Monday, December 07, 2009
Posted by Cathy Belk
One of the speakers at last week’s Minority Business Early-Stage Capital Summit (which was amazing, by the way) was Deborah Shufrin from The Initiative for a Competitive Inner City (ICIC). Her 40 minute presentation was packed with facts about inner city businesses across the nation and as a comparison, those in the Cleveland market. (By definition, inner cities are urban cores with high poverty and unemployment rates, and low median income levels). For everything I thought I knew about this topic, this research blew me away. All marketers love insightful facts, so I thought I’d share the top 5 things that surprised me about revitalizing inner cities through entrepreneurship.
As background, ICIC studied the characteristics of companies located in the largest 100 inner cities which met the following criteria: 1) had at least 10 employees, and 2) had grown from $200,000 in revenues to at least $1 million in revenues in the last 5 years. There were 557 companies included in this study, which covered 10 years of data. (I’ll call them the ICIC 100 below).
It has made intuitive sense to me that entrepreneurship in urban locations is one way to create jobs for inner city residents, and should be part of the urban agenda for that reason. Here, the facts prove it out. So how can we encourage more entrepreneurship in inner cities in Northeast Ohio? The Summit isn’t just enough, and the JumpStart Inclusion Advisors are here but can’t do it alone. What ideas do you have?
Cathy Belk is the Chief Marketing Officer of JumpStart. She specializes in branding, marketing communications, and business management. She brings 16+ years of experience in a variety of marketing and business roles, but gets her energy from working daily with entrepreneurs and their growing companies.
A small number of early-stage high growth firms in the inner city can create dramatic job growth. The ICIC 100 firms created 63,000 jobs between 1999 and 2007. By comparison, 458,000 firms across all inner cities in the U.S. lost 49,300 jobs.
Place matters. It’s actually not true that you can create jobs anywhere and all locations benefit similarly. To create jobs for inner city residents, it is much more efficient to do so with companies located in inner city locations. ICIC’s data shows that to create 100 jobs for inner city residents, you need companies that hire 450 people located in the inner city, whereas you need companies that hire 850 people in the rest of the central city and 1,450 people in the broader region.
Entrepreneurs leading these companies are participating to their communities. 70% of the leaders of the ICIC 100 have lived in inner cities at some point in their lives, and 30% are living there now. They recognize the importance of creating businesses, and jobs, directly in these neighborhoods.
These entrepreneurs are highly educated! 77% have an advanced degree vs. 23% of U.S. small business owners.
These firms have higher productivity and lower turnover than comparable U.S. companies their size. This is perhaps not surprising because on average, they offer higher compensation as well as better benefits (healthcare, bonuses, and retirement plans) compared to U.S. firms overall. They also spend 2x as much on training.