This article is an excerpt from the InFocus issue, Strengthen Your Local Economy through Economic Gardening, by Christine Hamilton-Pennell, published by ICMA.
Economic gardening is an entrepreneurial approach to economic development that seeks to grow the local economy from within. Its premise is that local entrepreneurs create the companies that bring new wealth and economic growth to a region in the form of jobs, increased revenues, and a vibrant local business sector. Economic gardening seeks to focus on growing and nurturing local businesses rather than hunting for “big game” outside the area.
Preparing a strategy for an economic gardening program can be complicated—there are many elements that must be developed first, taking into consideration unique community needs and available resources. Here are the seven steps to developing an implementation strategy for your economic gardening program to succeed.
1. Gain the support of local officials and other stakeholders
Governing bodies generally do not like to be handed a program and asked to vote on it. It takes time and effort to develop the support of elected officials for an economic gardening approach. The first step is to sit down with each official and other key stakeholders and listen to their concerns about economic development. Inadvertently or deliberately excluding a key stakeholder or someone on the governing board from providing input or participating in the decision-making process can lead to opposition and future undermining of your efforts.
2. Identify your community’s assets
Develop an inventory of community and business assets available to you. Ask yourself these questions:
- What human capital exists in my community? Human capital refers to “the unique capabilities and expertise of individuals that are productive in some economic context,” generally linked to formal education and experience.
- What skills and expertise can we tap into?
- What organizations can we partner with?
- What systems and organizations already exist to support entrepreneurs?
- Who is already motivated and passionate to make something happen?
- What cultural, recreational and other quality-of-life amenities do we have?
- What assets can we leverage outside our community?
Your list of assets should include the usual suspects such as economic development organizations, chambers of commerce, small business development centers (SBDCs), SCORE, workforce centers, universities and community colleges, financial institutions, and civic and social groups such as Rotary and Kiwanis. Other groups and individuals that can also provide value to your community efforts include:
- Public and university libraries
- Professional business associations and groups
- Community foundations and loan funds
- Microfinance organizations
- Elected and appointed officials
- Utility companies
- Successful entrepreneurs
- Council of governments
- Arts and cultural entities
- Healthcare agencies
- Tourism offices
- Immigrant and citizenship initiatives
- Continuing education and training programs
- And more
Look for individuals in your community who have skills and expertise in areas such as business coaching and mentoring, finance, employment/workforce development, research, marketing, meeting facilitation, organizing/managing projects, public speaking, legal support, and fundraising.
Perhaps the most important assets you can identify in your community are individuals who can become champions and advocates for your economic gardening project. They might be successful entrepreneurs who want to give back to their community or individuals within any of the groups or organizations listed above.
3. Develop a collaborative effort among resource partners
Once you have identified the assets in your community, explore which entities and individuals are likely to become resource partners in moving your economic gardening venture forward. Set up a steering committee that can guide and implement the project.
Bring key resource partners together to reach common agreement on goals and directions for the project, as well as to identify who will take responsibility to carry out each piece. If key resource partners are not willing to take ownership of the project, then your community may not be ready to launch an economic gardening project. You may have to step back and address the political and community development issues that are driving your locality.
4. Create a system-wide operating agreement
Because an economic gardening project generally involves multiple entities, it is important for the steering committee to develop a formal or informal operating agreement that addresses key operational and long-term planning issues. Questions that must be addressed include:
- Which entity or group will make program-level decisions?
- How will the program be funded?
- Who will serve as fiscal agent?
- Who will oversee and coordinate delivery of services?
- What role will each partner fulfill in the overall project?
- What resources will each partner contribute to the effort?
- How will the program be tracked and evaluated?
- How will a sustainable capitalization plan be developed?
5. Determine the target audience for services
One of the most important questions an economic gardening project needs to answer is, “Who will we serve?” Economic gardening programs around the United States take a variety of approaches, depending on their identified goals and community expectations. Some programs support all types of small businesses; others work only with growth-oriented companies. The important thing is to know which group of businesses you are targeting and why.
The first step in determining your target audience(s) is to inventory the available entrepreneurial talent in your community. What kinds of businesses are located there? What is their level of growth or maturity? Small local businesses generally fall into three categories: start-ups, lifestyle businesses (local consumer-based ventures), and growth businesses (offering goods and services to external markets).
A template for the entrepreneurial talent assessment process is offered by the Center for Rural Entrepreneurship (energizingentrepreneurs.org/index.php).
According to existing research, growth-oriented companies produce the greatest economic impact on a region, because they bring money into the community from outside markets. Many of these are so-called Stage 2 businesses, those that have between 10 and 99 employees and at least $1 million in revenues, although growth-oriented ventures can be found across the entire universe of companies. Growth companies also tend to be relatively young (less than five years old). They can range from companies with a local market that want to expand and reach external markets (often through e-commerce) to companies that have specialized expertise or knowledge and primarily sell to external markets.
Rapidly expanding, high-growth companies, sometimes referred to as gazelles, are a rarity in many communities, making up only 3 to 5 percent of all businesses. Most small localities do not have the technical resources to support the needs of high-growth businesses. These companies typically have the connections and technical assistance they need to grow, and they will do it with or without an economic gardening program.
Stage 1 companies—those with one to nine employees and less than $1 million per year in revenues—are by far the largest group of businesses in the United States. They collectively represent 28 percent of all employment nationally. Most of these firms are start-ups and lifestyle businesses, but some are growth-oriented companies, too.
Lifestyle businesses (the so-called mom ‘n’ pops) are the small retail and service businesses in every community. They do not usually “grow” the local economy by bringing in new wealth, but they recirculate the wealth throughout the local community. They are essential to what makes a local community a vibrant and desirable place to live and work. They can also provide significant political capital for an economic gardening program through their testimonials and support.
The “sweet spot” for most local and regional economic gardening programs to target is entrepreneurs who have started a venture that is between one and five years old and who want to grow it, regardless of its size. These ventures aren’t necessarily high-tech, but they have developed some sort of innovation in their product, process, or delivery method. They also have a potential or actual market outside the local economic region and create high-quality, living-wage jobs.
These nascent growth-oriented companies can provide significant economic impact and can benefit greatly from the services an economic gardening program typically provides. To focus on this target audience, find companies that meet the following criteria:
- Firmly established (in business for one to three years)
- Have financial statements that include profit and loss and cash flow numbers
- Have a clearly defined market
- Demonstrate revenue growth over time (even if the company has not yet reached the break-even point)
- Clearly intend to grow (as expressed in the desire to hire employees, expand operations or market area, or seek capital investment)
- Have a product or service that is scalable and preferably unique (i.e., cannot be easily imitated)
- Have a potential or actual market outside the local region.
These growth businesses will sometimes look like secondary businesses—local retail and service companies. The key is that they have both the desire and the ability to sell their goods and services outside the local area. For example, a local producer of specialized jams and jellies can sell their products over the Internet; a local coffee roaster using solar technology can wholesale their organic beans to coffee shops throughout the region; or a local printing company can provide on-demand printing and graphic services through their website.
You can also consider offering tiered services to different audiences. You might, for example, provide basic services to your lifestyle businesses and more comprehensive support to growth-oriented companies.
6. Develop a delivery system to provide services to the target audience
Steps involved in creating a viable delivery system include finding or developing qualified business coaches, providing or linking to technical assistance resources, locating entrepreneurs within your target audience, offering market research services, identifying financial resources, and partnering with other providers within and outside the local area. A local referral network of small business professionals and service providers is a crucial element at this juncture.
Having the capacity to deliver economic gardening services is a challenge for many small and rural areas. Rural communities must often develop a regional initiative and take advantage of government resources that are available to their local area. These include land grant university extension offices, small business development centers, and U.S. Small Business Administration (SBA) loan programs. Grant opportunities for rural community and economic development initiatives are available through federal agencies such as the U.S. Department of Agriculture and the U.S. Economic Development Agency.
Rural communities must have adequate transportation and broadband infrastructure to support local business logistical needs. They must also have an entrepreneurial climate—a business culture that supports entrepreneurship. They must provide quality-of-life amenities such as good schools, access to health care, and cultural amenities. They must also have access to a trained workforce that can meet local employment needs.
7. Develop a communication system to gain community support and buy-in
Make public presentations explaining the economic gardening program and gain the support of local media. Use entrepreneurs and your local referral network as advocates to deliver your message to funders, prospective clients, and the public. Build regular reporting functions into your ongoing activities.
The entire article, Strengthen Your Local Economy through Economic Gardening, published in ICMA's Infocus, is available for purchase in the ICMA Press online bookstore.