Economic Research Leads to Business Outreach and Assistance for Small to Medium Sized Businesses

29 Jul 2015

Guest authored by Dan Hodge and Chris Sikes

While the Pioneer Valley has long been known for its large number of esteemed colleges and universities and a few large private companies and hospitals (e.g., MassMutual and Baystate Health), the region’s economy is largely driven by its small to medium-sized businesses.  Even more than Massachusetts statewide, the Pioneer Valley has a high concentration of solo entrepreneurs (self-employed) and small businesses (less than 20 employees).  So, the economic health and opportunities for growth for small to medium sized businesses is central to the economic vitality of the region.

A research effort over the past few years, first in the Pioneer Valley and most recently in the Hartford area, has developed a unique, first of its kind profile of small to medium sized business in the bi-state Knowledge Corridor area.  A similarly innovative aspect of this effort has been the collaborative work and partnership of many of the region’s leading economic development organizations.  In the Pioneer Valley, a consortium of partners that included Common Capital, the Franklin Regional Council of Governments, the Massachusetts Growth Capital Corporation, MassMutual Financial Group, the MA Small Business Development Center, Pioneer Valley Planning Commission and Western Mass EDC, pooled resources to commission the UMass Donahue Institute to conduct an analysis to: 

  1. Develop a profile of small to medium sized businesses (5 to 500 employees) in the region in terms of industry sectors, growth trends by establishment, and other key characteristics; and

  2. Complete an in-depth business survey of over 170 regional businesses to understand the factors most important in driving growth, the obstacles to business expansion, and the types of business and financial assistance most in-demand by firms.

Key findings from that study were:

  • The vast majority (80%) of small to medium sized firms in the Pioneer Valley had stable job growth from 2005 to 2010, a time period in which the region saw a 4.8 percent decrease in total establishments and 6 percent decrease in total employment. The large number of firms that experienced stable or positive job growth, along with many more that increased sales revenue, helps demonstrate the resilience of the economy during the Great Recession of 2007 to 2009, and the dynamic nature of small to medium -sized businesses.

  • Of the fast growing firms, 91% percent were small businesses with 5-99 employees.  The two employment tiers with the largest number of fast growing firms were in the 10-19 and 20-49 employment size range. 

  • The Pioneer Valley’s skilled workforce is a key to making or breaking a business: 45 percent of firms (and 54 percent of growing firms) named the availability of a skilled workforce as a major contributor to their success, while 35 percent of firms (and 41 percent of growing firms) cited the lack of availability of skilled workers as a major barrier to success.

  • The top five major success factors cited by businesses surveyed were: market demand for products or services, availability of skilled workers, management and leadership capability, access to suppliers and vendors and innovation, product and/or technology improvements. 

  • The top five major barriers to success cited by businesses surveyed were: the cost of doing business (labor, real estate, taxes, energy, etc.), availability of skilled workers, market demand, permitting/regulations, and cash flow management.

  • Cash flow; the need for new equipment, technology, process or efficiency; and obtaining financing are all mid-level barriers to success for all firms, and for all growing firms.  These issues provide some evidence of the need for financing assistance by regional firms.

  • The top five needs for business assistance among survey respondents were market and customer research, advertising and marketing, social media and website optimization, employee recruitment and training, and operations/strategic planning and management/leadership training.

Remarkably similar findings about business issues and industry mix were found in the metro Hartford area and collectively have been compiled as a summary Knowledge Corridor report recently presented at the 2015 State of the Region meeting:

To gain full value of this research, economic development partners have been following-up on the study findings and establishment-level data to do business outreach focused on helping local businesses expand.  For example, Common Capital acquired the complete dataset of business establishments in Hampden, Hampshire and Franklin counties and is doing targeted outreach focused on financing tools for businesses looking to grow in the area.  Common Capital has a twenty-five year old history of working with start-ups through their microenterprise program which includes access to targeted businesses assistance and capital.  In the past decade they have expanded their work to help small businesses grow by providing flexible financing, access to the local market, and industry specific business assistance.  In addition, the Pioneer Valley Planning Commission used study findings focused on the importance of the workforce to complete an in-depth Knowledge Corridor Talent and Workforce Strategy:

Dan Hodge is Principal of Hodge Economic Consulting and former Director of Economic and Public Policy Research at the UMass Donahue Institute

Chris Sikes is Executive Director of Common Capital