Cultivating the Small Business Ecosystem (part 2)

To continue where we left off last week, talking about small business ecosystems:

When you grow a garden, you don’t build the plants out of rocks and plastic.  You create the environment where those tiny, threadlike little seedlings have the best chance you can give them of growing into strong and resilient plants.  Some plants grow faster than others, some are inherently hardier.    You can’t do it for them.  Your job is to give them the best chance you can give them to grow. 

Just like gardeners work at giving their plants the best odds to thrive, we who care about communities can build an environment where our small businesses have the best chances to grow.

Fine.  So you can’t build seedlings out of rocks and plastic.  So what the heck are we supposed to do?

If you want to build a healthy small business ecosystem in your community, you have to

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put in a significant amount of work ahead of time, and maintain diligent attention once the seedlings start coming out of the ground.

Okaaay…and the prep work looks like…what?

• Helping potential entrepreneurs select the right seeds.  One of those capacity issues we talked about the other day has to do with market knowledge.  Entrepreneurs tend to start businesses on a gut sense of an opportunity – or on a “gee, it would be cool to do that” sort of model.  A lot of time that works out just fine, but there’s also a big risk of wrong moves or mistaken choices that can cut into the entrepreneurs’ reserves.  As we discussed, one of the biggest differences between small businesses and larger businesses is capacity, whether that’s cash reserves, hours in a day or knowledge.  Missteps in the beginning can set a business up for failure, and anything that wastes capacity cuts away at a very thin layer of reserves.

Communities can help select the right seeds by sharing real-world information about their assets and their opportunities.  What’s our economic makeup?  Where are we over-supplied or undersupplied?  What are the hidden, maybe small-scale opportunities that result from population subsets or unusual regional destinations that out-of-towners might not know about? This information isn’t hard to come by, if you know where to look.  But it can make all the difference between a hometown success story and a could-have-been-if-only.

• Preparing the soil.  If you are starting a garden on a vacant lot, you don’t just throw seeds down and hope for the best.  You have to make sure that the dirt can nourish the plants you’re planning to grow, and of course all dirt is certainly not created equal.  What you need to add or do depends on what you are planning to grow.  Peat moss?  Mulch?  Compost?  Fertilizer?  Lime?  One seed needs one, one seed needs another.

Some business types benefit from opportunities to build strong local networks, while others need international connections.  Sometimes they need help with inventory management, human relations issues, finding funding to grow into their potential.  None of these require a degree in rocket science, but again, remember capacity: if I am an overwhelmed small business owner, chances are I will stumble along by the seat of my pants….until the crisis that has been building up through my inability to manage that issue effectively takes front and center.  And by then, it may be too late.   If we want to build a small business ecosystem, one of the easiest and simplest things we can do it to make this assistance easily available.  Chances are someone somewhere is providing the information your local businesss need… they just aren’t aware of it or able to get it with what little energy they have to throw at it.  Putting that within reach isn’t hard…but it takes consistent effort and lots of repetition.  Just like with fertilizing, once is never enough.

• Monitoring the ecosystem’s development.  Biologists don’t just look at an ecosystem once – they identify key measurable indicators, and they check them regularly.  What’s the water ph?  How many songbirds did we count this year?  Are we above or below the average for rainfall?  How else are you going to understand where things are going – or what we need to change in order to nudge trends in a better direction? 

We do a particularly lousy job of monitoring our local small business ecosystems.  We tend to assume that everything is fine based on a few overly-simplistic indicators, like the number of new businesses, without digging deeper into the data to understand whether those factors are actually signs of growth or decline.  An increase in the number of birds might look like a good sign to a biologist, but if most of the growth is invasive species who compete with the natives, that numerical increase might not be such a good thing.  Similarly, adding jobs that pay minimum wage or require only minimal skills could be less something to crow about than something to take as a warning signal.

None of these tasks are hard, and none of them require skills or information that we don’t already have or can borrow from other professions.  What we do need to bring to it is the diligence and the long-term perspective to cultivate our small business ecosystems.  It won’t happen overnight.