Communities gain jobs by nurturing homegrown companies
- July 30, 2012
Primitive humans were hunter-gatherers. Later, they learned to supplement that rich but unreliable source of food with the long-range stability provided by locally produced crops. That principle, applied to business, is at the root of a movement called “economic gardening” (EG).
Although community business planners are not about to give up their pursuit of outside companies to drag back home to feed the local economy, an increasing number are supplementing their pursuit of that quarry with EG. This approach shows home-grown enterprises low-cost ways to increase their yield in terms of both revenue and employee base.
EG originated in 1989 in Littleton, Colo., with an economic planner, Chris Gibbons, who is still that city’s director of business and industry affairs. The set of economic principles Gibbons dubbed “economic gardening” is credited with increasing Littleton’s net new jobs by 135 percent between 1990 and 2005 — twice the rate of nearby Denver and six times the national rate — and tripling its tax receipts from $6 million to $21 million.
Given such happy returns, EG’s popularity has spread, and it is now in use in about 20 jurisdictions across the country, including statewide programs in Wyoming, Kansas and Washington. A state-supported program in Florida reportedly produced an 8-1 return on tax investments before falling victim to recession-related belt-tightening last year. In Virginia, an EG pilot program, Innovate!HamptonRoads Economic Gardening Network, began last year.
“Economic gardening is a greenhouse system,” explains Mark Lange, the executive director of the Edward Lowe Foundation, a Michigan nonprofit that operates the National Center for Economic Gardening. Lange stresses that EG is not blanket boosterism of local businesses and that not just any company is fertile ground for the approach. EG works most effectively with so-called second-stage companies, which generally are defined as highly entrepreneurial businesses that have 10 to 99 employees and annual revenues of at least $1 million. These companies, sometimes referred to as “gazelles,” tend to create more jobs than smaller companies and produce more wealth per employee.
EG also differs from traditional methods for helping local businesses by using what Lange terms “refined and specific techniques” that examine a company’s competitors and customers, its potential markets and industry trends. “It is not about finances or manufacturing,” Lange says. “It is all about strategy.”
The Hampton Roads Partnership, a public/private organization that seeks to make the area more competitive in the world economy, is in charge of the commonwealth’s first EG venture. The partnership first worked with a team from the Center for Economic Gardening to put notices out about its pilot project and to solicit applications, says partnership President and CEO E. Dana Dickens.
The five businesses chosen for the six- to eight-week program — SimIS Inc. of Portsmouth; Unity Business Systems of Poquoson; E&E Enterprises Global, Inc. of Hampton; Citadel Logic, LLC of Hampton; and ESRG of Virginia Beach — paid nothing to participate. Instead, the partnership used public and private funds to foot the bill of about $4,500 per company. That modest amount of money bought advice from the experts from the National Center for Economic Gardening concerning market research; the location and use of low-cost and free assets, such as public universities and nonprofits; Internet search engine optimization; and the use of social media. The experts also provided access to databases and geographic information systems that otherwise might be too expensive for such mid-tier companies. This equivalent of business fertilizer was delivered “virtually,” primarily via the phone and Internet, which kept costs down. EG further encourages the recruitment of retired executives to act as mentors and coaches for aspiring businesses.
The participating companies in the Hampton Roads project were all government contractors. Most relied heavily on work from Washington, but with federal procurement dollars widely expected to shrink by as much as 10 percent in the near future, these companies recognized the necessity of expanding into secondary markets. The Hampton Roads economy needs them to diversify, too. Rick Lally, director of Innovate! HamptonRoads Program, a part of the partnership, says that almost half of that area’s economy revolves around federal spending.
Before participating in the economic gardening program, ESRG, the Virginia Beach company, had been doing some commercial work but primarily was supplying analysis and remote condition monitoring for U.S. Navy surface vessels. The monitoring, company President and Founder Ken Krooner explains, works like an OnStar system for ships.
For the past three years, Krooner says ESRG had logged about $5 million in annual revenues. He applied to the EG program hoping to get assistance in expanding the commercial component of his business, and it worked.
Through the EG marketing research team, ESRG got access to databases that otherwise would have cost a prohibitive $5,000 a report. It then used that information to overhaul and upgrade its website to provide a more focused message. ESRG now has two contracts pending with “major shipping entities,” Krooner says, and a third one with a manufacturer of engines. He expects to double his business in the next 12 to 18 months and increase his staff by 50 percent.
“The only thing they asked was for the resources to support them in doing [the project],” Krooner says. “The management and efficiency were impressive, and we certainly saw the benefit. The program showed immediate results.”
“This [EG] is a long-term project,” says Dan Girouard, vice president and president elect of the Virginia Business Incubator Association, which promotes entrepreneurial and small business development in the commonwealth. His organization is supporting the wider implementation of EG in Virginia, and last fall, it held a conference in Roanoke dedicated to the topic. The association’s goal, Girouard says, is statewide support for the EG approach.
Partnership chief Dickens describes the economic gardening pilot program that his organization sponsored as “a great success.” Four of the five companies have been able to target the private sector, he says, and, in the next 18 months, he foresees that leading to as many as 200 new jobs. Given the result of the pilot program, he wants to sow the seeds of economic gardening with 50 other businesses in the next year or so,
“To have our economy grow,” he says, “we have to grow our own companies.”