How to include microbusinesses in economic growth strategies

In 2005, Adrienne Bennett, the nation’s first licensed black female plumber and plumber contractor, started a plumbing company in Detroit, Benkari. Benkari was successful until things finally stagnated. Bennett knew she needed to invest in a new estimation tool to help bid on larger projects, but couldn’t get funding. This problem is common in ‘micro-enterprises’ or companies with fewer than 10 employees. Micro-enterprises are responsible for: nearly 80% of small businesses in the US. Those led by color owners are: disproportionately disconnected of capital, resources and strategic social networks that equip them to survive, adapt and grow.

In 2010, Bennett heard about the New Economy Initiatives (the organization I lead) business plan challenge NEIdeas, which offered $10,000 in grants to micro-enterprises with growth ambitions, but was barred from access to capital and other support. A total of 650 companies applied and Benkari was one of 30 to receive grants, with which they bought the estimation tool.

Benkari’s financing did not come from traditional lenders. Instead, through NEIdeas, the company received credit from a non-profit community development finance institution (CDFI) obtained with grant capital from philanthropists. With this financing and the estimation tool purchased, Benkari has won one of the larger contracts in the company’s history: the transformation of the iconic Detroit rail depot, Michigan Central Station, run by Ford Motor Company. With contracts like this, Benkari has grown 20 times in size in six years, now generating $2 million in annual revenue and employing 22 employees – 50% of whom are people of color, many with technical skills and earning family income. Benkari can now obtain loan capital directly from commercial lenders – a sign of the company’s long-term viability.

Benkari’s story illustrates how deliberate strategies to elevate micro-enterprises in underserved communities can benefit local economies. But it takes time, strategic planning and significant resources to generate these successes. As a strategic grant provider and ecosystem builder for entrepreneurial support for underserved entrepreneurs in the Detroit metro area, we at the New Economy Initiative (NEI) know that starting and growing a microbusiness here has not been easy, and we have learned a lot. For other communities interested in such an approach, here are three steps to consider.

1. Understand micro-enterprises, the barriers they face and how they can support their growth

As Benkari sought to expand its plumbing and construction services, it faced limited access to credit through traditional channels. But the lack of access to private capital and support from commercial banks is just one of the barriers facing micro-enterprises in Detroit. Others include:

  • Little or no investment in the family or social network-based investment On the same subject : Dickson city staff help teach new college codes course.
  • Inability to access public dollars (such as Small Business Administration loans)
  • Higher insurance costs
  • Ensuring public safety and underinvested infrastructure
  • Lack of a professional network
  • Challenges for staff

When we surveyed 600 microenterprises in metropolitan Detroit, we found that community economic developers need to develop strategies to engage and support underserved microenterprises, something that requires deliberate work. These micro-enterprises don’t make headlines or get accolades; they are often off the radar and receive no tax breaks or other incentives from local, state, or federal government programs. Many have no or insufficient bank accounts, as revealed last year when the early stages of the Paycheck Protection Program neglected micro-enterprises in underserved communities. We learned that too many of these companies chose not to even apply.

Why is this? Measured by traditional measures of economic development, such as job creation and capital investment, building a case for micro-enterprise support has been challenging. Often their growth trajectory is slow, their jobs are not always at wages that families can support, and they often operate in the locally serving part of the economy, meaning their growth may simply hinder the growth of another local business. But economic strategies that simply ignore microenterprises risk ignoring entrepreneurs who have access to corporate property outside the high-tech or advanced manufacturing sectors — two sectors that have historically been central to Michigan’s economic policy. As Michigan’s economic development strategies instead view racial equality or neighborhood opportunity as key outcomes, microenterprises immediately become a necessary lever for change. In Detroit, 82% of micro-enterprises are owned by people of color and 64% are owned by women. In Detroit neighborhoods like Grandmont Rosedale, businesses like Detroit Vegan Soul, Spa-A-Peel, and Pages Book Store—all women-owned—provide jobs for residents, a pathway to alternative income for owners, and most importantly, accessible services for residents near neighborhoods. their home. These businesses are part of the neighborhood community, supported by the community development company, Grandmont Rosedale Community Development Corporation, and also winners of NEI’s Small Business Challenge.

NEI’s small business challenge was just one way microenterprises were supported in the metro area of ​​Detroit. Hands-on counselors who provide financing and cash flow advice, accounting, legal and accessible micro and small loans are other ways the nonprofit sector serves these types of businesses, along with community development organizations building their capacities to point community businesses to resources.

2. Build and boost a support network to help micro-enterprises grow

Communities wishing to support micro-enterprises should consider this type of support as essential: To see also : Plumbing Fitting Market 2021 Global Industry Synopsis – Viega, Allied Group, Anvil International, Victaulic, Saint-Gobain, Meide Group, RWC, LESSO.

  • Access to affordable capital through microfinance organizations and community development financial institutions.
  • Practical help to provide expertise in marketing, legal, real estate, accounting and other business areas.
  • Expert coaching and mentorship from those who understand the nuances of micro-enterprise challenges and opportunities.

This support is best delivered through a network of business support organizations (BSOs) tailored to the unique needs of small businesses. The BSO network has a number of important characteristics:

  • A shared mission to support underserved small businesses.
  • A shared value around inclusive practices to increase support for businesses led by people of color and women.
  • Actively work to be aware of the services of others to make or receive referrals.
  • Meet regularly to share leads and best practices and identify and remove barriers to meeting the needs of small business owners.

Examples of BSOs include CDFIs, banks and credit unions, Community Development Corporations (CDCs), industry-specific support organizations, online resource and storytelling platforms, small business development centers (SBDCs), and local branches of U.S. SBA-funded SCORE, an association of more than 13,000 volunteer advisors who provide free advice and mentorship to business owners.

It is important to have an organization with resources to convene and nurture the BSOs as a network, and in turn enable that network to provide the micro-enterprises that need support and resources to to grow. Too often, out-of-home care organizations operate without adequate resources or in isolation, which limits their impact. NEI played this role in Detroit, strengthening the BSO network through:

  • Grants and resources for capacity building
  • Practical technical assistance
  • Training and learning opportunities
  • Events and meetings
  • Incentives to operate as a cohort
  • Sharing information
  • Trust and connections
  • Access to non-financial resources
  • Marketing and storytelling

3. Raise the conversation around micro-enterprise support

Answering the following questions should be an essential part of any community’s growth and development strategies: On the same subject : Pupils told to stay at home tomorrow after ‘emergency plumbing issue’ at a Sunderland school.

  • What if every sole proprietor that wanted to grow could get the support they needed?
  • What if every small business with fewer than five employees made enough income that the owner and his employees — regardless of their social or economic status — had a living wage?
  • What if the sources of resources that support small businesses had a better understanding of the Main Street micro-enterprises that represent most of the businesses in our communities and are mostly owned by women and people of color?

We need to figure out how to better improve this small business segment and the conversation about it. By allocating resources and doing more data-driven work to better understand their plight, more microenterprises will be on a growth trajectory, moving from micro to small and beyond.

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