Recently I’ve been meeting with state legislators to discuss an entrepreneurship-led economic development (ELED) initiative for Michigan. This initiative is unique in terms of its target audience, how it will balance Michigan’s historical emphasis on recruitment and retention — and the potential impact it can have on our state’s economic health.
Michigan is at a crossroads. Granted, we’ve seen a significant comeback from the economic lows of 2008-2010. But to meet our full potential, Michigan needs greater recognition and support for second-stage companies (those with 10-99 employees and $1 million to $50 million in annual revenue). Although still classified as small businesses, second-stagers are powerful job creators and generate more than double their market share of jobs. Indeed, in 2017 second-stagers represented 18% of Michigan’s companies, but generated more than 38% of all jobs in the state.
To help these important companies scale larger, Michigan Celebrates Small Business (MCSB) has mapped out an ELED initiative. In a nutshell, it provides a package of acceleration services (everything from peer-learning programs to accessing vetted experts on market strategy, internal efficiencies and operational issues). Graduates of these acceleration services are then eligible for mentorship programs, consultant matchmaking and more.
It’s important to note that MCSB already has a history of serving second-stage companies. Another hallmark is MCSB’s diversity: Its six founding organizations (Small Business Administration, Small Business Association of Michigan (SBAM), Michigan Small Business Development Center, Michigan Economic Development Corp., Michigan Business Network and Edward Lowe Foundation) are mission-centric and complementary rather than competitive. This is a partnership that doesn’t exist in other states and results in an unusual type of cooperation. More can be accomplished by this powerful collaboration than our individual organizations acting alone. (For the complete back story, click here.)
With additional funding from the state, MCSB would be able to reach more second-stage companies in Michigan, including those in rural and minority communities. For example, we project that helping an additional 50 companies this year would create more than 400 new jobs in 2020. That’s a pretty nice return. And the number becomes even more impressive when you start looking at cost-per-job comparisons for attraction strategies.
To create a robust statewide economy that isn’t overly dependent on recruitment and retention, supporting second-stage companies needs to be a priority. This is a very different approach than targeting industry sectors or a particular region. By targeting second stage, a critical time for growth companies, we have an opportunity for both greater and longer impact in all regions of Michigan.
In a presentation to the Michigan State Senate earlier this year, Brian Calley, president of SBAM, explained how ELED services help second-stagers face new challenges, such as managing a growing staff or entering new markets. “Tax incentives run out,” he said. “But when you build competencies like these inside of businesses, that [know-how] doesn’t run out.”
Currently Michigan is known as the Great Lakes State, which is good for tourism. Yet I also see us becoming a leader in economic growth and being known as the “Entrepreneurship State.” Programming that results from MCSB’s initiative will fundamentally alter the trajectory of Michigan’s business competitiveness — and be a model for the rest of the nation.
Published 4/30/2019