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How important are small businesses to upstate ny


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How important are small businesses to upstate ny

  1. 1. Focus of Economic Development for Upstate NY Needs to Change By Michael V. Franchell, Mel E. Ross, Harvey Price The Upstate New York economy has been declining in jobs, wages per job, personal income and population since the early 70s and the outmigration of our population continues. Apparently our funding approach has not worked. Why have our economic development efforts failed? The economic develop approach has not included community small businesses and it has been too narrow in scope. In 2006 New York had the second highest amount of grant money in the U.S., totaling 4 billion dollars, and the results have yet to be seen. Somehow in the past 20 years creativity seems to have been captured by the Universities, and the billions of dollars pouring in as grant money was earmarked to create new concepts, new ideas and possibly new products. The simple fact is a University only has a few great ideas and the rest of the concepts will never create enough jobs. It is often the case where a brilliant idea lacks the pragmatic experience to implement the concept. would recommend a two-pronged approach of funding: both Universities and community small businesses. Historically, economic development efforts have avoided funding the largest segment of society that creates most of our new jobs and that is the community-based small businesses. The data from the SBA and the Kaufman Foundation clearly points out that the small firms and startups are the key to reinvigorating our economy. Small firms have a very important role in our economic growth: • Represent 99.7 percent of all employer firms. • Employ just over half of all private sector employees. • Pay 44 percent of total U.S. private payroll. • Have generated 64 percent of net new jobs over the past 15 years. • Create more than half of the nonfarm private gross domestic product (GDP). • Hire 40 percent of high-tech workers (such as scientists, engineers, and computer programmers). • Are 52 percent home-based and 2 percent franchises. • Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007. NY ranks 3rd in the value of exports by small businesses, over $58 billion. NY exports increased 16.8% in 2010. • Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited. NY ranked 3rd in patents awarded. • NY’s entrepreneurial income, despite the recession, increased 16% between 2000 and 2009. • Two million small businesses in NY, 7% of national total, are located in every region, community and neighborhood contributing to making NY a great place to live and conduct business.
  2. 2. • Small Businesses employ 51.5% of NY non-farm, private sector workforce in 2008. • New York's real gross state product increased 1.6% in 2009 while U.S. GDP grew just 0.7% • 537,838 minority-owned businesses and 594,492 women-owned businesses in NY Startups Create Most New Net Jobs: Kauffman Foundation Research Series Tim Kane 1977 79 81 83 85 87 89 91 93 95 97 99 01 03 2005 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 -1,000,000 -2,000,000 -3,000,000 -4,000,000 -5,000,000 Startups Existing Firms A manufacturing renaissance will reverse our economic trends. Manufacturing brings higher job multiples than any other type of industry, so we need to focus our energy and intellectual talent on creating more manufacturing jobs that will stimulate additional community jobs. Products made in China have an uncertain future. It is historically understandable that as China's middle class grows so will the social unrest grow, that unrest will disrupt their manufacturing base that has been dependent upon low paid employees. The perfect corollary is Lenin did not want the peasants to own farms because they would then become members of the bourgeois. China is creating many new members of the bourgeois and they in turn will demand more freedom. The issues of social unrest, higher labor and fuel costs, combined with mediocre product quality, create an opportunity for Upstate NY.
  3. 3. What Do We Change? Recognize the value of small business and fund entrepreneurs/intrapreneurs/enterprisers with GAP funding just as you would provide grant money for research. Use a not-for-profit such as the Community Based Business Incubator Center, Inc ™Incubator and make it wall-less so it can cover the entire geography of our area. Provide mentors who are real entrepreneurs with experience to back them up. Provide our local entrepreneurs/intrapreneurs/enterprisers with computers and appropriate software that you can communicate to so we can help them overcome the obstacles that are holding them back. Have a team of Entrepreneurial Advocates trained to help them move through the process of starting a company and charge them nothing. Accelerating economic development will happen when a combined approach of technology, communications and consultation is utilized. Mayor Michael Bloomberg summarized the concept:. "The essence of innovation is you don't know what you're going to build, what it's going to be called, how much it's going to cost." Summary Central NY can become the hub of new manufacturing facilities because it is close to major North American markets. From a transportation perspective our target cities for our locally produced products would be: Albany, Boston, Buffalo, Cleveland, New York City, Montreal, Philadelphia, Pittsburg and Toronto by ground transportation. For international distribution we can ship out of the ports of Albany, New York City or Boston. Upstate can be a thriving, growing region again because we have the land, the housing, the knowledgeable labor to create new innovative manufacturing facilities that will enhance the wealth of our local communities. What we lack is capital and vision to create the new economy and our next new job. The chart below illustrates how our concept will boost the economic development cycle in Upstate.
  4. 4. We can rapidly grow our new companies if we commit to the idea. If we continue to use the same ideas with the same people then you will get the same results. Sources (see the Office of Advocacy's Research and Statistics page):  U.S. Dept. of Commerce, Bureau of the Census and International Trade Admin.  Advocacy-funded research by Kathryn Kobe, 2007  CHI Research, 2003  U.S. Dept. of Labor, Bureau of Labor Statistics.  Slide Presentation by Jim L. King State Director of SBA.  Original concept: “The Virtuous Cycle” by McKenzie & Company Modified by George Huang, (  Harvard Business Review: Wanted: A First National Bank of Innovations by Edmund S Phelps and Leo M. Tillman
  5. 5. Michael V Franchell is the Executive Director for the Community Based Business Incubator Center, Inc™. Contact him at Mel E. Ross is the Chief Financial Officer for the Community Based Business Incubator Center, Inc™. Contact him at Harvey Price is a Board Member for the Community Based Business Incubator Center, Inc™. Contact him at