Memphis must grow more small businesses to boost economy
FedEx's Richard Smith, board chairman of the Greater Memphis Chamber, recently offered his view on how to grow the Memphis economy. Mr. Smith’s grand idea was to focus on attracting large corporations to Memphis by using a new version PILOTs (payment in lieu of taxes).
The new PILOTs would exclude minority business contracting but incentivize large corporations to contract with minority- and women-owned businesses (MWBEs) if they want better terms.
I'd like to offer a competing vision for the future of economic development in Memphis.
As a commercial banker and previously a financial planner for individuals and small businesses, I say that the future of the Memphis economy is the small business.
Small-businesses are the lifeblood of local communities and employ half the country’s private workforce.
They represent 99.9 percent of all firms in the country, employ nearly 60 million people, have created 62 percent of the country’s net new jobs since 1993, and account for 46 percent of
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economic output in the U.S. according to the Small Business Administration.
Compared to the overall U.S. economy, small businesses in Memphis accounted for 29 percent or $43.3 billion of economic output. Publicly owned and non-classified companies accounted for 71 percent or $106 billion of economic activity.
Large corporations are definitely needed and currently make up the majority of the Memphis economy, but these same corporations are also pushing to rob city governments of taxes by way of PILOTs (payment in lieu of taxes), TIFs (tax increment finance), and other incentives.
While corporate America has been cutting jobs, employment at small businesses and start-ups has increased. Since 1990, as bigger companies cut 4 million jobs, small businesses added 8 million new jobs, according to the U.S. Small Business Administration.
Small businesses also operate locally, which gives them a strong preference for hiring local people.
Big corporations often move into new territory with a team already in place, which can improve a city’s pop- ulation, but nothing drives new job growth in a region like more powerful small businesses.
Look no further than Austin, Texas. The Texas capital recently was named the No. 1 place in America to start a business by CNBC, the top city for "small-business vitality" by American City Business Journals, and the top city for launching a technology startup by Sungard Availability Services.
Part of Austin’s formula for a small business surge is fairly well established: create an environment with the right pieces, including investors, good business schools, incubators, not too much red tape, and a critical mass of people with a business idea and big aspirations.
More and more, small business ownership is reflecting the diversity of the United States. As of 2012, 14.6 percent of small business owners were minorities, compared with 11.5 percent in 2007.
The greater diversity (people and entities) we have in the economy, the easier it is for the economy to withstand tough conditions.
Never forget that FedEx and AutoZone started small.
Williams Brack is a business development officer for First Tennessee Bank, and a community adviser for the Memphis and Shelby County Community Redevelopment Agency.
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