Columbus is home to a number of small businesses and entrepreneurs. Much of the city encompasses a spirit of supporting local, and many owners say that it’s one of the best things about owning a business in Columbus. Areas like Short North are packed with local spots, and The Metropreneur’s entire focus is on small business, but what do the statistics actually show about how Columbus ranks compared to other cities when it comes to small business?
Every two years, Community Research Partners releases a benchmarking report that helps Central Ohio understand how they rank against other cities across the U.S. in various measures. Viewing the three small business indicators on the report paints a somewhat disappointing picture for small businesses in Columbus.
Out of the 100 largest metropolitan areas in the U.S., Columbus ranks 80th in percentage of all employers that are small, 82nd in percentage of small business establishment births per 1,000 establishments, and 75th in percentage of all workers who are self-employed.
“We really aren’t the entrepreneurial hotbed we are cracked up to be,” says Bill LaFayette, founder of Regionomics. Many may be surprised by these stats, thinking of areas like Short North or the recent redevelopment of neighborhoods like Olde Towne East, but LaFayette says, “It’s easy to take anecdotal evidence, and use that anecdotal evidence to draw conclusions.”
After examining the statistics a direct answer has not emerged as to why Columbus ranks so low. Economic strength, population size, demographics, economic structure and venture capital don’t show a correlation. LaFayette thinks it could be a Midwestern mindset of conservatism as cities like Minneapolis, Indianapolis and Pittsburgh also rank low. However, he believes conservatism is an attitude that can be changed.
Although the cause is not clear, the problems it creates are.
“The reason why this is such a serious problem is simply that when you have an economy that’s really dependent on chains, the expenditures in those businesses tend to leak out of that economy at a much greater rate,” LaFayette says. Instead of money staying in the local economy by purchasing from small businesses, larger chains typically centralize their purchasing and business services elsewhere. Residents become dependent on decisions made in another city. Instead, an economy becomes more self-reliant when residents are buying local.
What can Columbus do to become a more self-reliant economy with more small businesses? LaFayette sees several solutions, with steps for both individuals and businesses.
At an individual level, “If we all shift 5 to 10 percent, the impact will be huge,” LaFayette says. “We have to encourage people to think about buying local.” He explains this doesn’t mean staying out of chains all together, but finding ways to buy local when possible. These shifts can be something as small as buying a daily cup of coffee from the corner shop instead of a national chain.
Another step is encouraging small business formation. LaFayette says it’s hard to tell if Columbus doesn’t have as much small business formation because we don’t have consumer and business support, or Columbus doesn’t have consumer and business support because we don’t have much small business formation.
The first step in overcoming this obstacle is awareness. What resources are available for an individual looking to start a small business? There’s practical support, like several of the resources highlighted in The Metropreneur’s entrepreneurial support series, as well as the support that comes from speaking with others in similar businesses and potential customers.
One area where small business development could be particularly valuable is in challenged neighborhoods. As with any community, the residents in the area best know what the neighborhood needs, but in an area with people with limited opportunities, starting a business offers another option. LaFayette says these individuals can be very successful working for themselves.
While more small businesses seems like an obvious solution, there’s also another direction from which to approach the problem. Columbus needs more anchor businesses to buy from local businesses.
Take the larger anchor institutions in the area like OSU, Battelle, Nationwide, local governments, “What we need to do is to is we need to encourage them to buy local too,” LaFayettte says. These institutions should analyze their purchasing patterns and figure out what can be localized. Aside from keeping money in the economy, choosing local can also have benefits like fast services and easy-access to the businesses from which these companies are purchasing.
While these are steps in the right direction, LaFayette has found proven cases of what happens when businesses are opened in challenged neighborhoods, and when large institutions choose a local supplier.
Evergreen cooperatives in Cleveland was started by a collaboration between the city, the Cleveland Foundation, Case Western, the Cleveland Clinic and Cleveland University hospitals in the economically depressed area of University City. Institutions in the area examined their purchase of goods and services and looked for what could be localized by starting businesses with those services. Then answer was a commercial laundry. The environmentally responsible location serves the hospitals in the area at 30 percent of the cost of a typical commercial laundry. People that may have had no other options are now part-owners of an excelling business. The facility was so successful it was followed up by a company that installs, maintains and repairs solar panels.
In Arizona, a national chain was awarded a $5 million office supply contract for the state. Calculations show that going with the chain versus an established, local company is costing the state $500,000 a year. As for jobs, 62 percent of national firm’s jobs in Arizona were part-time without benefits, while all of the local firm’s jobs were full-time. Also the local company sourced a majority of their goods from other local companies. While the national retailer might then lose jobs if the state chose the local supplier, the local shop would be much busier with such a large contract, thereby adding jobs the large firm may have lost.
Overall, Columbus has room to grow in supporting and starting local businesses. While the cause may not be clear, the solutions start small.
“Things are better than they were, but they need to be better than they are,” LaFayette says.
Photo via the Columbus Metropolitan Club Blue Chip Economic Forecast 2014.