A few months ago, I introduced you to different “types” or “parts” of economic development, including: 1) technology-led or oriented economic development, 2) small business and entrepreneurship oriented economic development, 3) workforce development, 4) business retention and expansion, 5) real estate development and reuse, and 6) neighborhood level economic development. I argued that any successful local or regional economic development strategy must include each of these six “types” or “parts”. Having already discussed technology-led economic development and small business and entrepreneurship oriented economic development, I thought that I’d take this opportunity to share with you some thoughts on workforce led economic development.

A discussion on workforce led economic development is particularly important today given the many different economic challenges we face in Nevada as well as nationally and internationally. As many of you probably have already noticed, there has already been considerable discussion about creating green-oriented jobs and jobs that can help build a healthy and vibrant state, national, and international economy. Let’s face it. The days of heavy manufacturing are over. And in the new “service-oriented” economy of today, we also find that service-sector jobs in retail, gaming, and tourism are simply not enough to provide people with a level of income needed to support a mortgage, a car payment, and sending your children to school. Workforce led economic development is not about creating jobs. It is about providing people with the skills and resources needed to build a career that can provide the individual with a level of income needed in order to live a comfortable and adequate lifestyle.

The International Economic Development Council (IEDC) argues that, “Increased global competition and technological change in services and manufacturing have resulted in a new mix of specialized workforce skill requirements.” According to the IEDC, “Workforce development programs seek to bridge the gap between demand and supply through skills enhancement of existing workers and/or improve basic skills of entry-level workers”. Unfortunately, most workforce development programs and initiatives concentrate too much on remedial skill development and do not aggressively seek to enhance, alter, and improve the skill sets (or human capital) of higher-skilled workers. In a nutshell, the IEDC has found that, “Providing the skills needed to obtain a job and addressing additional, often overlooked, issues such as childcare, language training, transportation, and housing, can increase the chances of the workforce of a community in seeking and retaining good jobs.” This insight helps us to understand that workforce development is a very complicated and very difficult undertaking for a community to pursue.

Successful development of a workforce development strategy has many individual and collective community benefits. High-pay and high-growth businesses and industries are usually attracted to areas where there is a plentiful supply of highly skilled and talented workers. Both Blakely and Bradshaw (2002) and Vijay Mathur (1999) found direct links between the number of high-pay and high-growth businesses and industries and the level of highly skilled, talented, and trained workers within a given community. They separately found that as the level of “human capital” (or the sum total of skills, education, training, and talent of a given workforce) increases within a community, the more likely it is that high-paying and high-growth businesses and industries will choose to relocate in those communities. They also found that in areas with high levels of human capital, it is more likely that high-paying and high-growth businesses and industries will be created in those areas. Now this information is probably not new to anyone. It stands to reason that the better trained the workforce of a community is, the better paying jobs the community is likely to attract. It also stands to reason that as more high-paying and high-growth jobs are created in a community, the better the local economic conditions will be.

Although most would automatically understand why a workforce development strategy is important, most would probably not know what a workforce development strategy entails and how a workforce development strategy can be employed.

The first step, according to Vijay (1999), is to think regionally, and stop thinking locally! Local economies operate regionally. Sometimes they operate across neighboring local municipal jurisdictions. Sometimes they operate across county lines. And sometimes they even operate across state boarders. Vijay (1999) has identified two primary “transmission mechanisms” or channels, through which “human capital affects the regional economy.” They are “direct channels” and “indirect channels”. Direct channels include: 1) technological change and innovations which make existing jobs obsolete and require significant “retooling” of the regional workforce, 2) entrepreneurship that directly implements new inventions and innovations, and 3) the diffusion of new inventions and innovations in existing or new businesses that are either attracted to the region or are “home grown” through new business start-up. Indirect channels are the “spillover effects” that help to encourage innovation and new business attraction and start-up. The indirect channels are visible through “positive feedback loops” between human capital, technology, and entrepreneurship. As human capital increases, new technologies are either learned or created. As these new technologies are either learned or created, entrepreneurs find new ways of introducing them to the regional economy. As new high-skill and high-paying jobs are created through the introduction of these new or learned technologies, even more jobs are created and this puts additional pressure on the regional economy to continually increase the stock of available human capital.

Both Blakely and Bradshaw (2002) and the IEDC have identified various “partners” who can help develop and implement a workforce development program. Blakely and Bradshaw (2002) identify the following groups, organizations, and partners:

• Job Training Programs: typically, these are nonprofit contractors who implement federal or state-supported training programs. These nonprofit contractors also administer and provide funds to businesses that provide their own “in-house” curriculum and instructors.

• Nonprofit Community Development Corporations (CDC’s): these CDC’s who have historically been involved in a variety of local economic development programs such as housing, social service, and other programs, are increasingly becoming more involved in workforce development and job training for various disadvantaged groups.

• High Schools: The high school still, for some odd-reason, remains probably the most untapped resource for growing the total potential of a community’s workforce. Teaching high school students through internships, business formation programs, and summer activities have been very successful in the few communities that have turned to their high schools for workforce development support.

• Adult Education Programs: These programs serve a very important roll especially when it comes to retraining a local and/or regional workforce. They include short-term but highly intensive workforce development curriculum designed to help adults “retool” their existing skill set to meet current industry demand for trained workers.

• Non-accredited Postsecondary Training Programs: Many training institutions are often associated with different industries and businesses that offer various “certificate programs” and are often run by business associations, unions, or equipment suppliers.

• Accredited Colleges and Universities: It seems almost silly to mention the important role colleges and universities play in developing a highly skilled and highly trained workforce. But it is important to note that colleges and universities serve as the bedrock institution in most communities when it comes to training individuals for a successful career in a seemingly endless array of possible industries and fields.

There are numerous components of any workforce development strategy – far more than I have the space here to discuss in any great detail. I have already hinted at a few by identifying above some of the major partners who can positively contribute to a successful workforce development strategy. What is needed is a regional economic development association or firm responsible for coordinating the efforts of these various partners. “Workforce Investment Boards” (WIB’s) have historically been the public-sector organization responsible for coordinating and administering the local and/or regional efforts of a community to create and implement a successful workforce development program. Some “historical” roles of these WIB’s have been, according to Blakely and Bradshaw (2002):

• Managing workforce training schemes, such as group apprentice schemes, adult retraining, and new training incentives.

• Offering business support services that increase employment.

• Developing and providing shared facilities for training activities.

• Operating general literacy and community education projects.

• Developing on-the-job training and work experience activities for young adults.

• Attempting to reduce discrimination in employment for disadvantaged groups.

A successful local and/or regional economic development strategy must include considerable and careful attention to the way in which a local community’s or region’s pool of available labor is trained and developed. The individual and community-wide benefits to having a highly trained and highly skilled workforce should be evident. Not only does a highly trained and highly skilled workforce attract new industry and businesses to a local community or region, but a highly trained and highly skilled workforce can also create new jobs by themselves through new business start-up and entrepreneurship. The greater the ability of a community or region to attract and create high-paying and high growth sector jobs, the greater likelihood that the community or region will enjoy longer periods of stable, long-term local and regional economic growth.

Workforce development strategies include a wide variety of partners and a wide-variety of approaches and techniques. Getting consistent cooperation across these various partners is difficult and the cost of these approaches and techniques can often be significantly high. But the benefit of a successful workforce development strategy translates into not only benefits for the individual worker, but for the entire community and region as well.

SBA Warns of Fraudulent Attempts to Obtain Bank Account Information from Small Businesses

WASHINGTON – The U.S. Small Business Administration issued a scam alert today to small businesses, warning them not to respond to letters falsely claiming to have been sent by the SBA asking for bank account information in order to qualify them for federal tax rebates.

The fraudulent letters were sent out with what appears to be an SBA letterhead to small businesses across the country, advising recipients that they may be eligible for a tax rebate under the Economic Stimulus Act, and that SBA is assessing their eligibility for such a rebate. The letter asks the small business to provide the name of its bank and account number.

These letters have not been sent by or authorized by the SBA, and all small businesses are strongly advised not to respond to them.

The scheme is similar in many ways to e-mail scams often referred to as “phishing” that seek personal data and financial account information that enables another party to access and individual’s bank accounts or to engage in identity theft.

The SBA is working with the SBA Office of Inspector General to investigate this matter. The Office of Inspector General asks that anyone who receives such a letter report it to the OIG Fraud Line at 1 (800) 767-0385, or e-mail at OIGHotline@sba.gov.

I thought that for my next blog I’d continue elaborating on different types of local economic development.  In my last blog, I talked about small business and entrepreneurial-led economic development.   Today, I’d like to talk about tech-transfer and technology-led economic development.  The International Economic Development Council (IEDC) defines “tech transfer economic development” as the “movement of a technology from one location to another”.  Technology can be “transferred” one of four ways:  1) data and information, 2) know-how or expertise, 3) right to make, use and/or sell, and 4) embedded technology that is contained in a piece of machinery or software.

A tech transfer and technology-led economic development strategy serves two basic purposes:  1) “Technology Commercialization”, to place new products, services or methods of production in the marketplace through existing companies and firms or through new companies and firms started around the development of a particular new technology, and 2) “Technology Development”, to place new or existing “off-the-shelf” technologies into existing businesses in order to enhance the competitiveness of a business or enable the non-technology-oriented business to develop new or enhance existing product lines, services, or manufacturing processes.

Typically, a local “tech-transfer economic development authority” provides a wide variety of services to encourage either “technology commercialization” or “technology development”.  When dealing with “technology-push forces”, new research that usually gets done by research institutes or local universities are marketed by the local tech-transfer economic development authority to private entrepreneurs and businesses that don’t even know they have a need for the new technology!  When dealing with “technology-pull forces”, it is the private entrepreneur and/or business that has a need for a new technology – usually a new product, improvement to an existing product or even the development/modification for new or existing manufacturing processes.  Usually, the local tech-transfer economic development authority will provide financing for new research at a research institute or local university that will focus on developing the new technology for the private entrepreneur or business.  In either case, the patent for the new technology is held by the local tech-transfer economic development authority and revenues generated from the patent’s use by private entrepreneurs or businesses is reinvested into new research in areas such as biotechnology, life science technologies, opto-electronics, computers and telecommunications, electronics, computer-integrated manufacturing, material design, aerospace, weapons, and even nuclear technology.

The difficultly in local technology-led economic development efforts lies in the trouble in classifying different high-tech and tech-oriented firms and businesses.  However, most “technology businesses” are either skill intensive companies or high-tech assembly companies.  A skill intensive technology-oriented company is “knowledge based” in that the company seeks to focus on the creation and/or effective implantation of new technologies.  Skill intensive technology-oriented companies have a high demand for a highly skilled workforce, high-speed data networks and access to transportation networks.  High-tech assembly companies are similar to “traditional manufacturers” and typically focus on the manufacturing of “tangible” and “real” products.  These high-tech assembly companies “put technology to work” in either the products they make or the manufacturing process.  High-tech assembly companies typically choose to locate near their target markets or supply sources, or near sophisticated transportation networks that allow them to access markets easily.

Various factors contribute to attracting high-technology and technology-oriented companies to a particular community.  These high-tech and tech-oriented firms like the presence of different and varied research institutions.  Access to capital is important especially for start-up high-tech and tech-oriented firms.  These firms also value high levels of support for entrepreneurial development in the community in which they choose to locate in and strive to achieve both state and local commitment.  High-tech and tech-oriented firms also need and want an educated and talented workforce.  For high-tech and tech-oriented firms choosing to move into a particular location, they do not want to spend a lot of resources on training an unskilled workforce nor do they want to spend a lot of money on moving the needed workforce from one community to another.  Start-ups, in particular, need an established workforce that is already educated and talented in various technology fields.

These firms also want an established technology infrastructure, which includes both the physical infrastructure and knowledge-based infrastructure.  Physical infrastructure can include such factors as fiber optic networks, technology incubators, connectivity abilities and even capacity for growth.  Finally, high-tech and tech-oriented firms typically want a high “quality of place” in order to attract an educated and talented workforce.  A high degree of diversity in all aspects of life including education, culture and other entertainment and recreation that supports different types of people at different stages in their life is also important to the high-tech and tech-oriented firm.  Housing and transportation are also important.

Right now you are probably thinking that there isn’t much a local tech-transfer economic development authority can do to help spur new technology-led economic development.  After-all, what can a local tech-transfer really accomplish when it comes to “quality of life”?  When it comes to the diversity of education, culture and other entertainment and recreation opportunities, most communities either “have it” or they don’t!  It’s not like the local tech-oriented economic development authority can really impact choices in entertainment all that much.  In general however, it is the responsibility of the local tech-transfer or tech-oriented economic development authority to coordinate and facilitate three concurrent activities, including:  1) technology development, 2) business development and marketing, and 3) financing.

In regards to technology development, the local tech-transfer or technology-oriented economic development authority might have the most direct influence.  In either the “technology-push force” or “technology-pull force” scenario, the local tech transfer or tech-oriented economic development authority serves as a “clearing house” for both the research institute/local university and the private entrepreneur/business.  In the “technology-push scenario”, new technologies are developed by the research institute/university and “transferred” via the local tech-transfer authority to the private entrepreneur/business.  In the “technology-pull scenario”, market demand by the private entrepreneur/business is communicated through the tech-transfer authority to the “best fit” research institute/university and then the newly developed technologies are transferred back to the private entrepreneur/business.  To accomplish this, the local tech-transfer authority usually provides financing for new research either directly or by funneling monies and donations from the private sector to the research institute and/or university.  If the local tech-transfer authority provides the research financing directly, the tech-transfer agency will usually hold the rights to any developed patent on the new technology and “sell the rights” to private interests.

During the business development and marketing activity, the local tech-transfer or tech-oriented economic development authority is responsible for coordinating and initiating the various activities involved with starting or expanding a business venture centered on the development of a new technological innovation.  Specific business development and marketing activities can include, but are not limited to, obtaining financial and personnel resources, analyzing existing market conditions, making informed market forecasts, developing advertising and marketing plans and strategies, developing pricing strategies and identifying potential distribution channels.

Financing remains one of the largest barriers to the implementation of a successful tech-transfer local economic development strategy.  Although the tech-transfer program itself is generally low cost, researchers and private entrepreneurs are always seeking new financing and funding sources to support new and existing research efforts and the actual development of new products, services and methods of production.  The local tech-transfer or technology-oriented authority must constantly search for appropriate financing sources for researchers and private entrepreneurs alike.

An excellent example of a successful local tech-transfer, tech-oriented economic development authority is Stanford University’s own “Office of Technology Licensing” (OTL).  If you get the chance, check out the OTL online at:  www.otl.stanford.edu.  Stanford’s OTL employs many of the tech-oriented economic development strategies already mentioned here including the support for new technology development, business development and marketing, and even provides financing to researchers and entrepreneurs alike.  In FY 2006 alone, the OTL reported a total of 518 “new disclosures” for new inventions discovered by Stanford University faculty, staff and students.  Nearly 91% of the 518 “new disclosures” resulted in income-generating patents held by the OTL.  In just FY 2006, licenses authorized by the OTL generated generally $61.3 million in revenue for the OTL which was subsequently reinvested by the OTL into new research efforts by Stanford University faculty, staff and students as well as directly into new small business high-tech start-up efforts.  The “Stanford Start-Up’s” program is part of the OTL and, in May 2002, the “Stanford Start-Up’s” program was responsibility for the successful development of nearly 100 high-tech, tech-oriented companies.

Tech-transfer and technology-led local economic development efforts are more “art” than “science”.  This may be some what paradoxical as “science” has everything to do with tech-oriented development!  You never know what the next “big thing” in technology will be but successful local support of the next “big thing” can lead to huge dividends for the local community that invests in it.  But in order to be able to invest in tech-transfer and technology-led local economic development, the right combination of organizational structure, local community resources and adequate financing must be made available in the short-term in-order to ensure long-term, stable local economic growth through technology-oriented development.

A recently released IRS study concluded that small businesses often over report deductions and underreport income. In many cases this is a result of the complexity of the tax code and lack of knowledge.

That’s where the new IRS e-News for Small Businesses comes in.

IRS e-News for Small Businesses offers small businesses and the self-employed a real time-saver. e-News is a bi-weekly newsletter that alerts them to what’s new, hot and important for small business owners to know. It’s quick to read, easy to subscribe – and it’s free.

e-News for Small Businesses is the IRS’s e-newsletter for businesses with specialized content consisting of:

• Important upcoming tax dates for small businesses
• What’s new for small businesses on IRS.gov
• Reminders and tips to assist small businesses with tax compliance
• IRS news releases and special IRS announcements
• Direct links to a variety of Web sites and resources
• Availability of IRS products, services, and training opportunities

Subscribe Now to IRS e-News

Businesspeople may also want to take a look at other IRS e-newsletters:

• IRS Tax Tips – tax information via e-mail from the IRS daily during the tax-filing season and periodically the rest of the year
• Retirement News for Employers – information about current developments and upcoming events within the retirement plan arena; issued periodically during the year

Back on October 14, I wrote a piece on whether or not economic development can help solve our current financial crisis.  In short, I answered “no”.  But I also argued that a comprehensive local economic development strategy could contribute to long-term, stable local economic growth.  I also wrote that any comprehensive local economic development strategy should and must consist of six general strategies, including:  1) technology led economic development, 2) small business and entrepreneur led development, 3) workforce development, 4) business retention and expansion, 5) real estate development and reuse, and 6) neighborhood level economic development.  I thought that it would be useful for those of you interested in local economic development to explore each of these six general strategies in greater detail over the next month or so.

I though I would start out by exploring entrepreneurship and small business-led economic development.  First, it’s kind of an obvious topic to start with for someone who writes a blog sponsored by the Nevada Small Business Development Center.  Second, I was also inspired to start with entrepreneurship and small business-led economic development after reading a wonderful op-ed piece published by Reno Gazette Journal back on October 19 and written by Mr. Dave Archer, CEO of the Nevada Center for Entrepreneurship and Technology (NCET).  The NCET was first formed in 2003 and, in a relatively short period of time, has helped small businesses and entrepreneurs start and grow their businesses across the state.  To anyone who is interested, I highly recommend that you check out their website at http://www.ncet.org/ to see what they are all about!

Small businesses and entrepreneurs can be, but are not always, the same person or the same businesses.   Mr. Archer, and others in the field of economic development, have argued that entrepreneurs differ from “traditional” small businesses in that the markets for the goods and services entrepreneurs develop and provide typically haven’t even been created yet!  They are risk takers!

Many owners of “traditional” small businesses decide to start their small business after a market has already been created for their goods and/or services.  The owner of a neighborhood coffee shop is reacting to a demand for coffee that many of us already have (myself included!).  The owner of a local neighborhood retailer is reacting to a demand for goods that already exists.  The owner of a local hair salon is reacting to the existing demand for hair cuts, perms and manicures.

Entrepreneurs are, as Mr. Archer points out, “typically risk-taking, forward-thinking people who have an ability to see far beyond the boundaries of ‘the box’ in assessing business-building opportunities”.  Because of their unique propensity to take risks, even in the best of economic climates, entrepreneurship-led local economic development strategies typically consist of three very specific and unique parts.  According to the International Economic Development Council (IEDC), these unique parts consist of:  1) technology assistance, 2) provision of business space (usually in the form of a business incubator), and 3) financial assistance.

Technical assistance generally consists of assistance in business plan development, aid with preparing grant applications (usually for those entrepreneurs who are involved in the research and development of new technologies), training and managing staff, applying for loans, financing, marketing and product development, improving the design of a product or the manufacturing process, and accounting and other record-keeping functions.  Depending upon the experience of the entrepreneur and the complexity of the good or service they hope to develop, it can take up to several months or several years just to provide the entrepreneur with “technical assistance”.

Small business incubators, or the provision of business space, for entrepreneurs can take years to develop.  The advantage of these incubators is that they provide the new entrepreneur with low rent, shared support services and even networking opportunities.  The downside is that it can take years for a local economic development authority to find the appropriate and required land to house the incubator, to secure the needed financing to build the incubator and it can take even more additional years to actually finish building the incubator.  There are short-cuts such as converting an old warehouse or rehabbing an existing factory, but even if you can get the incubator off the ground and open within a year or two, it still takes a lot of time for the entrepreneurs to move in, get settled, get to work and develop a new good or service to a point where it is ready for “mass production”.

Access to capital and financial assistance is the third way a local economic development authority can help in assisting entrepreneurs grow and develop their business.  A local economic development authority can provide low-interest loans, grants or even provide “seed capital” by putting entrepreneurs in contact with venture capitalists and “angel investors”.  In addition to these avenues of financial assistance, a local economic development authority can directly help an entrepreneur by helping the new business to generate funds from within the operations by reducing overhead costs (this usually requires the existence of an incubator), managing cash flows and assets, disposing of non-productive inventory and machinery equipment, collecting deposits or progress payments from clients, ensuring capital assets are being efficiently used, negotiating low prices from suppliers, leasing equipment and/or locations instead of purchasing them, and establishing “trade credit” with suppliers through consignment, installment contracts or longer credit terms.

Small business development and entrepreneurship-led development is a vital part of any local economic development strategy.  Small businesses and entrepreneurs, as Mr. Archer and the IEDC correctly point out, can positively impact local competitiveness, diversify a local economic base and stimulate local economic development.   Small businesses and entrepreneurs also serve as employers, creating new jobs and playing a very important role in hiring part-time workers and people just entering the labor market.  They serve as local tax revenue generators, helping to broaden the local tax base.  They are economic supporters in that they typically buy and sell locally, helping to generate income and opportunities for other local small businesses and entrepreneurs.  They are property owners and renters, helping to lease vacant space and even fill vacant downtown storefronts.  They are also providers of long-term economic stability in that, by definition, they are “homegrown” and have a “personal stake” in their community.

But is entrepreneurship and small business development “key” to an economic recovery, especially in the current economic downturn?  The short answer is “no”.  As I’ve tried to point out, both in this post and my post back on October 14, any local economic development strategy requires YEARS to be effective.  Small businesses and entrepreneurs in particular require years of investment to grow and develop in order to have a net positive impact on the local economy.  According to the IEDC, the majority of business start-ups (including traditional small businesses and even entrepreneurs) fail within the first 18 months of operation.  On average, only 40% of business start-ups survive the first five years of operation and only 10% will survive a decade!  Even as employers, the majority of small businesses and entrepreneurs offer their employees lower wages and fewer benefits than their “corporate counterparts” in the first couple of years because these small businesses and entrepreneurs need additional time to develop their goods and services and “break into” more lucrative markets.  Entrepreneurs in particular, because of their “cutting-edge” nature, may need additional time in order for the necessary markets to become available for their unique brands of goods and services.

The time needed to make small business and entrepreneurship development a success makes it a poor substitute for a short-term economic recovery plan and strategy.  That said, an economic downturn does NOT mean that we should abandon these small businesses and entrepreneurs.  In fact, they probably require even more support to just survive the current financial and economic crisis we are experiencing, both here in Nevada and across the nation.

The long-term pay-off of small business and entrepreneurship development is too large to ignore.  The long-term pay-off of this strategy has too much to offer to long-term, stable local economic growth to be shelved.  Our small businesses and entrepreneurs have historically served as the “back bone” of our local, and national, economy.  After all, where would we be if entrepreneurs such as Hewlett and Packard didn’t start their business in their own garage?  Where would be if it wasn’t for Steve Jobs and Bill Gates?  Can anyone really say that the world isn’t a better place because of the iPhone?  These start-up small businesses and entrepreneurs are now the employers of millions of people and have helped create a global network of economic linkages.  They are employers, tax revenue generators, economic supporters, property owners and renters and even providers of economic stability.  That said, we should not overly estimate their immediate short-term impact.  They may not be “key” to immediate economic recovery, but they are absolutely key to the long-term, stable economic growth of our local economy and our local community.

Despite the current financial upheaval both in Nevada and throughout the nation, entrepreneurs and small business owners still need access to capital to start or expand a business.  But, navigating the path from deciding a loan is needed to having the funds in the business banking account has recently become much tougher.

Not only have most all lenders tightened their underwriting guidelines in response to their own challenges in getting access to capital, many lenders are now only looking for outstanding business investment opportunities (that’s what a small business loan actually is).  The challenge for potential borrowers is to position themselves and their business (or proposed business) at the top of the applicant pile.

UNR President Milt Glick and our own Sam Males, Director of the Nevada Small Business Development Center, visit with KUNR Radio’s Dan Erwine to discuss how the economic meltdown is hurting small businesses in Nevada and the University’s role in assisting businesses.  This October 17, 2008 edition of KUNR’s Friday morning Nevada Newsline features call in comments and questions from listeners.

The program is archived on KUNR’s website.

No.

Okay, I know that’s probably not the answer any of you wanted to hear and it is probably a little too much “to the point” but the short answer is “no”, economic development can’t solve the current financial crisis.  Like many of you, I have watched the growing financial crisis over the past several months.  I have watched real-estate prices collapse.  I have watched the value of the US dollar fall.  I have watched as the “yo-yo” stock market lurches from down 700 points one day to up 900 points the next.  I have watched many of the largest global financial institutions fail and I have watched small businesses fail.  I have watched hard working small business owners lose everything and I have watched as even more teeter on the brink of ruin.

I decided to sit down tonight and write this blog amid this crisis largely because of an excellent op-ed piece I read in the Reno Gazette Journal back on October 5, written by Mr. Chuck Alvey, President and Chief Executive Office of the Economic Development Authority of Western Nevada (EDAWN).  Mr. Alvey wrote a magnificent op-ed piece that clearly outlines the role of economic development.  If you can, find it and take the time to read it!  As Mr. Alvey wrote, “economic development, as a practice, takes time”.  This is a breath of fresh air as politicians, pundits and everyone else scrambles to make promises they can’t keep and wild predictions based on little more than fear, panic and a smug sense of “knowing it all”.

Economic development does take time.  In fact, it takes generations and in the end, the job of economic development is NEVER done.  Many experts in the field of economic development, including Richard Florida, Edward Blakely, and Ted Bradshaw (all of whom have written extensively on the topic of local economic development and I strongly recommend them) argue that economic development is a constant, never ending process.  It is a tool used by communities to create jobs, enhance economic activity and provide long-term stable local economic growth to local communities.  I know that seems pretty vague and overly simplistic and I know that many people who are legitimately suffering right now want to hear specifics about how to get things back on the right track.  Unfortunately, we need to be honest.  Economic development is not overly specific.  Economic development is not a “cure all” for all that ails a local community.  Instead, economic development is a set of principals and strategies that are designed to encourage and stimulate the local and regional economy over time.

More “specifically”, economic development, as a set of strategies, is many things to many different people.  According to the International Economic Development Council (IEDC), economic development strategies could include technology led development (i.e. the support for the development of new technologies by research institutions and then marketed to private businesses for the use in new goods, services and methods of production).  These strategies also include small business and entrepreneurial development, workforce development, business retention and expansion, real estate development and reuse, and even neighborhood level economic development.  Still too vague?  Well, you wouldn’t be the first to think so.

There are a few things we can do to ensure that economic development is done “properly”.  The first is to think long-term.  The difficulty with government led economic development is that politicians and elected officials come and go.  They serve their elected term and ultimately and eventually, are replaced by “someone else”.  The policies and directions change.  Some politicians favor indirect support through cultivating a tax system which encourages new business development.  Some favor direct support through either cash subsidies or even the development of workforce training programs.  Some favor a mixture and some favor nothing.  In the end, government led economic development is ultimately short-term.  As one administration comes and goes, the policies and directions often change abruptly.  This ultimately means that it’s difficult to develop a long-term strategy the contributes to long-term, stable local economic growth.  Keep in mind the “stable” part of the statement.  For local long-term economic growth to be realized, the policies must be stable and predictable.

The second thing to do is to stop over-relying on marketing the local community to businesses and visitors in other communities.  Without a doubt, marketing a local community for economic development purposes is very important and should be part of any local economic development plan.  But, when it’s your only strategy, you’re much more likely to fail.  Remember, the other communities you’re marketing to will be marketing too!  They’re trying to get your businesses and residents to come to their communities and they aren’t going to give up on their own local businesses and residents that easily.  And remember, those other communities have a built-in advantage.  The businesses and residents in those other communities are already in those other communities.

This means that we should focus our efforts on growing our own, at-home businesses (small, medium and large) through a variety of business retention strategies while also encouraging new ones to grow.  Trust me.  As our own “at-home businesses” grow and as new ones are created, residents from other jurisdictions will be attracted to the local area naturally and existing residents will find greater opportunities for employment, entertainment and leisure.  Many researchers in the field of economic development have found that it typically costs 5 to 10 times more to recruit an existing business from another jurisdiction than it costs to grow and build upon local businesses and strengths.  In the end, you get more bang for your buck by investing locally!

Northern Nevada in particular has many local advantages.  But we also have many challenges to overcome.  Marketing and business recruitment will not, by themselves, overcome these challenges.  We need a much broader local economic development strategy that focuses on all aspects of economic development.  We shouldn’t give up entirely on marketing and business recruitment.  We just need to add to it.  This is going to take a long time to do and, quite frankly, it will never be completely done.  It will never be done because we live in a very dynamic world that is constantly changing and evolving.  Once we think we’ve gotten it right, I can promise to you that the “rules will change” and we’ll be forced to “reinvent the wheel” all over again.  As a free markets kind of guy, even I admit that markets are susceptible to failure.  I’m also a realist.  What goes up will eventually come down and sometimes we need immediate action.

But in these challenging times, economic development does have a very important role to play but it’s a long-term role.  It involves building upon local strengths through concrete and specific strategies.  Just listing a bunch of growth industries isn’t enough to contribute to long-term stable economic development.  In fact, it’s even a bad “first step”.  The first step should be simply identifying and appreciating our local advantages while recongnizing our disadvantages.  We have to commit resources to education, to the local development of new technologies, to the local expansion of small, medium and large businesses as well as to their retention.  We need to continue to support local real estate development and reuse.  Local economic development can’t prevent an economic downturn and certainly can’t prevent an economic recession.  Forty years ago many in Nevada thought that this state was “recession proof”.  We’ve been proved wrong before and will likely be proved wrong again.  When real estate prices soared in Nevada, no one thought the good times would end.  But they did.  And the role of economic development is to chart a long-term course that contributes to long-term, stable economic growth, building upon the local human and physical resources we already have in great abundance.

Change to be uneven around Nevada over the next 20 years due to a number of factors

The Nevada State Demographer’s Office, located on the University of Nevada, Reno campus, has released its population projections for 2008 through 2028. The projections are for the state and the counties. Overall, Nevada is projected to grow by more than 1.3 million or 49 percent over the next 20 years.

“Nevada will likely continue to outpace the national growth rate. The Census Bureau’s National Projections show the United States growing by 22 percent between 2007 and 2028 and Nevada’s growth rate is projected at 49 percent for the same period,” said Jeff Hardcastle, the State Demographer. “Even though Nevada is expected to grow over the next 20 years, there is uncertainty about near-term changes in our population.”

According to Hardcastle, of particular concern is the impact of new hotel projects opening on the Las Vegas Strip between now and 2012. There are approximately 32,000 hotel rooms in some stage of development to be added to the hotel inventory on the Las Vegas Strip. One possible scenario from modeling the Southern Nevada economy is that the net effect of these rooms may be more like adding approximately 7,000 rooms.

“This scenario may be reflecting a number of factors that include the decrease in real wages over the past seven years and accompanying decrease in discretionary spending, the increase of transportation costs, and increasing competition locally, nationally, and internationally in the gaming industry,” Hardcastle said.

Overall, Hardcastle noted change will be uneven around Nevada. Northwestern Nevada (Carson City, Churchill, Douglas, Lyon, Storey, and Washoe Counties) is projected to grow by more than 226,000 people.  Rural Nevada (Elko, Esmeralda, Eureka, Humboldt, Lander, Lincoln, Mineral, Pershing, and White Pine Counties) is currently experiencing mining growth and that may last through the next 20 years. There are some other projects in the beginning stages that might help some of these counties weather any mining downturn. Southern Nevada (Clark and Nye Counties) is projected to grow by more than 1.1 million people.

The projections are used in preparing the state’s budget and for other planning purposes. They were prepared using the Regional Economic Models Inc. (REMI) model which relates a county’s population and economy to other counties in the model and the nation as a whole. A draft of the projections has been provided to local governments and other interested parties.

The complete report is available by downloading the pdf.

The State Demographer’s Office is part of the Nevada Small Business Development Center at the University’s College of Business Administration, and is funded by the Nevada Department of Taxation.

Should I Blog? An Essential Question for Businesses Today.

The answer may very well be, “no.” Certainly for many, the answer is, “What’s a blog?” Fair enough. It’s quite normal for most business owners (especially these days) to be so busy working to keep their businesses running, they don’t have the time to keep up with the latest techniques for reaching out to new customers and clients. If you’re like many of our clients, however, you may have been saying to yourself, “I have to find a new way to develop more business, because the old ways don’t seem to be working as well these days.” Well, blogging is one of those “new” ways.

If the concept intrigues you even just a little bit, spend just two more minutes of your very precious time reading the list below to see if blogging is for you.

The 10 top reasons you should consider blogging for your business are:

1. Your business is in need of an extremely inexpensive, professional online presence that can be easily found by potential clients and customers searching for your goods and/or services on the Internet.
2. Your business has a product or service that is new to the market, that might need some explanation on what it’s for or how best to use it.
3. Your business offers a knowledge-based service.
4. Your business requires educating the customer in some way.
5. Your business desires to receive feedback from others for the purpose of improving the company’s products and services.
6. Your business offers a product or service that serves a special niche market that includes like-minded people with similar special interests.
7. Your business could use some good press or needs to counteract bad press.
8. Your website is more than five years old and/or has not been optimized for search engines.
9. You desire to create loyal trusted relationships with current and future clients and customers.
10. Your business has competitors that it needs to differentiate itself from.

If you would like to learn more about blogging, you can Google search blogs and learn more than you ever wanted to know about blogging.

Visit our website and check out the information on a Build Your Own Blog Site Workshop , or call me, Debra Deming at the NSBDC Reno office at (775) 784-1717 and make a counseling appointment to talk about your business. All our business counseling services are offered free so it can’t hurt.