Description
With this particular criteria amplify washtenaw countys locally owned small business and entrepreneurship opportunities.
Washtenaw County’s
Locally Owned
Small Business and
Entrepreneurship
Opportunities
Assessing local economic development
opportunities for non-venture capital funded
entrepreneurship, with a spotlight on
cooperative business models.
July 2013
Authors:
Jessica Meissner
Economic Anthropologist
The Shed, BEC
[email protected]
Joanna Rosene-Mirvis
Food Systems Specialist
Washtena County !""ice o" Community # Economic $e%elopment
&
Abstract: Washtena County !""ice o" Community # Economic $e%elopment '!CE$( "unded this research
recogni)ing that there are numerous incenti%e, capital, and *usiness ser%ice programs a%aila*le to help gro
technology, li"e science, communications, +T, ad%anced manu"acturing and other ,high tech- *usinesses in
the county, *ut comparati%ely "eer programs a%aila*le to assist locally.oned small *usinesses in other
sectors. Washtena County !CE$ as interested in e/ploring the potential o" cooperati%e *usiness models
as tools "or groing locally oned small *usinesses. 0roth o" these local *usinesses is needed to ha%e a
sustaina*le economy and pro%ide jo*s "or local residents. The purpose o" this research as to identi"y the
speci"ic challenges locally oned *usinesses and non.%enture capital "unded entrepreneurs "ace, especially
as they launch and gro, and ho e might *est support them. We ere then interested in assessing hat
speci"ic cooperati%e %entures sho the highest potential to support the de%elopment and di%ersity o" the
local entrepreneurial and *usiness community, and positi%ely impact Washtena County1s o%erall economy
and employment. This report details the results o" this research and outlines ho e can ta2e action to
achie%e these goals.
Table of Contents
Introuction 2
!art I
&. The +mportance o" 3ocally !ned Business and 4on.%enture Capital Funded
Entrepreneurship 5
6. The Application o" Cooperati%es "or Economic # Business $e%elopment 7
!art II
5. Small Business # Startup Broader Conte/t &8
9. The Washtena County Small Businesses and Entrepreneurship Sur%ey &:
!art III
7. Washtena County Wor2"orce Factors 5;
;. !pportunities "or Wor2er.oned Cooperati%es 9&
!art I"
:. Sector.speci"ic !pportunities "or 0roing 3ocal Business in Washtena County 99
=esearch ?articipants and +nter%ieees ;&
+deas 3ocal Businesses =eported through the Sur%ey 'in direct @uotes( ;5
Additional E/amples o" Co.ops and Food 3ocali)ation Strategies ;;
Washtena County 3argest Ao* Shortages Compared to Ao* See2ers ;>
+nstitutional ?rocurement +nter%ie $ata :8
Selected BA33E 3ea2age Calculator $ata :6
6
Introuction
The main purpose o" this research as to de%elop a picture o" local small *usinesses, their challenges
and opportunities, and assess the potential o" cooperati%es to address these. Co.ops ere necessarily loo2ed
at "rom to related, *ut not identical perspecti%es: as *usiness de%elopment tools and as economic
de%elopment tools in Washtena County. This re@uired pulling together @uite a "e pieces o" the pu))le and
understanding their relationships, ma2ing it a comple/ and %ery interesting project. We needed not only an
understanding o" cooperati%es and ho they can *e used, *ut also the degree to hich they might remo%e
signi"icant *arriers to local *usiness groth and ho interested the *usiness community ould *e in ma2ing
use o" them. From an economic de%elopment perspecti%e, e also needed to as2 hat 2inds o" *usinesses
might hold the greatest opportunities "or impact on the economy and jo* creation. This led us to as2 "urther
a*out the 2inds o" jo* creation that might *e most desira*le. To anser that @uestion, e needed an
understanding o" the local or2"orce. Bringing us *ac2 to cooperati%es, e considered ho or2er.
onership might impact the desira*ility and "easi*ility o" ta2ing ad%antage o" speci"ic 2inds o" jo* creation.
The research relied on "ieldor2 and inter%ies, an in.depth sur%ey o" small *usiness oners, and se%eral
di""erent a%aila*le data sets.
We disco%ered that these %arious pieces "it together especially ell in se%eral places so that the
themes that emerged suggest some e/citing opportunities. The report is structured to gi%e an idea o" the
shape o" each o" the pieces, highlighting here gaps and opportunities e/ist, and *uilding a picture o" ho
they relate to one another along the ay.
!ART I summari)es the economic de%elopment rationale *ehind the "ocus on small *usiness, the
*road inclusion o" entrepreneurial paths, and the spotlight on cooperati%es. In the 'ection 1* you1ll "ind a
summary o" the e/pected *ene"its o" an increased "ocus on locally oned *usinesses and non.%enture capital
"unded entrepreneurship. Buch o" hat you ill "ind in this report can *e used to in"orm any e""ort to
support the groth and di%ersity o" our local economy in Washtena County. In the 'ection 2, you1ll "ind a
summary o" the reasons "or a special interest in cooperati%es. $espite the rising interest in co.ops and their
increased co%erage in the press as success"ul and pro"ita*le community and economic de%elopment
%entures, e "ound that e%en mem*ers o" local "ood or housing co.ops ere surprised *y certain "acts
regarding their role in our *roader mainstream economy or the di%erse and uni@ue ays cooperati%e
*usiness models ha%e *een used as de%elopment tools. +ncluded in this section is a *rie" outline o" the
proposed Business # Employment Cooperati%e.
In !ART II* e di%e into the character o" small *usiness and entrepreneurship. 'ection 3 o""ers a
"rameor2 "or understanding the analysis that "ollos, including the *roader contours o" Washtena
County1s small *usiness community and some o" the less ell 2non "acts a*out entrepreneurship in
general. The main analysis *egins in 'ection +* here e present the sur%ey data and e/plore hat local
*usiness oners and leaders ha%e to tell us a*out the character and e/perience o" *usiness onership and
entrepreneurship in Washtena County. We summari)e the potential impact o" %arious cooperati%e joint
%entures and highlight the highest potential opportunities "or cooperati%es as *usiness de%elopment tools.
!art III ta2es a closer loo2 at the local or2"orce. 'ection ( presents some o" the rele%ant contours
o" Washtena County1s talent *ase and highlights some 2ey characteristics o" the or2"orce that should
in"orm our direction and gi%e shape to ne/t steps in implementing recommended actions. 'ection )
summari)es the economic de%elopment argument "or or2er onership, considers some o" the highest
potential opportunities here the launch o" or2er oned cooperati%es might *est "it in Washtena County,
and *rie"ly outlines hat ould *e re@uired to mo%e "orard.
!ART I" pulls together some o" the patterns that emerge. +n 'ection ,, you ill "ind a discussion o"
sector.speci"ic opportunities in Washtena County. In 'ection -* e summari)e the "indings *e"ore mo%ing
on to our recommendations "or Washtena County.
5
'ection 1
/hy focus on locally o0ne s#all business1
There is a groing *ody o" literature and research supporting the 2ey role o" locally oned
*usinesses in *uilding sustaina*le local economies and %i*rant communities.
&
Cere e ill simply summari)e
just a "e o" the compelling *ene"its e can e/pect "rom promoting locally oned *usinesses.
$e%eloping locally.oned *usinesses gros local economic
acti%ity and employment *eyond the immediate e""ects on indi%idual
*usinesses due to the Dlocal #ultiplier effect.- When a local *usiness1
mar2et share increases, the additional *usiness incomes and ages tend
to stay and circulate in the community. $ollars spent on imports "rom
non.local *usinesses represent ,lea2ages- in the local economic system.
2ocali3ation i#pacts local econo#ic 4ro0th* e#ploy#ent an the ta&
base *ecause independent *usinesses recirculate three times more o"
their re%enues locally than national chains do.
6
4et employment gains in the economy, "rom a macroeconomic perspecti%e, come "rom small
*usinesses and startups. Economic de%elopment strategies are *eginning to incorporate the untappe
potential of #icroenterprise* a category that de"ines *usinesses ith "eer than ; employees. Though their
re%enues may *e small compared to *ig *usiness, the o%erhelming num*er o" these companies is hat
gi%es them their real poer. If 5ust 1(6 of /ashtena0 County7s #icroenterprises
3
hire t0o ne0
e#ployees each* it 0oul cancel out all current une#ploy#ent in the county.
9
A rich iversity of local businesses not only pro%ides econo#ic security* *ut also contri*utes to a
uni@ue culture and vibrant co##unity. 3ocally oned *usinesses tend to care "or the el"are o" their
communities and contri*ute more to local philanthropy.
(
?romoting the launch and groth o" locally oned *usinesses has signi"icant implications "or local
0ealth builin4. Since this gi%es the community access to capital that can *e used "or in%estment in the
launch o" "urther locally oned *usinesses, the potential "or long.term sel"."unded groth also increases.
The potential impact o" *usiness onership, especially "or underser%ed minorities, is hard to ignore:
Ta*le & . Business !nership E""ects on 4et Worth 'Source: Association "or Enterprise !pportunity(
U.S. Median Net Worth
Population
For Non-Businesses
Owner
For Business
Owner
Percent Improvement from
Business Ownership
All $85,000 $211,000 148%
African American $10,000 $77,000 670%
Hispanic/Latino $9,000 $37,000 311%
Women $82,000 $180,000 120%
&
See especially Shuman, Cortese, and Business Alliance "or 3ocal 3i%ing Economies ,=esources.-
6
Ci%ic Economics, ,The +ndie +mpact Study Series 4ational Summary =eport-
5
Based on E.S. Census ,Sur%ey o" Business !ners- data
9
As o" Barch, 68&5
7
American +ndependent Business Alliance, ,Top =easons to Buy 3ocal, Eat 3ocal, 0o 3ocal-
A 688< study o" 0rand
=apids, B+ "ound that a &8F
shi"t o" sales "rom national
chains to local *usinesses
ould result in G&5: million in
increased local economic
acti%ity and &,;88 ne jo*s.
'Cortese: pg ;6(
9
The ealth *uilding implication o" *usiness onership as one o" the rationales *ehind Cle%eland1s
E%ergreen Cooperati%es, a large.scale community ealth *uilding e""ort to launch "or.pro"it, employee.
oned *usinesses in underser%ed neigh*orhoods, *eginning ith a commercial laundry "acility, a solar
energy company, and 0reen City 0roers, the nation1s largest ur*an greenhouse comple/ o" its 2ind. This
study espouses a second important and idely applica*le insight "rom the E%ergreen Cooperati%es. That is, it
is not enou4h to focus on anchorin4 local assets an pro#otin4 local o0nership 0ithout consierin4 the
stability of the #ar8ets for those assets an businesses. +n order "or the employment and ealth *uilding
*ene"its to *e sustaina*le, it is important to "ind 9anchore: local #ar8ets "or ne *usinesses, meaning
mar2ets that cannot easily lea%e the community. E%ergreen relied primarily on institutional procurement,
*ut this report ma2es an e""ort to "ocus on sectors here there is a strong mar2et o" local institutional,
consumer or di%erse commercial *uyers.
;o0 oes 9non-venture capital fune: entrepreneurship fit in1
The relationship *eteen these considerations and ,non.%enture capital "unded- or ,non.high tech-
entrepreneurship may not seem sel".e%ident at "irst *lush. Coe%er, on a%erage, only 8.9F o" *usiness
startups recei%e %enture capital "unding, so "ocusing on other paths to entrepreneurship directly supports
almost all o" our small local *usinesses. What1s more, %enture capital "unding comes ith a *ig string
attached: the e&it strate4y. Almost *y de"inition, venture capital fune co#panies o not stay locally
o0ne. Henture capitalists in%est in order to cash in a *ig return hen startups sell to a large company
interested in the intellectual property rights or hen the *usinesses gets sold to the pu*lic on the stoc2
mar2et through an +?!.
So, there is a close relationship *eteen supporting a %i*rant community o" locally oned *usiness
and "ocusing on the entrepreneurial paths that are in "act more common, e%en i" they do recei%e less press
than the *ig %enture capital *ac2ed, so.called ,high groth startups- 'a phrase hich in most cases re"ers to
groth "rom a %enture capital "und management perspecti%e, hich is not @uite the same as the perspecti%e
o" a local community(. This is not in any ay to say that e should not continue to support %enture.capital
"unded entrepreneurship. They *ring many %alues to our community including economic acti%ity, jo*s, talent
and e/pertise, etc. These are strengths in Washtena County ell orth continued de%elopment. We
simply ish to argue "or a more inclusi%e approach to entrepreneurship that actually plugs ,lea2s- in the
local economy and addresses the needs o" a *roader segment o" startups ith untapped potential "or
sustaina*le groth.
7
'ection 2
Cooperatives
The data and analysis presented in this paper can *e used to gi%e shape to any num*er o" initiati%es
supporting locally oned *usinesses, and ideally it ill inspire many. !ne o" the opportunities that ga%e
shape to this project as Washtena County !CE$1s interest in e/ploring the possi*ilities "or a local Business
# Employment Cooperati%e ',BEC-( to support small *usinesses and incu*ate ne %entures, including
or2er.oned enterprises to "urther *oost @uality employment. +n
general, the goal as to "ind the *est ays to promote the groth
o" locally oned *usinesses, entrepreneurship and sustaina*le
employment. At the onset o" this research, the BEC project as in
the "easi*ility assessment phase and this research has helped mo%e
the project "orard signi"icantly and gi%e it shape. 4ecessarily,
then, there is an emphasis on the "easi*ility and e/pected impact o"
a local BEC in the sections that discuss cooperati%e *usiness models.
Coe%er, there are #any types of cooperatives an very stron4
ar4u#ents for for0ar-thin8in4 econo#ic an co##unity
evelop#ent professionals to inclue cooperative evelop#ent
support 4enerally in their toolbo&.
The Enited 4ations declared 68&6 ,The Iear o" the Cooperati%e,- and cooperati%es ha%e certainly
recei%ed increased press recently,
;
especially as locali)ation, sel".reliance, and sustaina*ility ha%e *ecome
increasingly important community and economic goals. Although cooperati%es ha%e recently *een in the
spotlight, they are "ar "rom ne. They ha%e pro%en success"ul o%er their long trac2 record since the "irst
o""icial
:
cooperati%e enterprise in &
According to the Jau""man Foundation, startups declined another 7.>F in 68&&.
&9
Com*ined data shoing
the num*er o" *usinesses entering and e/iting the economy o""ers an e%en *lea2er picture:
&5
Bureau o" 3a*or Statistics, ,Business Employment $ynamics: Entrepreneurship and the E.S. Economy-
&9
Jau""man Foundation, ,4e Business Startups $eclined in 68&&, Annual Study Shos-
&&
Bi4ure 2 - 'tartups an ?&its =
Inustry =%AIC' escription>
%u#ber of
%one#ployer Bir#s
!ercent of all
?stablish#ents
T!TA3 F!= A33 SECT!=S 6;, >5F
Educational ser%ices &,7&9 >6F
Bining, @uarrying, and oil and gas e/traction :6 >6F
=eal estate and rental and leasing 6,>&6 >8F
Agriculture, "orestry, "ishing and hunting &8: F
Transportation and arehousing ;9: 9:
%one#ployer Bir#s
Total Receipts
T!TA3 F!= A33 SECT!=S G&,&8,888
=eal estate and rental and leasing G6>5,:69,888
?ro"essional, scienti"ic, and technical ser%ices G657,87:,888
Cealth care and social assistance G&86,>:>,888
Construction G>>,:
!ercent of e#ployerG none#ployer o0ners reportin4 the
follo0in4 as one of their 9pri#ary roles: in the businesses
4onemployer
!ners
!ners that
Employ !thers
?roducing 0oods andNor ?ro%iding Ser%ices ;5.9F 75.:F
$ay.to.day Business Banagement 96.&F 7
'ources of capital use to start or acAuire the business %u#ber of Bir#s !ercent
Relatively Infor#al or Accessible 'ources
?ersonalN"amily sa%ings o" oner's( 5,6:< &8.9
Business loanNin%estment "rom "amilyN"riends 5:;,&75 6.;
4one needed 6,>>>,75: 68.<
Bor#al Institutional 'ources
Business loan "rom "ederal, state, or local go%ernment >:,979 8.:
0o%ernment.guaranteed *usiness loan "rom a *an2 or "inancial institution >>,. 0i%en the aims o" this study, and that most o" the "arms in Washtena County are
"airly small.scale, supporting local "ood producers is o" particular importance. Washtena County is home to
&,588 "arms. )36 of those are s#all* 0ith avera4e sales less than H10*000. !nly &6F o" Washtena County
"arms ha%e annual sales greater than G&88,888.
66
Boo proucers surveye for this stuy reporte annual
sales ran4in4 fro# H3*(00 - H33*000, @uali"ying them as relati%ely small producers. These points are
particularly signi"icant *ecause foo businesses #ust navi4ate especially ti4ht #ar4ins such that scalin4 an
efficiency are especially i#portant factors for viability.
+t is not possi*le to e/trapolate speci"ic operating characteristics o" the local population o" "ood
*usinesses *ased on a small sample. Coe%er, the o*ser%ations a*out local "ood *usinesses suggest to us
that a concerte effort #ust be #ae to supple#ent the support syste#s available to foo businesses.
Food *usiness responses a*out their e/periences ith local support organi)ations con"irm this.
Challen4es an Fbstacles
+n most cases, the num*er o" *usiness oners reporting signi"icant challenges in the %arious areas
e as2ed a*out did not %ary signi"icantly according to the num*er o" years in *usinesses. The "olloing ta*le
shos a "e e/ceptions. The percentages re"lect ho many *usinesses in each age range reported ?ersonal
+ncome, Storage or Ciring as ,*ig- or ,moderate- challenges, potentially holding them *ac2 "rom reaching
their 5.7 year goals.
Table , - Challen4es Correlatin4 0ith A4e of Cusiness
Iears in Cusiness 'tora4e Fbstacle ;irin4 Fbstacle
!ersonal Inco#e $ Cenefits Fbstacle
8.6 69F 5;F &5F :7F :7F
&8.&7 8F :>;
23- H3*10-*-0+
aressin4 personal inco#e an benefits 4aps for early sta4e businesses coul
have a si4nificant i#pact on the 4ro0th of locally o0ne businesses an 5ob creation
e ere somehat surprised *y the o%erall eighting o" the challenges small *usinesses and
*elo shos the percentage o" respondents rating
potentially 2eeping them "rom achie%ing their goals. 'Category.speci"ic challenges are gi%en
as percentages o" applica*le *usinesses, not o" the hole population.(
!ercent of Cusinesses 'urveye Reportin4 "arious Challen4es as !otential Fbstacles
ales are the *iggest challenges "rom oner1s perspecti%es. There are many
ays to address this pro*lem, and the solution is almost de"initely a multi.pronged approach.
*usinesses reach their mar2ets ill *e addressed in detail in the ne/t section. ?roduct and ser%ice *usine
ha%e highly %aried mar2ets, *ut se%eral options "or helping all categories include:
8F &8F 68F 58F 98F
Certi"ications '"ood only(
?urchasing '"ood and product only(
3and N Facility !nership '"ood only(
Wholesale prices '"ood only(
+nstitutional Buyer $emand # ?re"erences '"ood only(
Warehousing # Storage '"ood and product only(
=etail Space '"ood and product only(
$istri*ution '"ood and product only(
Customer Ser%ice
Facilities
Accounting
3egal, Contracts
?lanning
Scaling # E""iciency
Capital # Financing
Ciring
Esta*lishing Business ?artnerships
Cash Flo
?ersonal +ncome # Bene"its
Sales
Bar2eting
The ne/t ta*le shos the target re%enues and projected hiring o" respondents 8.7 years in
rsonal income and *ene"its as a potential *arrier to achie%ing their goals.
?arly 'ta4e ?ntrepreneurs 'urveye
%e0 Revenues
G.66
:;.:6
5.56
>5.96
>>.:
&68.7<
&95.>6
&79.57
&; coul 5oin such a co-op an vastly increase its econo#ic evelop#ent i#pact.
This area is also strongly recommended "or "urther e/ploration.
Certification
Finally, there appears to *e signi"icant interest in cooperati%ely "inancing "ood certi"ication processes.
Coe%er, only 58F o" the interested *usinesses reported this to *e a signi"icant challenge "or their *usiness,
so it is di""icult to ma2e the argument that such a co.op ould remo%e signi"icant *arriers "or a large num*er
o" local *usinesses. Coe%er, Eni%ersity o" Bichigan re@uires its "ood producers to ha%e "ood sa"ety
certi"ications, such as 0A?. E/panding opportunities "or a""orda*le 0A? certi"ication o" local "arms could shi"t
su*stantial amounts o" E o" B1s "ood purchasing toards local suppliers.
@I'TRIC
With this particular criteria amplify washtenaw countys locally owned small business and entrepreneurship opportunities.
Washtenaw County’s
Locally Owned
Small Business and
Entrepreneurship
Opportunities
Assessing local economic development
opportunities for non-venture capital funded
entrepreneurship, with a spotlight on
cooperative business models.
July 2013
Authors:
Jessica Meissner
Economic Anthropologist
The Shed, BEC
[email protected]
Joanna Rosene-Mirvis
Food Systems Specialist
Washtena County !""ice o" Community # Economic $e%elopment
&
Abstract: Washtena County !""ice o" Community # Economic $e%elopment '!CE$( "unded this research
recogni)ing that there are numerous incenti%e, capital, and *usiness ser%ice programs a%aila*le to help gro
technology, li"e science, communications, +T, ad%anced manu"acturing and other ,high tech- *usinesses in
the county, *ut comparati%ely "eer programs a%aila*le to assist locally.oned small *usinesses in other
sectors. Washtena County !CE$ as interested in e/ploring the potential o" cooperati%e *usiness models
as tools "or groing locally oned small *usinesses. 0roth o" these local *usinesses is needed to ha%e a
sustaina*le economy and pro%ide jo*s "or local residents. The purpose o" this research as to identi"y the
speci"ic challenges locally oned *usinesses and non.%enture capital "unded entrepreneurs "ace, especially
as they launch and gro, and ho e might *est support them. We ere then interested in assessing hat
speci"ic cooperati%e %entures sho the highest potential to support the de%elopment and di%ersity o" the
local entrepreneurial and *usiness community, and positi%ely impact Washtena County1s o%erall economy
and employment. This report details the results o" this research and outlines ho e can ta2e action to
achie%e these goals.
Table of Contents
Introuction 2
!art I
&. The +mportance o" 3ocally !ned Business and 4on.%enture Capital Funded
Entrepreneurship 5
6. The Application o" Cooperati%es "or Economic # Business $e%elopment 7
!art II
5. Small Business # Startup Broader Conte/t &8
9. The Washtena County Small Businesses and Entrepreneurship Sur%ey &:
!art III
7. Washtena County Wor2"orce Factors 5;
;. !pportunities "or Wor2er.oned Cooperati%es 9&
!art I"
:. Sector.speci"ic !pportunities "or 0roing 3ocal Business in Washtena County 99
=esearch ?articipants and +nter%ieees ;&
+deas 3ocal Businesses =eported through the Sur%ey 'in direct @uotes( ;5
Additional E/amples o" Co.ops and Food 3ocali)ation Strategies ;;
Washtena County 3argest Ao* Shortages Compared to Ao* See2ers ;>
+nstitutional ?rocurement +nter%ie $ata :8
Selected BA33E 3ea2age Calculator $ata :6
6
Introuction
The main purpose o" this research as to de%elop a picture o" local small *usinesses, their challenges
and opportunities, and assess the potential o" cooperati%es to address these. Co.ops ere necessarily loo2ed
at "rom to related, *ut not identical perspecti%es: as *usiness de%elopment tools and as economic
de%elopment tools in Washtena County. This re@uired pulling together @uite a "e pieces o" the pu))le and
understanding their relationships, ma2ing it a comple/ and %ery interesting project. We needed not only an
understanding o" cooperati%es and ho they can *e used, *ut also the degree to hich they might remo%e
signi"icant *arriers to local *usiness groth and ho interested the *usiness community ould *e in ma2ing
use o" them. From an economic de%elopment perspecti%e, e also needed to as2 hat 2inds o" *usinesses
might hold the greatest opportunities "or impact on the economy and jo* creation. This led us to as2 "urther
a*out the 2inds o" jo* creation that might *e most desira*le. To anser that @uestion, e needed an
understanding o" the local or2"orce. Bringing us *ac2 to cooperati%es, e considered ho or2er.
onership might impact the desira*ility and "easi*ility o" ta2ing ad%antage o" speci"ic 2inds o" jo* creation.
The research relied on "ieldor2 and inter%ies, an in.depth sur%ey o" small *usiness oners, and se%eral
di""erent a%aila*le data sets.
We disco%ered that these %arious pieces "it together especially ell in se%eral places so that the
themes that emerged suggest some e/citing opportunities. The report is structured to gi%e an idea o" the
shape o" each o" the pieces, highlighting here gaps and opportunities e/ist, and *uilding a picture o" ho
they relate to one another along the ay.
!ART I summari)es the economic de%elopment rationale *ehind the "ocus on small *usiness, the
*road inclusion o" entrepreneurial paths, and the spotlight on cooperati%es. In the 'ection 1* you1ll "ind a
summary o" the e/pected *ene"its o" an increased "ocus on locally oned *usinesses and non.%enture capital
"unded entrepreneurship. Buch o" hat you ill "ind in this report can *e used to in"orm any e""ort to
support the groth and di%ersity o" our local economy in Washtena County. In the 'ection 2, you1ll "ind a
summary o" the reasons "or a special interest in cooperati%es. $espite the rising interest in co.ops and their
increased co%erage in the press as success"ul and pro"ita*le community and economic de%elopment
%entures, e "ound that e%en mem*ers o" local "ood or housing co.ops ere surprised *y certain "acts
regarding their role in our *roader mainstream economy or the di%erse and uni@ue ays cooperati%e
*usiness models ha%e *een used as de%elopment tools. +ncluded in this section is a *rie" outline o" the
proposed Business # Employment Cooperati%e.
In !ART II* e di%e into the character o" small *usiness and entrepreneurship. 'ection 3 o""ers a
"rameor2 "or understanding the analysis that "ollos, including the *roader contours o" Washtena
County1s small *usiness community and some o" the less ell 2non "acts a*out entrepreneurship in
general. The main analysis *egins in 'ection +* here e present the sur%ey data and e/plore hat local
*usiness oners and leaders ha%e to tell us a*out the character and e/perience o" *usiness onership and
entrepreneurship in Washtena County. We summari)e the potential impact o" %arious cooperati%e joint
%entures and highlight the highest potential opportunities "or cooperati%es as *usiness de%elopment tools.
!art III ta2es a closer loo2 at the local or2"orce. 'ection ( presents some o" the rele%ant contours
o" Washtena County1s talent *ase and highlights some 2ey characteristics o" the or2"orce that should
in"orm our direction and gi%e shape to ne/t steps in implementing recommended actions. 'ection )
summari)es the economic de%elopment argument "or or2er onership, considers some o" the highest
potential opportunities here the launch o" or2er oned cooperati%es might *est "it in Washtena County,
and *rie"ly outlines hat ould *e re@uired to mo%e "orard.
!ART I" pulls together some o" the patterns that emerge. +n 'ection ,, you ill "ind a discussion o"
sector.speci"ic opportunities in Washtena County. In 'ection -* e summari)e the "indings *e"ore mo%ing
on to our recommendations "or Washtena County.
5
'ection 1
/hy focus on locally o0ne s#all business1
There is a groing *ody o" literature and research supporting the 2ey role o" locally oned
*usinesses in *uilding sustaina*le local economies and %i*rant communities.
&
Cere e ill simply summari)e
just a "e o" the compelling *ene"its e can e/pect "rom promoting locally oned *usinesses.
$e%eloping locally.oned *usinesses gros local economic
acti%ity and employment *eyond the immediate e""ects on indi%idual
*usinesses due to the Dlocal #ultiplier effect.- When a local *usiness1
mar2et share increases, the additional *usiness incomes and ages tend
to stay and circulate in the community. $ollars spent on imports "rom
non.local *usinesses represent ,lea2ages- in the local economic system.
2ocali3ation i#pacts local econo#ic 4ro0th* e#ploy#ent an the ta&
base *ecause independent *usinesses recirculate three times more o"
their re%enues locally than national chains do.
6
4et employment gains in the economy, "rom a macroeconomic perspecti%e, come "rom small
*usinesses and startups. Economic de%elopment strategies are *eginning to incorporate the untappe
potential of #icroenterprise* a category that de"ines *usinesses ith "eer than ; employees. Though their
re%enues may *e small compared to *ig *usiness, the o%erhelming num*er o" these companies is hat
gi%es them their real poer. If 5ust 1(6 of /ashtena0 County7s #icroenterprises
3
hire t0o ne0
e#ployees each* it 0oul cancel out all current une#ploy#ent in the county.
9
A rich iversity of local businesses not only pro%ides econo#ic security* *ut also contri*utes to a
uni@ue culture and vibrant co##unity. 3ocally oned *usinesses tend to care "or the el"are o" their
communities and contri*ute more to local philanthropy.
(
?romoting the launch and groth o" locally oned *usinesses has signi"icant implications "or local
0ealth builin4. Since this gi%es the community access to capital that can *e used "or in%estment in the
launch o" "urther locally oned *usinesses, the potential "or long.term sel"."unded groth also increases.
The potential impact o" *usiness onership, especially "or underser%ed minorities, is hard to ignore:
Ta*le & . Business !nership E""ects on 4et Worth 'Source: Association "or Enterprise !pportunity(
U.S. Median Net Worth
Population
For Non-Businesses
Owner
For Business
Owner
Percent Improvement from
Business Ownership
All $85,000 $211,000 148%
African American $10,000 $77,000 670%
Hispanic/Latino $9,000 $37,000 311%
Women $82,000 $180,000 120%
&
See especially Shuman, Cortese, and Business Alliance "or 3ocal 3i%ing Economies ,=esources.-
6
Ci%ic Economics, ,The +ndie +mpact Study Series 4ational Summary =eport-
5
Based on E.S. Census ,Sur%ey o" Business !ners- data
9
As o" Barch, 68&5
7
American +ndependent Business Alliance, ,Top =easons to Buy 3ocal, Eat 3ocal, 0o 3ocal-
A 688< study o" 0rand
=apids, B+ "ound that a &8F
shi"t o" sales "rom national
chains to local *usinesses
ould result in G&5: million in
increased local economic
acti%ity and &,;88 ne jo*s.
'Cortese: pg ;6(
9
The ealth *uilding implication o" *usiness onership as one o" the rationales *ehind Cle%eland1s
E%ergreen Cooperati%es, a large.scale community ealth *uilding e""ort to launch "or.pro"it, employee.
oned *usinesses in underser%ed neigh*orhoods, *eginning ith a commercial laundry "acility, a solar
energy company, and 0reen City 0roers, the nation1s largest ur*an greenhouse comple/ o" its 2ind. This
study espouses a second important and idely applica*le insight "rom the E%ergreen Cooperati%es. That is, it
is not enou4h to focus on anchorin4 local assets an pro#otin4 local o0nership 0ithout consierin4 the
stability of the #ar8ets for those assets an businesses. +n order "or the employment and ealth *uilding
*ene"its to *e sustaina*le, it is important to "ind 9anchore: local #ar8ets "or ne *usinesses, meaning
mar2ets that cannot easily lea%e the community. E%ergreen relied primarily on institutional procurement,
*ut this report ma2es an e""ort to "ocus on sectors here there is a strong mar2et o" local institutional,
consumer or di%erse commercial *uyers.
;o0 oes 9non-venture capital fune: entrepreneurship fit in1
The relationship *eteen these considerations and ,non.%enture capital "unded- or ,non.high tech-
entrepreneurship may not seem sel".e%ident at "irst *lush. Coe%er, on a%erage, only 8.9F o" *usiness
startups recei%e %enture capital "unding, so "ocusing on other paths to entrepreneurship directly supports
almost all o" our small local *usinesses. What1s more, %enture capital "unding comes ith a *ig string
attached: the e&it strate4y. Almost *y de"inition, venture capital fune co#panies o not stay locally
o0ne. Henture capitalists in%est in order to cash in a *ig return hen startups sell to a large company
interested in the intellectual property rights or hen the *usinesses gets sold to the pu*lic on the stoc2
mar2et through an +?!.
So, there is a close relationship *eteen supporting a %i*rant community o" locally oned *usiness
and "ocusing on the entrepreneurial paths that are in "act more common, e%en i" they do recei%e less press
than the *ig %enture capital *ac2ed, so.called ,high groth startups- 'a phrase hich in most cases re"ers to
groth "rom a %enture capital "und management perspecti%e, hich is not @uite the same as the perspecti%e
o" a local community(. This is not in any ay to say that e should not continue to support %enture.capital
"unded entrepreneurship. They *ring many %alues to our community including economic acti%ity, jo*s, talent
and e/pertise, etc. These are strengths in Washtena County ell orth continued de%elopment. We
simply ish to argue "or a more inclusi%e approach to entrepreneurship that actually plugs ,lea2s- in the
local economy and addresses the needs o" a *roader segment o" startups ith untapped potential "or
sustaina*le groth.
7
'ection 2
Cooperatives
The data and analysis presented in this paper can *e used to gi%e shape to any num*er o" initiati%es
supporting locally oned *usinesses, and ideally it ill inspire many. !ne o" the opportunities that ga%e
shape to this project as Washtena County !CE$1s interest in e/ploring the possi*ilities "or a local Business
# Employment Cooperati%e ',BEC-( to support small *usinesses and incu*ate ne %entures, including
or2er.oned enterprises to "urther *oost @uality employment. +n
general, the goal as to "ind the *est ays to promote the groth
o" locally oned *usinesses, entrepreneurship and sustaina*le
employment. At the onset o" this research, the BEC project as in
the "easi*ility assessment phase and this research has helped mo%e
the project "orard signi"icantly and gi%e it shape. 4ecessarily,
then, there is an emphasis on the "easi*ility and e/pected impact o"
a local BEC in the sections that discuss cooperati%e *usiness models.
Coe%er, there are #any types of cooperatives an very stron4
ar4u#ents for for0ar-thin8in4 econo#ic an co##unity
evelop#ent professionals to inclue cooperative evelop#ent
support 4enerally in their toolbo&.
The Enited 4ations declared 68&6 ,The Iear o" the Cooperati%e,- and cooperati%es ha%e certainly
recei%ed increased press recently,
;
especially as locali)ation, sel".reliance, and sustaina*ility ha%e *ecome
increasingly important community and economic goals. Although cooperati%es ha%e recently *een in the
spotlight, they are "ar "rom ne. They ha%e pro%en success"ul o%er their long trac2 record since the "irst
o""icial
:
cooperati%e enterprise in &
According to the Jau""man Foundation, startups declined another 7.>F in 68&&.
&9
Com*ined data shoing
the num*er o" *usinesses entering and e/iting the economy o""ers an e%en *lea2er picture:
&5
Bureau o" 3a*or Statistics, ,Business Employment $ynamics: Entrepreneurship and the E.S. Economy-
&9
Jau""man Foundation, ,4e Business Startups $eclined in 68&&, Annual Study Shos-
&&
Bi4ure 2 - 'tartups an ?&its =
Inustry =%AIC' escription>
%u#ber of
%one#ployer Bir#s
!ercent of all
?stablish#ents
T!TA3 F!= A33 SECT!=S 6;, >5F
Educational ser%ices &,7&9 >6F
Bining, @uarrying, and oil and gas e/traction :6 >6F
=eal estate and rental and leasing 6,>&6 >8F
Agriculture, "orestry, "ishing and hunting &8: F
Transportation and arehousing ;9: 9:
%one#ployer Bir#s
Total Receipts
T!TA3 F!= A33 SECT!=S G&,&8,888
=eal estate and rental and leasing G6>5,:69,888
?ro"essional, scienti"ic, and technical ser%ices G657,87:,888
Cealth care and social assistance G&86,>:>,888
Construction G>>,:
!ercent of e#ployerG none#ployer o0ners reportin4 the
follo0in4 as one of their 9pri#ary roles: in the businesses
4onemployer
!ners
!ners that
Employ !thers
?roducing 0oods andNor ?ro%iding Ser%ices ;5.9F 75.:F
$ay.to.day Business Banagement 96.&F 7
'ources of capital use to start or acAuire the business %u#ber of Bir#s !ercent
Relatively Infor#al or Accessible 'ources
?ersonalN"amily sa%ings o" oner's( 5,6:< &8.9
Business loanNin%estment "rom "amilyN"riends 5:;,&75 6.;
4one needed 6,>>>,75: 68.<
Bor#al Institutional 'ources
Business loan "rom "ederal, state, or local go%ernment >:,979 8.:
0o%ernment.guaranteed *usiness loan "rom a *an2 or "inancial institution >>,. 0i%en the aims o" this study, and that most o" the "arms in Washtena County are
"airly small.scale, supporting local "ood producers is o" particular importance. Washtena County is home to
&,588 "arms. )36 of those are s#all* 0ith avera4e sales less than H10*000. !nly &6F o" Washtena County
"arms ha%e annual sales greater than G&88,888.
66
Boo proucers surveye for this stuy reporte annual
sales ran4in4 fro# H3*(00 - H33*000, @uali"ying them as relati%ely small producers. These points are
particularly signi"icant *ecause foo businesses #ust navi4ate especially ti4ht #ar4ins such that scalin4 an
efficiency are especially i#portant factors for viability.
+t is not possi*le to e/trapolate speci"ic operating characteristics o" the local population o" "ood
*usinesses *ased on a small sample. Coe%er, the o*ser%ations a*out local "ood *usinesses suggest to us
that a concerte effort #ust be #ae to supple#ent the support syste#s available to foo businesses.
Food *usiness responses a*out their e/periences ith local support organi)ations con"irm this.
Challen4es an Fbstacles
+n most cases, the num*er o" *usiness oners reporting signi"icant challenges in the %arious areas
e as2ed a*out did not %ary signi"icantly according to the num*er o" years in *usinesses. The "olloing ta*le
shos a "e e/ceptions. The percentages re"lect ho many *usinesses in each age range reported ?ersonal
+ncome, Storage or Ciring as ,*ig- or ,moderate- challenges, potentially holding them *ac2 "rom reaching
their 5.7 year goals.
Table , - Challen4es Correlatin4 0ith A4e of Cusiness
Iears in Cusiness 'tora4e Fbstacle ;irin4 Fbstacle
!ersonal Inco#e $ Cenefits Fbstacle
8.6 69F 5;F &5F :7F :7F
&8.&7 8F :>;
23- H3*10-*-0+
aressin4 personal inco#e an benefits 4aps for early sta4e businesses coul
have a si4nificant i#pact on the 4ro0th of locally o0ne businesses an 5ob creation
e ere somehat surprised *y the o%erall eighting o" the challenges small *usinesses and
*elo shos the percentage o" respondents rating
potentially 2eeping them "rom achie%ing their goals. 'Category.speci"ic challenges are gi%en
as percentages o" applica*le *usinesses, not o" the hole population.(
!ercent of Cusinesses 'urveye Reportin4 "arious Challen4es as !otential Fbstacles
ales are the *iggest challenges "rom oner1s perspecti%es. There are many
ays to address this pro*lem, and the solution is almost de"initely a multi.pronged approach.
*usinesses reach their mar2ets ill *e addressed in detail in the ne/t section. ?roduct and ser%ice *usine
ha%e highly %aried mar2ets, *ut se%eral options "or helping all categories include:
8F &8F 68F 58F 98F
Certi"ications '"ood only(
?urchasing '"ood and product only(
3and N Facility !nership '"ood only(
Wholesale prices '"ood only(
+nstitutional Buyer $emand # ?re"erences '"ood only(
Warehousing # Storage '"ood and product only(
=etail Space '"ood and product only(
$istri*ution '"ood and product only(
Customer Ser%ice
Facilities
Accounting
3egal, Contracts
?lanning
Scaling # E""iciency
Capital # Financing
Ciring
Esta*lishing Business ?artnerships
Cash Flo
?ersonal +ncome # Bene"its
Sales
Bar2eting
The ne/t ta*le shos the target re%enues and projected hiring o" respondents 8.7 years in
rsonal income and *ene"its as a potential *arrier to achie%ing their goals.
?arly 'ta4e ?ntrepreneurs 'urveye
%e0 Revenues
G.66
:;.:6
5.56
>5.96
>>.:
&68.7<
&95.>6
&79.57
&; coul 5oin such a co-op an vastly increase its econo#ic evelop#ent i#pact.
This area is also strongly recommended "or "urther e/ploration.
Certification
Finally, there appears to *e signi"icant interest in cooperati%ely "inancing "ood certi"ication processes.
Coe%er, only 58F o" the interested *usinesses reported this to *e a signi"icant challenge "or their *usiness,
so it is di""icult to ma2e the argument that such a co.op ould remo%e signi"icant *arriers "or a large num*er
o" local *usinesses. Coe%er, Eni%ersity o" Bichigan re@uires its "ood producers to ha%e "ood sa"ety
certi"ications, such as 0A?. E/panding opportunities "or a""orda*le 0A? certi"ication o" local "arms could shi"t
su*stantial amounts o" E o" B1s "ood purchasing toards local suppliers.
@I'TRIC