There’s continued momentum in Detroit’s burgeoning entrepreneurial ecosystem and there are many perspectives on what it means to the city’s revitalization efforts, including economic development and job creation. To this end, I wanted to gain insights from a business executive who has family roots grounded in Detroit’s entrepreneurial community.
David Girodat has a long history with the city of Detroit’s small businesses; his grandfather owned and operated a pharmacy at Mack and Devonshire in the 1940s. More recently, Girodat has spent the last 30 years at Fifth Third Bank, which has a regional headquarters in downtown Detroit – and serves the small business community in the city and throughout Eastern Michigan.
I talked to Girodat about his experiences in working with small businesses and entrepreneurs, and the vital difference they make in the community and to economic development.
Lee: Talk about the the impact of small business has on employment and new job creation.
Girodat: Small businesses are a massive source of employment. The Small Business Administration (SBA) reports that smaller companies employ 47.5 percent of the private U.S. workforce. According to 2012 U.S. Census figures, there are nearly 62,000 small businesses in Detroit and about 152,000 across Michigan.
And the younger the company, the more jobs created. According to the National Bureau of Economic Research, companies less than five years old create nearly 20 percent of all new jobs in the country. Next time a new salon, eatery or design firm opens in your community, expect several new job listings to follow.
Lee: Discuss the potential impact of entrepreneurship on various segments of the population and how it can contribute to leveling the playing field.
Girodat: Entrepreneurship helps build the middle class by giving lower income populations a chance to prosper more quickly and exponentially than they might as someone else’s employee. Small business ownership also gives women, minorities and other underrepresented groups the opportunity to create the job they want.
Women hold less than 5 percent of the CEO positions at S&P 500 companies. For women of color, that figure is even lower. Entrepreneurs, however, have the power to create their own career trajectory, bypassing widely reported hiring and performance biases at private companies and starting off at a higher rung on the corporate ladder.
In addition, entrepreneurs concerned with leveling the employment playing field have the autonomy to hire more underrepresented workers and women- and minority-led vendors. Some small business owners also make it a policy to employ a high percentage of veterans, disabled workers or former prisoners. Entrepreneurs also can establish corporate responsibility programs that directly benefit underserved populations—another decision they may have little to no control over when working for someone else.
Fortunately, Detroit and surrounding communities have efforts underway to support the underrepresented entrepreneurs, including the Detroit Development Fund’s Entrepreneurs of Color Fund and even Walsh College’s Entrepreneur Year forum for women.
Lee: How do small businesses stimulate the economy?
Girodat: Small businesses don’t just help line municipal and state tax coffers. Local workers patronize neighborhood restaurants and cafes for lunch and coffee breaks. They also eat, drink and shop at other neighborhood businesses on their way home from work. Likewise, local entrepreneurs tend to do business and partner with one another.
And a successful business district can increase local property tax values.
Lee: Are small businesses driving innovation?
Girodat: A small business hub can add ingenuity, creativity and a healthy sense of competition to a struggling, lackluster district in need of a jumpstart. Up-and-coming entrepreneurial hubs tend to attract Small Business Development Centers, grants, business plan contests, co-working spaces and other vehicles for business development. They also tend to attract more artists, entrepreneurs, and creative workers and thinkers. All these additions can help the entrepreneurial ecosystem.
Lee: What do small businesses do for the communities they’re in?
Girodat: A thriving business district can help foster a sense of identity, community and civic pride among residents. Plus, businesses committed to their surrounding community are more likely to get involved with local organizations (think Little League and Girl Scouts), charitable causes and politics. They’re also more likely to participate in parades, street fairs and other special events.
Lee: Do you think customers are treated differently when they visit small businesses?
Girodat: Yes. Small booksellers, shopkeepers, restauranteurs, dry cleaners and other retailers and service providers often get to know their best customers’ names and preferences. Shoppers and diners appreciate this heightened level of attention from entrepreneurs, which can strengthen their loyalty and trust in the business. As a result, local businesses may enjoy a revenue boost from their most ardent supporters, especially around holidays and other special dates.
Lee: Do small businesses have any effect on the environment?
Girodat: Small business storefronts leave a smaller ecological footprint than big box stores and shopping malls. Having more small companies in the neighborhood cuts down on employee commute time. What’s more, local residents and out-of-town visitors can walk to Main Street rather than driving on the freeway to reach a shopping mall or plaza 10 or 15 miles away. There they can grab a bite to eat, knock a couple of Saturday morning errands off their to-do list and do a little shopping, all in one walkable business district.
The relationship between small businesses and their surrounding communities is a reciprocal, symbiotic one. Each relies on the other to thrive: small businesses shape the growth and identity of their immediate region, while community members directly contribute to the success of the small ventures in their midst.
Mark S. Lee is President & CEO, The LEE Group (TLG), MI LLC, and you can hear him Sunday mornings via radio.com and “In the Conference Room” on 910am Superstation.