Economic development as personal and community growth
by Peter Donovan
HASTINGS, MINNESOTA--For 20 years, Lawrence Belk has taught and coached gymnastics. He's managed gymnastics clubs, coached school teams, and been involved in every aspect of the sport. His dream has been to own and operate his own gymnastics studio.
Through an acquaintance, Lawrence was introduced to Ron Toppin, who is employed by the Hastings Area Enterprise Facilitation Program to offer free and confidential advice and coaching to anyone who wants to start or expand a business in the area. Lawrence told Ron that he'd like to start up a gymnastics studio in Hastings, but didn't know if there was a market, and didn't have enough money for the startup.
Says Ron, "we first spent quite a bit of time finding out whether a gymnastics studio could make it in a community of this size. We found out that there's a very good program in a community a little less than our size, they had 400 students, very profitable, and they owned their own 10,000-square-foot building now."
"So Lawrence decided there was a need. I didn't do anything on his business plan, all I did was make sure that he got a good one in place and in time. Then we went to a bank to try to get funding. The bank says there's no hard collateral here. What are we going to take back if your business fails?"
The plan was to rent a vacant building in the city's industrial park that had been used for truck repair. Ron and Lawrence went next to the owner of the building for an alternative form of financing.
"We said, 'look, you've got 8,000 feet of space, you want to have it rented, and over three years he'll pay you significant rent. Would you be willing to make a loan to this company, to help him get through that first year? He'll pay you interest and it will be paid back over the three years of the lease.'"
"So the landlord became the financing partner. That would never have happened if it hadn't been for a board member [of the Hastings Area Enterprise Facilitation Program] who suggested that we approach the landlord this way."
After tearing out some walls, repainting, electrical work, and remodeling, the Hastings Gymnastics Center opened for business in September of 1998. In two months, the center's staff of 12 had 160 students, which was the goal Belk had outlined in the business plan for Month 7.
Belk had managed gymnastics programs in the Twin Cities. "I made sure I got involved in every aspect. I took all my experiences, and figured out how I wanted my company to run, what was going to work best for me."
"He'd done his homework," says Ron. "He started meeting with the school system, looked around the community for where he'd house it. We worked together on how to get those final pieces to go into the puzzle. The whole thing rides on Lawrence, his training ability, his ability to get students to enjoy gymnastics. All I did was guide him on how to get some of the financial things put together."
"He has done a very good job of getting community people who were already excited about gymnastics to go out and advertise his program. Basically, they were driving somewhere else with their students, and now they've got a program right here."
"This is stage one. He's got the business started, he's starting to show enough students that this is going to be a profitable business, and then long-term, gymnastics creates enough student base that he'll be able to have his own building which will be made specifically for gymnastics. That will make a big difference in his program."
The school system has loaned equipment to Lawrence and now their teams do their workouts at the center. The schools are pleased because their janitors don't have to set up and take down mats and equipment every day. Brothers and sisters of the team members are becoming Lawrence's students as a result.
Students range from preschool to adult, six days a week. "The kids enjoy it," says Lawrence. "I love everything about it. The hours are long, but working for myself is something I enjoy. This has been my whole life goal. My heart was here."
"I couldn't have done it without the Enterprise Facilitation," he says. "It opened my eyes on a lot of things as far as the business aspect."
The Enterprise Facilitation concept
In the 1970s, Ernesto Sirolli worked in Africa for an Italian international development agency. His experiences caused him to rethink the concept of development, which he saw could not truly be imposed or imported from somewhere else. True development, Sirolli saw, was self-actualization or right livelihood-- "doing what in our hearts we know we ought to be doing."
In 1985 he pioneered his Enterprise Facilitation concept in Esperance, an economically depressed town of 10,000 in Western Australia. Sirolli provided free, confidential, and diligent guidance to people who were driven by their passions to establish new enterprises. "Entrepreneurs," writes Sirolli in his book Ripples in the Zambezi: Passion, Unpredictability, and Economic Development, "are irrational people who are propelled by inner feelings."
In order to make sure that the drive to change their lives came from people rather than from the program, Sirolli never went out and motivated people or recruited clients for his program. Things were slow at first, but by the end of the first nine months, 29 new entrepreneurial businesses had started or expanded in and near Esperance as a result of the assistance that Sirolli provided. After twelve years, the program had produced 400 businesses and 1,000 jobs, thus changing the economic fortunes of the entire community. Last year, 1,800 people contacted the Esperance facilitator about ideas they had.
Sirolli's approach differs from top-down or government-led economic development efforts, which have concentrated on infrastructure such as roads, telecommunications, and industrial parks. There is another leg to economic development, he has maintained, and that has to do with helping entrepreneurs with passion, drive, and creativity connect with the skills and resources to succeed.
"The key," he says, "is to find ways to let the community take responsibility for its own economic success. Enterprise Facilitation presents a social technology for allowing this to happen. It is the only way we have found to actually train people in the community to be responsive to the overall needs of entrepreneurs."
Lincoln County, Minnesota
In 1989 Sirolli was invited to Southwest State University in Marshall, Minnesota to establish an Enterprise Facilitation program, which he did in Lincoln County to the west with the help of local champions such as Joyce Dass.
In this rural and depressed county of 6,800 people, hundreds of projects developed in the first eight years, creating 140 jobs and retaining 80. The average cost to the program per job created has been under $2,500, a small fraction of the average cost of job creation through economic development authorities trying to recruit outside businesses.
"You work from the inside out--that's what I liked about this program," says Joyce Dass. She is a board member for the project, and some years later she also became a client, wanting to start a bed-and-breakfast business in her small community of Lake Benton. Facilitator Vince Robinson "walked me through the steps just like any other client: marketing, pricing, regulations, and the rest. With Vince, it was so much easier and quicker."
Nine years later, "we are now one community" instead of competing small towns, says Joyce. The economic development authorities work together instead of competing, and refer business startups to Lincoln County Enterprise.
Rural communities like Lincoln County, which has no stoplights, typically lose much of the younger generation to lack of opportunity. Joyce emphasizes that Enterprise Facilitation has enabled some young people who grew up there to establish viable businesses, and to come back and raise their families. "I believe in blossoming where you are planted," she says.
Vince Robinson has learned that "there is more ingenuity and creativity out there than I ever thought there was. Enterprise Facilitation is based more on psychology than business administration. It's person-centered, looking at the needs of the individual first."
In 1997 Nancy Larsen was hired as the Enterprise Facilitator for an eight-county area near the Badlands inhabited by 25,000 people. She has been a dairy farmer's wife and nontraditional student. Her job "has become a passion with me. Helping people identify what they love to do." She has had 130 contacts in the last 18 months, and 60 percent of these have followed through on some aspect.
"There are some that I've helped to a business plan, and they have decided it's not going to work. That's a success, too--to give time and thought to something before they give their finances, or their savings, or get down in a hole and lose it all."
"We don't tell them it's not going to work. They need to discover that for themselves. I'm a cheerleader, I help to direct them, but they have to ultimately make a decision."
Successful clients include a rancher who was searching for a different profit center and started a hunting guide service, and a movie theater that is helping to revitalize a small town. "We don't replace traditional top-down economic development, which is needed," says Nancy. "But so is bottom-up. It's helping people one-on-one."
How it works
Hastings, Minnesota is a mid-sized town on the Mississippi River about half an hour southeast of Twin Cities. The Hastings project was the first Enterprise Facilitation program in the U.S. in a non-rural area.
|Hastings, Minnesota, USA.|
"Hastings is a prosperous third-ring suburb," says Ron Toppin. "In the Badlands, it is really hard to get new business startups. But some of Nancy Larsen's clients have the same problems my clients do. And we're located in a supposedly affluent, economically developing area. So if some of my solutions work for her, or her solutions work for mine . . . We've started networking quarterly. If you care about the people, the people with the ideas, in both locations it's a matter of caring."
The Hastings project, which covers the east side of Dakota County, was initiated in 1996 by the local economic-development partnership, and it is supported and guided by a local board of directors. LaDonna Boyd, a board member who works for the electric utility, got involved because she was looking for a rural method of developing business. The project "is really filling a need. The business coaching has been very successful."
Lynn Olson, a board member who is CEO of the local medical center, says, "Traditionally, the economic development efforts I've been involved with have dealt with infrastructure building: industrial parks, tax-increment financing, and so on. This really taught a different way to build businesses--a way to build the people, as opposed to the infrastructure. The facilitator was the key to that. I learned what it takes to start up a small business, and it can be a daunting task."
|In Minnesota as elsewhere, a traditional strategy of economic growth is recruitment of existing businesses.|
"I'm a supporter of business development and responsible growth. What we said for a long time in Hastings, we had a lot of the essence in place but we didn't have anybody who could knit them all together for somebody, walk them through the steps of how to get a business started. What Ron has done here has become that glue that binds those pieces together."
"We have a very low unemployment here and a very stable employment base. The people who've come to our Enterprise Facilitation process aren't coming to us out of desperation. They are people who had a vision, who wanted to stop the job they were doing and start something new."
"The best growth in business comes from within. It's not trying to land that big fish from outside, which may take your incentives for 10 years and then leave. It's really trying to grow your existing businesses, and trying to create new entrepreneurs from within your community, who know your community and what it needs, and are committed to staying here."
"This kind of growth tends to be more sustainable over time. It's steady, it's from within, it's that 5-person business expanding to a 10-person business, it's that person who was working for someone else in the Cities who decides to branch off and do that business here and provide that service locally. It keeps the character of your community consistent."
"Hastings has its own community characteristics. People like to raise a family here, shop here, get their services here. The community wants to keep that. We don't want to become another suburb with a string of warehouses and tracts of housing. It is a community with a downtown, with a sense of history."
"What Ron helps do is identify the character of the town for people, what it lends itself to, and that kind of drives what businesses pop up here. It helps that Ron knows the space available and can match that up. He knows what business loans are available. That resource just wasn't here before."
Board member Steve King directs the Dakota County Economic Development Partnership. "It's revolutionary because it's bottom-up. I never did look at bottom-up economic development before."
"No one was reaching down and providing a free service to the little guy starting in his garage or his basement. If someone's really got the will and the desire, there is somebody there for them. It may not be that every person succeeds, but the ones who do are the ones that Enterprise Facilitation has reached. That's a new concept for me. It involves the community and it involves networking. That's a very positive thing."
Everyone agrees that the facilitator is the key person. He or she must be a good listener, diligent, sensitive, and consistent, and be willing to let the client make decisions. Training is provided by the Sirolli Institute, a nonprofit organization founded by Ernesto Sirolli to support the Enterprise Facilitation programs.
Typical costs to support, train, and hire a full-time facilitator are $55,000-$65,000 a year. The Hastings project is funded locally and by a matching grant from the McKnight Foundation. The board hired Ron Toppin as the facilitator. He owns a women's clothing store and has lived in Hastings for 20 years. He is relaxed, knowledgeable, and attentive.
"In the beginning," he says, "you're spending time building the network. Each board member introduces the facilitator to 10 resource people within the community." He estimates that 60 percent of the program's success depends on the facilitator, and the rest on the board. "I'm the person who is talking to the clients, but I draw on the nine members of the board for direction and guidance to help clients."
Says board member Dan Dibble, "When you get a group of people together with a diverse background (the board), you have a lot of contacts out there. A lot of it is getting the right facilitator that people feel comfortable with."
Michelle Jacobs, president of the Hastings Chamber of Commerce and also a project board member, says "when somebody is excited about starting a business, they may not know where to start." Ron Toppin's office is located right next to the Chamber.
"It's free and confidential," says Ron. "The facilitator has to wait. If you advertise or call clients, then you become the motivator."
"Even if I don't help a client start a business, if I can help them make a decision, I've been successful. These are clients bringing us their dreams. We have to be careful in the guidance we give them."
"I take off some of the blinders that they have, saying these are the steps. About 40 percent come back and work through the homework developed by the program. They build a team, investigate markets. About one in four of these actually does it."
He has learned to "listen for what the client wants, let them decide what is the best path. I've learned that a lot of people come with half-thought ideas. They have a passion or dream, but they haven't looked into it."
Ron often goes to the client rather than having the client come to him. When he does receive clients, he sits alongside rather than behind a desk.
He helped a manager of a building-supply store locate space for his own interiors business. They have just rented the front 4,500 square feet of a building. The owners agreed to give the new business a three-year lease with an option to buy. This way, the new business protects its expense risk in remodeling. Says Ron, "it was just getting people together, counseling both sides, not doing any of the legal work or the accounting work, but just saying think of the options, so they were negotiating from a position of cooperation."
An optometrist wanted to buy a business from a retiring optometrist. He didn't know how to present financial figures and projections to the bank so that he could get the capital to buy and expand the business the way he wanted to. "We were able to find out industry standards, so we were able to develop a cash-flow analysis for him to present to the bank."
"Even the ones who come with experience have never been through a business startup, incorporation, they have a fear of going to a banker and asking for money. Part of what I do is help their confidence build up. They've looked at two or three choices and they feel this is the best one for them. They've thought through their business plan, and asked others. If they're going to have an accountant help them do the books, I ask the accountant to help them prepare financial projections. Then discuss it with their accountant. If they've looked at options, if they've got a good strong plan, their confidence level builds, so when they go in to present their case to the financial resources they may need, they do a better job of presenting what they want to do. I think it helps out the business community, whether it be the banking community or financial community."
"Most facilitators would say, there's plenty of money out there, but it's mostly unavailable to startup businesses because they do not capitalize. Most banks need a one-to-one ratio of capitalization. Some startup businesses don't have $20,000 that they need to borrow. Some don't have the management ability, and yet they don't have enough money set aside to hire an accountant. We ask them, see if there's someone else in their sphere of friends who could do that. So they build a team without spending a lot."
City and county
Ron points to capital, appropriate space, and location as key factors in business startups. "Maybe your city or county is supportive of businesses with a number of employees moving in to the area. But they're not always as supportive of the local community businesses that are starting to grow within their community. So it's kind of like changing the way they are looking at it. We're all standing with our backs together looking out, to see where we're going to gather the people that are coming into our community. We need to be looking right inside our community. What's the building at 4th and Sixth being used for? What could it be used for? What can we do to grow a business in there? We need to look at the assets we have, and improve on them, instead of looking outside and trying to bring an asset in."
"That's part of the shift that's going on in economic development. I feel supported by the board and the community. It costs you more to bring in businesses from outside than it does to grow them inside your community."
"We have an economic development plan for our downtown area, for our industrial park. But that leaves about 80 percent of the community without a plan or economic development tools to be used. What we're saying is, we need to use the tools we have downtown and in the industrial park, but also create a plan and tools to be used anywhere in the community. Maybe they're financial, maybe they're fast-track development guidelines, maybe they're just zoning tools to create a reason for people to develop a business in any part of the community, and help them through the process of doing that. Right now there aren't the tools in place. It's 'let the developer do what they want, then we'll say by zoning whether it's acceptable or not.'"
"City and county government can do more. Don't just provide funds, because funds are a never-ending stream. Provide encouragement and maybe some guidance to help the people where they live. If they can do that, they're planting seeds instead of just taking in the benefits of the crops that are already there. For long-term growth, we need to continue to plant seeds each year. This company that had only one employee last year may have six employees at the end of this year because of encouragement. No big handouts, but encouragement. Part of it can be not making the regulations so hard, some of it is giving some guidance on where they should locate their business, making it easier for them to get in there."
"I think I've seen the effects of our city government being involved in this Enterprise Facilitation program. They're now more open to helping new projects take place within the community than they were in the past."
Michelle Jacobs agrees. "There's kind of a different focus now at the city in terms of how do we help or how do we better assist businesses looking to start up."
What is most rewarding, says Ron, is "hearing each person's story. It doesn't matter if it's a carpentry shop or a gymnastics studio. It's really rewarding to help them along the steps to achieving their dream. If a person is really passionate about that, we shouldn't put up hurdles in front of them. A lot of our communities today put up hurdles to slow down business growth, to slow down individuals from getting to the next step. If I can help take down a hurdle for a client, it really is rewarding."
A business expansion
Paul and Jaci Eischen have been building custom kitchen cabinets. They started with one employee and now have four. When they ran out of room at their present shop, without any space to show or market their cabinets, they went to Ron.
Jaci says, "Getting a context was primary. Ron found the right people to contact, and helped us develop our business plan. We explored leasing versus building."
Paul says, "I know how to build cabinets. Money management? Finding the land, dealing with the city? I didn't know what to do. Ron did a lot of legwork, forced us to slow down, helped us analyze, ran the numbers on lease versus build." Ron helped them land innovative financing from the builders who made up the bulk of Eischen Cabinet's clients.
Says Ron, "Enterprise Facilitation shows the steps, a staged path, so they don't go in all directions: (1) We want to expand. (2) Build rather than lease. (3) Expand the workforce. (4) How to manage employees. We gave them counseling rather than paperwork."
The Hastings Industrial Park was trying to sell land for $15,000 an acre, and it wasn't moving. The city developed a program where if a business wanted to move into a building and create jobs, they'll sell an acre of land for $1. "It's a great equity position for someone who wants to build there, if you can produce the jobs and the building within the time allotted." Now Jaci and Paul are building a new 10,000-square-foot shop and showroom in the industrial park. They will lease out the portion that they won't use right away.
"With Enterprise Facilitation, the price is right," Jaci says. "We would have stumbled. I feel we made all the right decisions. I think it's an excellent program. Every community should have one. There are so many things we never thought of. Ron's a business owner, he knows the problems. He has helped us make better decisions--for example, how do we interview and hire employees?"
"It's not just their business," says Ron. "It's their family, their community. That's the key to the Sirolli facilitation method. Don't let your clients try to do it just on their own. Help them build a team, a network of support that will help them be successful, instead of just starting with 'myself and my wife and we're going to make it successful no matter what.' Help them build a team and strategies that will work for them over the long term, not just in that startup period."