What about recruiting outside companies?

A reader stopped by my inbox to ask for my tips on attracting outside companies to your small town. I don’t have any.

I’m not criticizing him for asking me or for working on attracting a call center. Maybe that is a great move for his town. Maybe it makes sense when you have an inside line to a company, or you see it as a way to help your town reach another goal besides just “jobs.” But his question got me thinking about why I don’t have any recruiting tips.

Recruiting outside firms is not where I would spend my limited time, effort or money. 

Here’s why:

  1. If you can attract them, someone else can attract them away. 
  2. If headquarters and decision-making are elsewhere, that’s where profits are going, too. 
  3. If it’s part of a larger company, local service providers and subcontractors are unlikely to get much business from it.  

Small companies are better for your town than big ones. Better to grow 10 of your own one-person businesses than to recruit a 10-employee branch.

You think I made that up, don’t you? Well, it wasn’t me. Blame researcher Charles Tolbert of Baylor University. He found small firms are associated with positive factors like:

  • Higher average incomes
  • Lower poverty levels
  • Lower income inequality
  • Better health outcomes such as lower death rates from chronic disease. 

There was no such association with large firms.

Locally-grown businesses really do return more money to your community. Here are 10 new studies on that from the AMIBA.

Then there’s the Harvard Business Review saying “More small firms means more jobs.” 

  • “Regional economic growth is highly correlated with the presence of many small, entrepreneurial employers–not a few big ones.”  
  • “Industries with smaller firms and more startups enjoyed faster employment growth than other industries in the same city and than the same industry in other cities.”
  • “Cities relying on only a few large firms for employment experienced slower subsequent job growth than cities with an abundance of small firms.”

Get the summary

Then there’s research from the Federal Reserve Bank of Kansas City, that “focusing on the growth of existing small businesses and entrepreneurs can be a more productive and cost-effective strategy than recruitment of new businesses.”

  • Regions and towns with “more entrepreneurship have a higher gross domestic product.”
  • “Entrepreneurship helps raise incomes and improve the quality of life of citizens.  Research has demonstrated that regions and local economies with strong entrepreneurship bases achieve faster and more sustainable economic growth.”
  • “Entrepreneurs serve a critical role in the social development of communities, especially in rural areas and the urban core of inner cities. Entrepreneurs are committed to their community’s long-term growth and viability. Local entrepreneurs are likely to remain in their community and be committed to philanthropy and community service.”

Michael Shuman summed up what he called a 10-year-long debate over recruitment- versus entrepreneurship-based economic development with this, “We have won the war of ideas.”
Hear more about Shuman’s local-business-first view in this audio interview.

More than enough people are focused on recruiting outside businesses. Let them do it. Your town needs you to think differently.

Next week, we’ll talk about HOW. How do you grow your own businesses? Hit reply and tell me how you’re supporting local entrepreneurship, and I’ll share your best tips with everyone along with my opinions. 

Keep making your small town better,

PS –  Should small towns consider parking meters for revenue and to encourage parking turn over? What do you think?