Courtesy KSDC

By David Oetken

David Oetken, director of the Louisvikke
David Oetken, director of the Louisville Small Business Development Center

A New Year requires a new perspective and a reality check for Louisville entrepreneurs, business owners, employees, lenders, mentors and policymakers. Startups are important to our region’s economy, but they will not be the main drivers of growth. The local and national numbers tell the tale.

The Census Bureau found there are 27.9 million small businesses (defined as independent businesses with fewer than 500 employees) operating in America. Eighty percent are “non-employers,” or as we refer to them nowadays, “solopreneurs.” The big opportunities for growth, as identified by the U.S. Small Business Association are the firms between $150,000 and $200,000 in revenue. When accounting for net employment change among businesses smaller than 500 persons, 60 percent of new jobs created are from expansions or scaling up.

Locally, Endeavor Louisville, a nonprofit that supports high-impact entrepreneurs, discovered that new company formation in Louisville is strong, but those companies are not growing or adding jobs fast enough.  Per data compiled by Reference USA, almost 43 percent of businesses in Louisville have under $500,000 in annual sales, 21 percent have $500,000 to $1 million, and almost 19 percent have $1 million to $2.5 million. Those three brackets are where we need to focus efforts for the long-term betterment of the region.

But to succeed at pushing these companies, we must reprogram our views about entrepreneurship. Starting a business is only part of the equation. Helping a business grow is often more challenging.

Anecdotally, I meet many owners of smaller enterprises in all manner of industries who are not interested in growing. The challenges are substantial, and not everyone has an appetite for risk and long hours away from family, or other pursuits. I meet even more who have worked to expand their business, only to be forced to revert to old habits.

The scale-up is difficult to master, but crucial to our future success. Our goal in Louisville must be to create an entrepreneurial ecosystem that fosters the growth of existing companies.

Continuing, one-on-one support and technical assistance is irreplaceable in this process. Entrepreneurs looking to make the leap to higher growth must be self-critical in 2017.

Conducting proper business planning or a reexamination of an older plan is essential. Business owners benefit from having a formal, written plan. Prioritizing efforts as they relate to time and money, and setting clear, measurable goals makes this exercise worthwhile. After all, real business plans are crucial in securing Small Business Administration guaranteed loans and bank lending. Institutions will not approve lending without a well-written plan, and any significant growth will require additional capital.

Standardizing business processes are also an integral component of scaling up.  Experiences can be consistently reproduced through standardization. An employee handbook, with well-constructed on-boarding and training is a good place to start. In the early stages of a company, these structures seem unnecessary, but eventually they are musts.

If Louisville commits to a scale-up and startup mindset, we will be a force to be reckoned with for years to come.

About the author: David Oetken is director of the Louisville Small Business Development Center, funded in part through a cooperative agreement with the U.S. Small Business Administration, University of Kentucky, Louisville Metro and GLI. He helps businesses with one-on-one consultations at no cost to existing and potential entrepreneurs in the region. Oetken has owned, operated, expanded and sold several successful businesses in the food-distribution and publishing industries. He can be reached at [email protected]

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