Disappointing News from the SBA

Keith McBride on July 06, 2017 in Ec. Dev. Challenges, Entrepreneurship

In 2015, the towns of Yarmouth, Freeport, Brunswick, Bath and Topsham cooperated to bring a new, SBA-funded business assistance program called “Scale Up” to the area. Amidst the $43.2 million being cut this year from the Small Business Administration is the elimination of Scale Up.  The total cost of the program is small -the equivalent of a rounding error in the federal budget, but the program brought tremendous value to Freeport and to Maine.  And for that reason alone, the news of its demise is disappointing.

But the program was also ground-breaking in a few additional ways.

First, because it brought wide access to a program for businesses that are often overlooked when it comes to support. The Scale Up program focused on businesses that were past the “start up” phase.  Everyone loves start-ups and entrepreneurs; their energy and belief in their own limitless potential is inspiring, and everyone loves to celebrate the courage of one who chooses to pursue something they are passionate about.  And this is why there is so much attention and effort directed at entrepreneurs and start-up businesses, even though they often fail and result in no actual economic growth.

But once these start-ups move past the adorable and inspiring first stage of life, the attention and support disappears.   This second stage is where a business has found that they have a successful business model, but now need to make hard choices on how to grow, whether that means to hire employees, buy new equipment, expand into new markets, etc.  In short, this is where young businesses have to invest in themselves, and that inherently involves risk.  It’s often cited that small businesses account for some high percentage of all job growth (see,  e.g.:  This article. Or this fact sheet.  And its a talking point that politicians love to throw around), but the growth doesn’t come from scores of brand new start-ups, it comes when those start-ups with viable businesses have survived their tumultuous first stage, and have moved into the second stage where the business expands.  And for the most part, at this stage they are either going alone, or paying for expensive consultation services.

Scale up was important because it provided free, expert analysis and consultation to help these businesses minimize risk and make the best decisions possible.  By focusing on these growing businesses rather than on seedlings, it had greater potential to have a greater impact on all the economic development benchmarks:  job growth, wealth creation, revenues, import/export balance, and on and on.

Communities in Maine don’t often collaborate.  When tax dollars are spent, residents want to know that the money is exclusively benefiting the area within their town lines, which is understandable.  But economic development doesn’t stay within town boundaries.  When a business locates in Brunswick and announces it wants to hire 1000 employees, this will have a positive economic impact on Freeport, Topsham, Bath, and all the other towns in the surrounding area.  Its to our benefit to make sure our neighbors are doing well.

Which is the argument that each town’s economic development professionals made to its decision-makers when proposing an effort to bring Scale Up to the region.  Of course, it didn’t hurt that it required zero additional financial expenditure from any of the towns, only the time and effort of economic development staff, which we all agreed was worth spending for the potential benefit.  Every town expressed enthusiastic support for the program, and my colleagues and I hit the ground running to make it happen.

It was an enormous victory for the region when the first Yarmouth-Freeport-Brunswick-Topsham-Bath Scale-Up class was brought together in 2015.

In less than 3 years, the program (statewide) helped nearly 100 businesses create new jobs, raise capital, and participants have won awards and other recognition from public and private business organizations.   I can’t help but wonder what it could have done with another three years, or more.

 

I’d be remiss without ending this by sending my thanks and appreciation to Gerry Brown, the Scale-Up program administrator for Maine, and to my counterparts in Yarmouth (Denise Clavette), Brunswick (Linda Smith), Topsham (John Shattuck), and Bath (Scott LaFlamme) for making this program a success, albeit an unfortunately short-lived one.