic Opportunity (DCEO) say they understand these things and want to assist the creation of such jobs, that's why the IEN was formed.

“Right now we're in the process of building the conceptual infrastructure of entrepreneurship,” explains Garza. “The biggest challenge is finding people with the willingness and resources to take a chance on developing a small business or expanding an existing business into new areas. It's not my role to provide new business ideas or to tell someone whether their business idea has merit. Instead I help lead them through the planning process and help them obtain information and assistance that permits them to determine the likelihood of success for themselves.”

Garza and Johnson are here with the mission of facilitating local entrepreneurial growth and development but they are also assisted by experts across the IEN. Before you can even think about obtaining financing you have to develop a marketable product or service and assess its probably market success. If the idea is determined to have merit then most of us require financial assistance to enable realization of that idea. Garza says that his office will not only help a business line up a commercial bank loan but also help them utilize available government incentives and assistance ranging from small grants to tax savings to training assistance.

“We are a partnership working together with economic development groups across Illinois and especially GREDA (the Galesburg Regional Economic Development Association) to promote the creation and growth of local small business. A successful small business doesn't stay small for long. Assessing the performance on an ongoing business and reviewing your operations is crucial to both growth and survival. We're not just here to help get you started but also to help insure your continued success and growth in both jobs and financial return. Our strength is the network of available resources we can help make available to the business person.”

Starting a small business is a risky endeavor. Statistically most new businesses do not succeed but there are things a smart businessperson can do to maximize the probability of success. One such thing is having the patience to properly research and plan your potential business before you startup. Not all business ideas are practical or workable or even realistic. And it is not uncommon for someone to desire their own business while being clueless just what that business should be.

“Probably the most interesting and challenging request made of me is when someone says that they want to start a business but don't have any idea what it should be,” said Garza. “Not everyone is cut out to start their own business or in a position to do so realistically and we want to help those people make a sound assessment before they sink their life savings into a high risk business venture. But on the other hand there are also plenty of people who are well equipped to become small business people if only they had a good business idea. I can help those people generate potential business ideas and evaluate interesting opportunities or offer suggestions. Ultimately the dream and the decision must be theirs. My role is to make sure that they have exercised due diligence and sound judgment in evaluating the opportunity. It may not be realistic but I want everyone I speak with to be successful business people.”

Business risk is inevitable and typically, like any investment, that risk is proportional to the return one anticipates. Timing, experience, resources, market knowledge and luck all play important roles in determining the success in establishing a new business or the expansion of an existing business. Garza can help ongoing businesses continue to prosper and grow by offering advice, training and referrals to experts within the IEN.

One of the goals Garza has for the Galesburg Entrepreneurship Center is to reestablish the former SCORE program. When first started by the federal Small Business Administration the acronym SCORE stood for “Service Corp of Retired Executives” but times have changed and so has SCORE. In its former incarnation in Galesburg Garza's partner Dick Johnson was a key figure in the local score chapter that put the decades of business experience of retired local business people before current businesses seeking assistance. Today's economic climate in Galesburg means that there are fewer retired business executives available but Garza wants to network both active and retired business people to assist he and Johnson in advising local businesses. “There's a lot more available business expertise in this area than people realize and I want to leverage it to help our clients,” stated Garza.

Another goal of Garza's is to begin offering a series of local training workshops for business people covering everything from basic accounting principals to the essential of human resources to how to identify and purchase affordable technology for your business. “None of us know everything we need to know to remain successful. Large businesses can hire a team of experts to assist but that is practical for the small business. A small businesswoman needs to be a Jill-of-all-trades and we can help that happen.”

And finally Garza believes that it is important to recognize that not all entrepreneurs are created equal. There are different kinds of entrepreneurs offering different potentials to the community. The commonly recognized entrepreneur is what Garza terms an “operational entrepreneur” who thrives on the creation and operation of his own business. Another type of entrepreneur is less often recognized but just as important, the “social entrepreneur” possesses resources such as cash or ideas but not the desire to directly operate a business. This latter group can be paired with the former to assist in the financing of new business ventures or the incorporation of a new idea to expand an existing business.

Identifying potential social entrepreneurs and convincing them to become involved in starting or expanding local businesses seems like a key ingredient toward the economic resurgence of the Galesburg area. Garza is convinced that most of the required resources are already available in this region to support the creation and growth of new businesses and new jobs. Two of the benefits of pursing economic development in this way are that it diversifies the economy not only because it is less reliant on a small number of large employers but also because it employs a wider variety of both blue- and white-collar employees. Secondly, businesses started by people who already live in the area seem far less likely to be lured away just when they become most valuable to the community.

Growing the local economy through the creation and expansion of a number of local small business takes a lot longer than successfully recruiting a single large manufacturing plant to town but we already have a track record of success on the former and many years of failure at the latter. Perhaps the old fairy tale about the hare and the tortoise may have just some real world applicability here.

8/16/07