Tough economic times are helping to cultivate a new approach to economic development.
Traditionally, local economic developers have sought growth by trying to lure businesses from outside a region — so-called "economic hunting." Hunting can produce big economic gains, but it poses lots of challenges: It’s slow, uncertain and usually requires big marketing budgets and travel along with a raft of local and state incentives. It also may end up attracting highly mobile companies looking for the cheapest place to do business at the moment — and willing to leave for another town as soon as they believe the grass is greener elsewhere.
In recent years, economic developers have begun experimenting with another approach that has gained momentum as Florida’s unemployment rate has risen to over 10% and local governments and economic recruiters have seen their recruitment budgets shrink.
"Economic gardening" focuses on helping so-called second-stage companies with 10 to 50 employees and revenue of $1 million to $25 million — local businesses that have survived at least five years and are growing revenue and adding employees.
The gardening approach doesn’t view all businesses equally. Startups with fewer than 10 employees appear to produce more growth, accounting for a 40.7% increase in employment in Florida between 1993 and 2007, according to the Edward Lowe Foundation, a Michigan non-profit group that assists entrepreneurs. But the foundation points out that startups have a high failure rate, meaning many of the jobs they generate quickly disappear in the churn of business formation and failure.
Proponents of economic gardening say startups are important but believe the most effective way to build a local economy is to focus on helping the second-stage businesses, which accounted for a 36% employment increase in Florida between 1993 and 2007. The second-stage firms, they say, have demonstrated staying power and also tend to pay higher wages than startups.
Economic gardening — the term originated from the approach used to resurrect the economy of Littleton, Colo., in the late 1980s after an economic meltdown — doesn’t generate the headlines associated with big business relocations but can produce solid results within two to three years, its adherents claim. The approach is also attractive to economic developers because it doesn’t require lots of capital. More than money, second-stage businesses need the kind of sophisticated marketing information, information technology and management advice that much larger firms take for granted — and are often the key to expanding further, says CEO Nexus President Steve Quello, a Winter Park consultant who has worked with many of the economic gardening projects around Florida.
Case in point: Entrepreneur Jim Cossetta, co-founder of Naples-based 4What Interactive, a 14-year-old marketing, training and communications consulting company with $2.5 million in revenue and 19 employees, says his biggest challenge at this point is in human resources — identifying the right people to hire for middle management positions. That’s a topic he’ll likely focus on as he participates in the Collier County EDC’s new economic gardening program. The approach, he says, "makes total sense."