Non-tech Columbus startups lagging?

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From the April 2014 issue of Columbus CEO
  • Bill LaFayette, director of the Columbus Region Logistics

Bill LaFayette is a numbers guy at heart, and he’s concerned the numbers aren’t adding up when it comes to small business development in Central Ohio. Ask the owner of Regionomics LLC, an economic and work-force analysis firm in Columbus, about what needs done to improve the region’s economy, and he’s likely to point to data that shows the 10-county Columbus Metropolitan Statistical Area trails many of the nation’s MSAs on several important small business indicators.

A good example can be seen in the Indie City Index compiled by Civic Economics, an economic analysis firm with offices in Chicago and Austin, Texas. The index assigns a score to each of the 363 MSAs based on the vitality of their independent retail sectors. Columbus was ranked a lowly 350 on the most recent list based on 2011 data.

Then there is LaFayette’s analysis of benchmarking reports from Community Research Partners, the Columbus-based, nonprofit research and data center that tracks employment, work-force development and other community issues in central Ohio. LaFayette said the research has consistently shown the Columbus region is well down the list of the largest 100 metropolitan areas when it comes to the percentage of self-employed workers, very small businesses as a percentage of all firms, and creation of very small businesses per 1,000 establishments.

“We all need to be very concerned about this,” he said. “If we don’t have the right local business economy, dollars are not being tracked, circulated and creating more prosperity here.”

Instead, a disproportionate share of the money is being spent at chain stores, restaurants, and other businesses owned by out-of-town interests. That revenue gets funneled back to those companies’ home bases, not Columbus and its suburbs.

“Our economic impact multipliers are lower than they should be,” LaFayette said. “Dollars spent in Columbus generate less total (economic) output and fewer jobs than they ought to be.”

But he also admits he can’t exactly put his finger on why small business ownership rates are lagging in central Ohio. LaFayette doesn’t think it’s because of the energy and capital that leaders in the public and private sectors put into TechColumbus, the high-profile group that’s hyper-focused on supporting tech startups. New businesses outside the technology realm can turn to numerous central Ohio organizations ready to assist them and help secure funding, LaFayette said.

His gut feeling is people in central Ohio and the Midwest in general are conservative by nature so they are less likely to give up a steady job and roll the dice on starting a business. Evidence of that can be seen in his analysis of the Community Research Partners reports. The data shows cities such as Indianapolis, Pittsburgh, Cincinnati, Akron, Dayton, and Toledo rank in the lower half to lower third of the small business creation categories.

Steve Fireman, president at the Economic and Community Development Institute in Columbus, is familiar with that research and thinks Columbus may be a victim of its own prosperity when it comes to small-business creation. It’s a region whose employment landscape is dominated by Ohio State University, state and local government, Battelle, insurance companies led by Nationwide, and headquarters for Fortune 500 companies such as Cardinal Health Inc. and L Brands Inc. Workers, especially older ones, tend to hang on to jobs with such prestigious employers, Fireman said.

But he sees that shifting a bit in his work at ECDI, the nonprofit economic development organization founded in 2004 by Inna Kinney, who remains its CEO. He said the agency is seeing more workers in their 50s looking to start a business after hitting a dead end in their corporate careers. Then there are the Generation Xers and Millennials who want to be autonomous and view starting a business as a way to achieve that.

ECDI has 30 funding sources in the public and private sectors and 60 staff members. They help would-be entrepreneurs turn their ideas into viable micro businesses and assist existing small businesses improve their operations. ECDI makes loans of $1,000 to $350,000 and works with Main Street-type businesses, including ones in food service, trucking, child care, home healthcare, retail, accounting, and small technology companies that don’t fit under the TechColumbus umbrella.

Fireman estimates the agency, which also has offices in Cleveland and Toledo, assists anywhere from 60 to 100 entrepreneurs at any given time with lending services, technical assistance and training. Overall there are about 450 active businesses in ECDI’s portfolio.

“After we make the loan is when the real work starts for us,” Fireman said. “We’re more like a partner than a lender. We help grow our businesses by providing extra value to them.”

ECDI is one of numerous places in Columbus where people wanting to start a business can find help, said Columbus Chamber of Commerce CEO Michael Dalby. He is quick to point to programs sponsored by the Small Business Administration, Ohio State University, TechColumbus, Young Professionals Organization, Small Business Beanstalk and other groups focused on helping get a business off the ground. There are also several business incubators in the region, and the chamber pitches in with support services for the smaller companies in its membership ranks.

So it all gives Dalby pause when he hears people say the Columbus region is lagging behind others in developing small businesses.

“Columbus has a ton of resources to help small and mid-sized companies,” Dalby said. “To be honest, I’ve never lived in a city with as many varied types of resources to start small businesses.”

He pointed out 70 percent of the chamber’s members have 30 or fewer employees. A number of them are second-stage companies that look to his organization for help with making business-to-business connections, marketing, recruiting workers and dealing with government agencies.

“They are the ones that have survived and are starting to thrive,” Dalby said. “We can help them with the other components they need.”

Jeff Bell is a freelance writer.