One often hears the terms "entrepreneurship, innovation and small business" spoken in economic development organizations, main street programs, chambers of commerce and other community development organizations when discussing start-up and pre-venture growth potential for a community.
That is because a growing community typically considers, and rightfully so, new business start-ups necessary to grow its business districts and community product and service delivery. Also, start-ups and pre-ventures act to replace businesses that cease operations through closures or relocations. Having a new business is exciting, and most everyone enjoys either being a part of the process or at least being a participant in patronizing the business.
However, new business start-ups are only half of the challenge for a community seeking to grow and create jobs and wealth. There exists an aspect of a community's development that sometimes gets overlooked, and that is a mistake. That aspect is the existing businesses in a community.
When looking at existing businesses, we should consider the retention of existing business and the expansion of existing business. Simply put, we should keep in mind that there are businesses that we want to keep in our community and those we want to expand in our community.
The existing businesses are sometimes a better opportunity to expand and create both jobs and wealth in a community. There are many reasons to include business retention and expansion (BRE) in a community's growth plan. I will offer here just a few for thought.
One reason an existing business is a growth opportunity is that it typically has a business model with a demonstrated ability to sell a product and/or service thereby generating sales and cash flow sufficient to cover operating expenses.
The longer the business has been in operation, the more likely that business model has proven itself capable of surviving the internal and external challenges that a business operation normally, and sometimes surprisingly, faces and still sustain its operations, generate sales and pay expenses.
This is different from a start-up which is, in many cases, creating a new business model based on assumptions, projections, research and other methods that may not hold 100 percent accurate to expectations and result in disappointing, or exhilarating, results.
Another reason is that job creation is a key measure of economic growth, and existing businesses already have the established processes and procedures necessary to hire. Supporting a business that is seeking to expand its existing market or enter new markets can be a driver for job creation.
A third reason is that an existing business is providing a current tax base and having an economic impact from the turn of its dollars in the community from the wages it pays to the products and services it consumes. It is worth noting that replacing an existing business is a much tougher lift for a community than finding and supporting those businesses already in the community especially in light of the tax base and B2B activities an existing business provides.
There are other reasons we should look at BRE work. In future articles, I will share more of the reasons as well as more about business retention and expansion, and this approach to development.
Chris Wooldridge is an instructor in finance, banking and economic development in the Murray State University Bauernfeind College of Business. He can be reached at 270-809-2495.