To Grow Small Businesses, Doing What Local Governments Do Best is Best
The recent recessionary period has garnered new attention to the role of small businesses in generating economic growth. As a result, many local governments have renewed interest in policies to support and grow their small business community. But how do we know what really works? During a recent meeting of the Atlanta and Dallas Federal Reserve and Kauffman Foundation, NLC presented preliminary findings on those local government policies that create the most significant opportunities for small business growth…and the results may surprise you. Research findings are based on NLC’s analysis of the International City/County Management Association and NLC 2009 Economic Development survey of city and county officials.
Doing What You Do Best is Best. Overall, the findings suggest that those local policies that have the greatest impact on small business growth, defined as the growth in the number of new establishments under 99 employees between 2007 and 2008, are providing regulatory assistance and creating a supportive culture between the local public and private sectors. Regulatory assistance includes one-stop shops and streamlining permitting/zoning processes. Creating a supportive culture means providing avenues for local small businesses to engage with each other and to be heard by policy makers.
These aren’t revolutionary measures. In fact, they are facilitative roles of local government that lie squarely within their purview, and are exactly those things that local small businesses expect from their local government. Surprisingly, however, only 59% of cities report providing regulatory assistance and only 48% report creating partnerships with the private sector.
A Word of Warning. The study’s preliminary findings also suggest that the primary local policy used for providing small businesses access to capital – revolving loan funds (RLF’s) – likely has little of the desired impact on small business growth, and may in fact actually contribute in the opposite direction. Similarly, while Small Business Development Centers (SBDC’s) had a positive effect on small business growth overall, they did not have the sizable impact we would have expected.
RLF’s and SBDC’s should not be ruled out based on our preliminary results alone, however. There are many examples of communities with successful programs. Our results represent the swath of local governments across the country and do not necessarily capture the reach of particular programs. In those communities that have had success, their small business programs have the appropriate level of resources and management and industry expertise, engage strategic partners, respond to unique needs of the small businesses in their community, support a broader economic development strategy, and have political support.
In the coming year NLC will work with local communities to better understand what makes programs successful, and also explore more innovative local approaches, such as economic gardening. In the meantime, the good news for cities is that they have options to support small businesses that are proven, within their scope to implement fairly quickly and easily, and are not necessarily costly.