Is Economic Gardening the Right Approach for Job Growth in Portland?

Job growth in Portland comes from local, small businesses.

As demonstrated in the last installment of Thinking Local, a discussion of “Job Creation Not Relocation,” resident companies are growing considerably while nonresidents are losing jobs—that’s negative job creation.

In a 10 year period from 1999 to 2009, existing Portland companies grew by 63.6 percent while nonresidents (headquartered outside of Portland) declined by 8.9 percent, according to the National Establishment Time Series database. During this time, Portland-based small businesses with less than 10 employees were the only net job creators, adding 113,630 jobs.

So, it seems only logical to ask: How can we continue to stimulate local, small business?

Beyond traditional government subsidies, loans and educational opportunities, a group of Oregon lawmakers, dubbed the Grow Oregon Council, have stepped in with an innovative, entrepreneurial approach to economic development called economic gardening.

What Is Economic Gardening?

Why make multi-million dollar public investments to woo corporations to Portland when we can grow our own jobs through entrepreneurial activity instead?

The seeds of economic gardening began growing in Littleton, Colo., in 1987 with a project kicking off in 1989 “with the idea that ‘economic gardening’ was a better approach for Littleton (and perhaps many other communities) than ‘economic hunting,’” recounts Christian Gibbons, the City of Littleton’s Director of Business/Industry Affairs, in his history of economic gardening.

“By this, we meant that we intended to grow our own jobs through entrepreneurial activity instead of recruiting them,” he continues. “The idea was based on research by David Birch at MIT that indicated the great majority of all new jobs in any local economy were produced by the small, local businesses of the community. The recruiting coups drew major newspaper headlines but they were a minor part (often less than 5 percent) of job creation in most local economies.”

Over the next two decades, Littleton nearly doubled jobs (from 15,000 to 27,000) and the sales tax revenue tripled (from $6 million to $20 million) while the population only grew by 23 percent. All this and the city’s industries diversified.

How did economic gardening achieve all this?

Education, Intelligence and Mentorship

Access to education and mentorship opportunities already exist in our small business landscape, but it’s market intelligence that’s crucial to economic gardening.

The Grow Oregon Council defines economic gardening as “an innovative small business-centered economic growth strategy” comprised of three basic elements:

• Providing critical information needed by businesses to survive and thrive;
• Developing and cultivating an infrastructure that goes beyond basic physical infrastructure and includes quality of life, a business culture that embraces growth and change, and access to intellectual resources, including qualified and talented employees; and
• Developing connections between businesses and the people and organizations that can help take them to the next level—business associations, universities, financial and technical service providers, local business roundtable or local mentoring program, and more.

Access to education and mentorship opportunities already exist in our small business landscape, but it’s this idea of market intelligence that’s crucial to economic gardening.

Christine Hamilton-Pennell of Growing Local Economies defines market intelligence as “a process that enables growth-oriented companies to access and use high-level technical expertise and strategic market information to explore new markets and growth strategies.”

This levels the playing field, providing small and medium-sized businesses the same kind of advanced market information, in the key areas of competition, consumers, market and industry, and social media, as highlighted/outlined by Hamilton-Pennell, that was once only available to large corporations. The additional the expertise and guidance from “qualified business coaches,” as Hamilton-Pennell puts it, helps small business then interpret the data and utilize it.

Economic Gardening in Oregon

Grow Oregon aims to assist a minimum of 40 local, traded sector, second-stage companies that have grown past the startup stage but have not grown to maturity.

Grow Oregon launched its economic gardening pilot program in March 2012 after receiving $300,000 in funding from the state. Those funds will be managed by the Oregon Small Business Development Center Network (OSBDCN) and last until June 2013, during which time Grow Oregon aims to assist a minimum of 40 local, traded sector, “second-stage companies that have grown past the startup stage but have not grown to maturity,” according to official Grow Oregon proposal/definitions.

“The Grow Oregon approach initially involves a comprehensive assessment of the participating business by a highly qualified team of business advisors to identify potential growth challenges and barriers,” Michael Lainoff, the State Director of OSBDCN, says. “As needs are identified, the advisors facilitate the implementation of growth strategies, including advanced market research, digital media development and enhancement, search engine optimization, and/or CEO mentoring.”

Lainoff says that at least 13 Portland-area firms will be served in the coming year, describing the structure of the OSBDCN network as “a well-established partnership among 17 community colleges, three state universities, the US Small Business Administration, and the Oregon Business Development Department. Statewide Grow Oregon will be principally delivered by three SBDCs: Portland Community College (PCC), Rogue Community College and Central Oregon Community College.”

Grow Oregon will be an extension of OSBDCN’s services enabling eligible firms to receive “in-depth advising and guidance provided by two-person teams,” Lainoff says. He also differentiates between the two programs, explaining, “Although OSBDCN provides basic market research assistance and digital media guidance and instruction to clients statewide who demonstrate needs for these services, Grow Oregon clientele will benefit from state-of-the-art market research resources (via OMEN MarketLink and other providers) and high-level digital media consultation.”

How To Get Involved

In order to participate, a business must employ 10 to 100 employees, have $1 million to $50 million in annual gross receipts, and be an Oregon traded sector company.

Your business must meet specific size (between 10 and 100 employees) and financial (between $1 million and $50 million in annual gross receipts) requirements as well as have demonstrated growth in three of the five previous years to qualify for Oregon’s economic gardening program. And you must be an Oregon traded sector company, defined as “businesses that do not compete primarily in a local or regional market or transact business primarily with household consumers.”

“Interested eligible firms can request further information and referral via email: groworegon@bizcenter.org,” Lainoff says, or you can find out more about eligibility and details on the services that Grow Oregon provides in its proposal  or on the OSBDCN website.

Local Successes

Economic gardening in Oregon has already seen success, most notably with Tualatin’s Keyscaper. Photo: Keyscaper.

Economic gardening in Oregon has already seen success, most notably with Tualatin’s Keyscaper. The company was part of the local Greater Portland Inc. economic gardening program in 2010, which helped the company find new distributors and increase sales by more than $100,000 per month while growing its staff by 50 percent in one year.

This success caught the eye of legislators and while Lainoff says, “It’s too premature to identify specific success stories as a result of Grow Oregon assistance,” there are “several firms statewide in the pipeline.”

He does point to three local success stories from the PCC-SBDC program: Mudshark Studios LLC, Protoco Enterprises LLC, and Social Enterprises, Inc. These three business “came to the SBDC at either pre-venture or early stage and, as a direct result of the assistance they received, they developed their plans, opened their doors, and/or expanded their staff,” Lainoff says. “They accomplished these outcomes via OSBDCN’s core advising and training services, prior to our award of the state’s Grow Oregon contract. In total, as a direct result of PCC-SBDC assistance, they have obtained $165,000 in debt and equity financing and hired 25 employees.”

And as Grow Oregon gears up, Lainoff emphasizes that it “provides an opportunity for OSBDCN to significantly enhance a well-established and successful service delivery model for our state’s small businesses.”

Supporting Small, Young And Fast-Growing Businesses

A 2010 study by the Kauffman Foundation found that “despite their relatively small numbers, fast-growing young firms generate approximately 10 percent of new jobs in any given year.” The “gazelle” companies, which tended to be smaller (less than 100 employees) and younger (three to five years old), were able to create about 27 jobs per year while the average U.S. firm added a mere 2 to 3 jobs a year.

With the top-performing 1 percent of these fast-growing young companies generating roughly 40 percent of new job creation, also according to Kauffman, these numbers show us the importance of encouraging new, small businesses.

"Without startups, our research shows that net job creation in most years would be negative, so policies that expand firm formation could increase both job creation and the number of high-growth firms," Dane Stangler, the study’s author, said.

Seeing how Portland-based small businesses were the only net job creators in the region from 1999 to 2009, an innovative approach like economic gardening is all the more appropriate to support entrepreneurship and existing businesses, especially those that are primed to make their next, or first, big move.

What do you think? Is economic gardening the right approach for job growth in Portland?