Business Retention and Expansion programs are taking on increasing importance across the country as communities look to mitigate the negative economic impact of the pandemic. These efforts can help local and regional businesses regain their footing and prosper in the new market environment.
What is Business Retention and Expansion?
The term is used to describe efforts to help local business grow and thrive. In contrast to business attraction programs, retention and expansion programs seek to help business already located in a community. Historically, business retention and expansion programs have been focused on helping businesses secure real estate, capital, and tax incentives for expansion of businesses and navigate the associated interactions with government. Increasingly, retention and expansion programs also help with challenges related to workforce development, innovation, technology development, and partnerships.
What Organizations Are Involved?
Typically, local economic development organizations or economic development departments in municipal or state governments lead business retention and expansion programs. There are a variety of community-focused organizations that are a part of the ecosystem that supports these programs, whether formally or informally. These include:
- Small Business Development Centers
- Manufacturing Extension Partnership Centers
- Workforce Development Boards
- Chambers of Commerce and other business groups
- Community Colleges
- Trade Schools
- Manufacturing Institutes
Where is the Opportunity?
Dr. Michelle Shumate, Director of the Network for Nonprofit and Social Impact at Northwestern University highlighted in a recent article the need for “decentralized, municipal-level networks to address the secondary problems that both the disease (COVID-19) and its response create.” Dr. Shumate’s point was more focused on public health considerations, but it certainly applies to economic development ecosystems as well. A network of organizations in a community that has been historically focused on supporting local businesses can be an effective tool in mitigating the economic effects of the pandemic. However, these ecosystems are not currently equipped for what is in front of them.
For one, participation by businesses is a challenge. Many businesses are not familiar with the organizations or what they do. Even if they are aware, the limited focus of the programs on supporting geographic expansion only attracted businesses that were looking to expand their footprint. Even with the inclusion of technology, innovation, workforce development, and partnerships in the service offerings, the large majority of businesses in a community do not participate, other than perhaps to join the chamber or a mailing list. So market awareness is a challenge.
Also, the ecosystem and the organizations that are a part of it are not equipped to handle the volume or scope of the support that is needed. With the shock of the pandemic and the broad eligibility of businesses for federal funding, the number of businesses seeking support has skyrocketed. Near term demand for support is focused in three areas:
- Securing available financial support via local, state, and federal programs
- Managing human resources challenges related to layoffs, payroll, remote work and health care
- Adhering to reopening guidelines and adjusting as the guidelines change
In the medium-to-longer term, support in these three areas will still be needed. Businesses will also benefit from help in managing the changing environment, e.g. in markets for products and services, regulations, health care, employment, and others.
Despite the above hurdles, local economic development ecosystems have an opportunity to adapt and meet the challenge. The following are several high-level strategies.
1.) Increase Funding for Organizations in the Ecosystem
The majority of funding intended to foster business recovery should go directly to the businesses. Funding for business support organizations would also be a worthwhile investment, especially for those that have proven effective in the past. With the right mix of services and people, these organizations can make a difference for many businesses in the community.
2.) Scale up to Address New Areas of Need
Businesses will be able to use help in a variety of areas. Navigating government programs, managing human resource challenges, and adjusting to reopening guidelines will remain at the top of the list, but marketing, strategy, operations, and innovation are other areas in which support will be helpful. Engagement and services strategies will need to take these needs into account, beyond what organizations focused on in the past.
3.) Expand the Use of Technology/Software
The ecosystems cannot scale up to meet demand simply by adding money and people. Better use of technology will multiply the capacity of the resources in the ecosystem, just as it has in so many other sectors of our economy. Ready-made solutions for more efficient communication and coordination such as Cureo, Zoom, and others can help immediately, and other custom-built solutions can also help in the medium-to-longer term.
4.) Focus Leadership on Community, not on Organizations
Leaders of organizations in local economic development ecosystems can often be too concerned about competitive organizations or neighboring communities. More than ever, leaders need to minimize parochial interests and think and act as an ecosystem. After all, if they can’t help now when the need for assistance is so great, why should they be trusted in the future?
5.) Engage Private Sector Business Service Firms
Private sector service firms focused in accounting, marketing, operations, technology etc can be powerful allies in this effort. They too will be feeling the effects of the pandemic, but many will be eager and able to help local businesses where they can.
Mark Barbash of the Ohio Economic Development Institute recently predicted that business retention and expansions programs will be THE most important tool in the toolbox for economic development organizations as a result of the pandemic. I wholeheartedly agree. When the dust settles and communities get back to normal (or the new normal), business leaders are going to ask which organizations proved their worth. Those that do will be cherished community resources for years to come and will be well positioned to attract and retain businesses for the community in the future.