Supporting Local Businesses
As part of their economic development strategy, municipal governments are increasingly thinking about how to cultivate smaller, locally owned businesses. There are good reasons for this: small businesses comprise more than 99 percent of all firms, and local businesses keep a greater percentage of their profits in the local economy—more than three times as much, according to some studies. Local businesses also tend to be attached to shorter—and thus less carbon-intensive—supply chains, and are significantly less likely to relocate in the near term. However, not all small or local businesses are model employers, so economic development policy supporting local businesses is not a substitute for comprehensive wage and hour standards, and those standards should broadly apply to small businesses as well as large. That said, concentrating on local businesses and creating a healthy local economy is part of creating efficient, sustainable, and thriving localities, and cities should consider some of the approaches below as methods of doing so.
Through relatively minor investments in resources, cities can expand business’ capacity for good management and cost-savings, like educating owners and encouraging energy efficiency, or by shifts in land use planning and code that prioritize small business. The often confusing thicket of regulations and business knowledge that potential entrepreneurs must navigate to form a new venture is one obstacle to startups. City governments can help new small-business owners succeed by providing them with necessary business knowledge and public intermediaries to smooth interaction with regulators. Additionally, municipalities can help small businesses retain more of their earnings by educating owners on potential efficiencies and government incentives. Cities can also discourage chain stores or promote the centrality of small businesses through changes to land use planning.
Cities can also support small business by providing more intensive technical assistance. Cities using economic gardening – a model to grow small and local businesses – have three main roles: improving infrastructure, facilitating connections, and providing information. Business incubators are another relatively low-cost type of assistance program that supports the successful development of entrepreneurial companies through an array of business resources and services. Some cities have also begun to encourage democratic employee ownership and cooperative business models, or helped establish specific business corridors or incubators for people of color, women, and other underrepresented business owners.
Lastly, by strategically leveraging direct financial investments, cities can boost the success of small, local businesses. Assisting businesses in finding city- or privately-owned commercial space, as well as providing small grants (attached to wage stipulations) for façade improvements, can significantly improve small business’ success. Access to capital in the form of loans is also a major need, and cities can help lessen this barrier to starting and growing a business by providing low-interest loans directly to small-business owners or by facilitating loans through partnerships with private lenders.
Affordable Space: How Rising Commercial Rents Are Threatening Independent Businesses, Olivia LaVecchia and Stacy Mitchell, Institute for Local Self-Reliance, April 2nd, 2016. Read more.
Creating Inclusive High-Tech Incubators and Accelerators, Institute for Competitive Inner Cities, January 1st, 2016. Read more.
Minority and Women Entrepreneurs: Building Capital, Networks, and Skills, Michael S. Barr, The Hamilton Project, March 1st, 2015. Read more.
Access to Capital for Local Businesses, Institute for Local Self-Reliance, April 15th, 2014. Read more.
Supporting Entrepreneurs and Small Business, J. Katie McConnell, Christiana McFarland, and Brett Common, National League of Cities, January 1st, 2014. Read more.
Ensuring Racial Equity in Public Contractin, Local Progress and PolicyLink, September 1st, 2013. Read more.
Going Local: Quantifying the Economic Impacts of Buying from Locally Owned Businesses in Portland ME, Amar Patel and Garrett Martin, Maine Center for Economic Policy, December 1st, 2011. Read more.
The Role of Elected Officials in Economic Development, Christiana McFarland and Katie Seeger, National League of Cities, January 1st, 2010. Read more.
Local Purchasing Preferences, Institute for Local Self-Reliance, December 1st, 2008. Read more.
Economic gardening is a technique pioneered by Littleton, CO to help second-stage small businesses move to national and international markets while keeping the firm (and its jobs for local residents) rooted in place.
Ventura, CA worked with private firms to leverage municipal assets toward providing capital for job-creating businesses, as part of its Jobs Investment Fund.
Cambridge, MD used extensive feedback from residents to shift to small-business-friendly planning in its Main Street area.
Dennis, MA requires all large floorplate businesses to undergo special review, allowing discretion to reject some big-box chain stores, while San Francisco, CA requires special review for all formula businesses to monitor the balance of chain and local businesses.
Des Plaines, IL amended its code and consolidated 55 separate licensing categories down to 14.
Boston, MA has been updating its online permitting process to improve the user friendliness, which includes easy-to-understand guides and checklists to walk business owners through even cross-departmental permitting requirements.
San Francisco, California has developed an exemplary online business portal, paired with one-on-one assistance available from business counselors, to provide consolidated technical assistance to owners.
New York, NY offers a “one-stop-shop” to provide targeted technical assistance about permitting and other small business issues. The City also pioneered a program to assist women in starting a business, and offers other targeted TA, including its investment in worker cooperatives.
Milwaukee, WI developed sustainability technical assistance for small manufacturing businesses to reduce their environmental impact with cost-effective practices.
|Read more about supporting small and local businesses in our report Cities at Work: Progressive Local Policies to Rebuild the Middle Class.|