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We’re open for business: Small business starts are climbing in urban areas, particularly Detroit

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by Mark Lee, Neighborhood News Hub

Detroit is hot!

Yes, when it comes to entrepreneurship, it’s on a roll with new businesses sprouting up across the city.

Mark Lee

Mark Lee

According to a recently published report, nearly two dozen restaurants, stores and service businesses have opened in Detroit’s Midtown neighborhood over the past year, and at least a dozen more are on the way in the coming months across the city.

For example, in January 2014, ex-Detroit Lion and Detroit-native Ron Bartell opened Kuzzo’s Chicken & Waffles in the Avenue of Fashion on Livernois in Northwest Detroit.  Since then the restaurant has experienced long waits and excellent neighborhood support. As a result, Kuzzo’s has hired 20 employees (mostly from the surrounding neighborhood) and is looking to expand and hire more.

“Livernois Avenue, specifically, the Avenue of Fashion, is a hidden gem in the city,” Bartell says. “I felt the area had long been overlooked and underserved. So much of the revitalization talk regarding the city centers is in downtown, Midtown, Corktown but often neglects the neighborhoods.”

RBartell_5113Minority-owned businesses such as Chicken & Waffles create jobs and fuel economic growth in neighborhoods and Detroit is fortunate to have an abundance of them. According to 2010 U.S. Census data, it is the fourth largest city in the country for minority-owned businesses with approximately 32,000.

“There’s a strong black business class in Detroit, and maybe other businesses will look at Detroit as a place for expansion,” David Blaszkiewicz, president, Invest Detroit, was recently quoted as saying.

With more Bartell-like businesses opening in neighborhoods across the city, think about the impact it would have on economic, job and neighborhood development.

According to the Bureau of Labor Statistics, small firms accounted for approximately 63 percent of net new jobs created between 1993 and mid-2013.  Since the end of the 2008 recession, small businesses accounted for 60 percent of the net new jobs created across the country. That recession was a key driver for entrepreneurial growth.  Flushed with buyout cash resulting from corporate downsizing, many ex-employees decided to take it and launch their own business. 

Women-owned businesses are also playing a key role in Detroit’s growth. There are approximately 242,000 women-owned small businesses in Michigan, making it the ninth largest in the nation and many of them are in Detroit.

Carolyn Cassin

Carolyn Cassin

Carolyn Cassin, president & CEO of the Michigan Women’s Foundation, says in 2014  the organization allocated nearly $600,000 to 32 women-owned businesses with funding ranging from $5,000 to $50,000. Nearly 90 percent of the allocated resources went specifically to Detroit-based, women-owned businesses.

“Non-traditional financing is available now to entrepreneurs because the traditional forms of financing just don’t work for everyone starting a business,” Cassin says. “They don’t have access to friends and family (with potentially the same levels of funding opportunities) or to any of their own personal resources.”

Therefore, the challenge is to ensure start-ups have access to capital they need for long-term sustainability.

The SBA’s Office of Advocacy reports approximately half of all new businesses survive five years or more and about one-third survive 10 years or more.

Why high failure rates?

Priscilla Archangel, president & CEO, Archangel & Associates, a Detroit-area consulting firm, believes there are several factors driving small business failure rates beginning with the lack of proper organizational leadership.  Additionally, she cites:

  • Lack of proper organizational leadership
  • Operational inefficiencies
  • Not having a succession plan

She suggests having strategic plan focused on business priorities, key strategies and specific steps to mitigate risks.

“You can’t have the mentality of building it and they will come,” Archangel says. You must have a plan that addresses key components focused on business sustainability.”

Other issues are:

  • Access to Capital: In post-recession 2008, many start-ups didn’t have the financial resources necessary for long-term sustainability. While there was short-term cash due to corporate buyouts, long-term financial planning to support a business was sorely lacking.
  • Long-term planning: A strategic plan may not have been properly developed and implemented effectively. The lack of an effective plan leaves a business with no direction and with no direction there is a higher probability of failure.

What can be done?

  • Promote industry-specific accelerator and incubator programs that provide education and experience using real-life business examples and assist in developing strategy-based plans focused on business priorities
  • Provide “hands-on” training opportunities with readily accessible business mentors
  • Enhance access to capital awareness opportunities
  • Focus on excellence every time

Small businesses continue to play a critical role in Detroit’s transformation. With investment dollars readily available to support the small business ecosystem, it’s clear the entrepreneurial spirit will have an integral part in Detroit’s future.

“I feel like if you want people to patronize and spend their hard-earned dollars with you, they deserve your best,” Bartell says. “I’ve changed things such as logos, colors and menu options countless times. My drive to be the best can wear on people.”

– This blog originally appeared in a new publication, Neighborhood News Hub, part of TheWeigh. Detroit Unspun is a partner in that venture.

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2 comments on “We’re open for business: Small business starts are climbing in urban areas, particularly Detroit

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