Cultivating Success in Our Backyard
An important event took place early last month that will help chart the future of economic development in the Grand Traverse region. More than 50 stakeholders representing different sectors with varied points of views – large companies, small firms, nonprofits and public sector officials – gathered to identify and prioritize the many aspects of economic and community development. These are critical discussions to our region’s future as vibrant, thriving communities need a healthy and diverse economy that includes job growth, business growth and attraction, and sustainable infrastructure.
Many think of “economic development” as the attraction of new businesses to an area and the fostering of entrepreneurship. After all, it is exciting to see headlines and success stories about new companies, services and products produced locally.
While business attraction and entrepreneurship are important and need to be part of the mix, the most critical component of a sustainable economic development strategy is the retention and growth of existing businesses. The ground-breaking book, “The Job Creation Process,” by former MIT professor David Birch reported up to 80 percent of job growth in a community is generated by the businesses already located there – not through business attraction efforts. This intuitively makes sense when viewed through the lens of business. A general business rule of thumb is that a majority of business comes from repeat customers. It is easier and more cost-effective to retain customers and grow existing relationships over attracting new customers. Economic development is no different: Business attraction efforts tend to be more expensive and time-consuming than business retention and expansion efforts.
We need to focus on cultivating our business ecosystem, including all of our important economic assets in the private sector and other key employers like Munson Healthcare and Northwestern Michigan College. Existing firms are important barometers of economic health. We need to nurture these relationships, as they have tremendous growth potential. Just as in any successful private sector operation, focusing on customer satisfaction is key.
An active and sustained economic development strategy involves planting seeds of regional economic success. Not tired, traditional business assistance, but economic gardening; a strategy focused on so-called second-stage companies: growth-oriented businesses with external market potential that have moved beyond the startup stage. These small and medium-sized businesses are the major drivers of job growth. In an economic gardening model, effective business retention and expansion involves proactively connecting with existing businesses to understand and respond to their needs. This grow-from-within approach is centered on providing market information to aid firms in developing new markets, refining business models and gaining access to additional resources, such as talent, capital, regulatory reform and more.
This important work needs to be done person-to-person in the form of site visits with employers to foster conversations that identify opportunities for growth, regional resources and the obstacles they face. Specific, comprehensive and confidential strategies are critical to address these issues. Often, CEOs evaluate a community’s business climate through conversations with other CEOs. A successful business retention and expansion program results in engaged CEOs and executive teams, both of whom are the most effective promoters for our region. By proactively connecting with existing businesses to understand and respond to their needs, these companies will grow, stay, and become more committed to the community. Over time, these efforts improve the business climate, promote competition, job growth, community development and our quality of life.
A vibrant community prioritizes and nurtures its business ecosystem. Business retention and expansion efforts yield rich business and community connections that improve our region’s vitality, making us stronger and more resilient over time. As the area’s economic development efforts continue to come into focus, bolstering our existing business sector will be a major component in the overhaul of our regional economic engine.
Warren Call is the president and CEO of TraverseCONNECT, a regional economic development organization that includes the Traverse City Area Chamber of Commerce and Venture North. Contact him at email@example.com.