Entrepreneurial census – making it count

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New regional index provides a quarterly gauge for entrepreneurial activity and capacity in the New North

Story by Cheryl Hentz

SMALL BUSINESSES ACCOUNT FOR a significant number of new jobs being created, not just in northeast Wisconsin, but throughout the country. And, according to many experts, small businesses and entrepreneurship is where much of our future economic development lies. So naturally there is a vested interest in having a stronger, more vibrant, more resilient and better prepared entrepreneur and entrepreneurial community. To achieve that, though, one must know how far they’ve come and where their strengths and weaknesses lie.

To uncover those attributes, northeast Wisconsin’s regional economic development effort, New North, worked with the Small Business Development Center at the University of Wisconsin-Oshkosh to develop and maintain the Northeast Wisconsin Entrepreneurial Activity Index. The new index – which was initially conceived a few years ago – was unveiled in September.

According to Bob O’Donnell, director of the SBDC at UW-Oshkosh, the idea for the indexing project was born a few years ago when New North Executive Director Jerry Murphy asked the following questions: With all the resources that are being invested by various education institutions, governmental units, economic development groups, and so forth in promoting entrepreneurship in northeast Wisconsin, what’s the return on that investment? Has there been a significant increase in entrepreneurial activity in the region?

After identifying the need to measure entrepreneurial activity in the region, O’Donnell said they did a study to evaluate the various models they might use.

“We didn’t want to reinvent the wheel. So the entrepreneurial index we’re using is based on something that was developed at the University of Michigan at Dearborn. We studied different indexes and then after looking at that for a couple of months we were told that the State of Wisconsin was looking at developing a statewide index that would then be broken down by the various regional economic development groups, like New North, Thrive in Madison, and Milwaukee 7,” explained O’Donnell. “After a year of a statewide effort to look at this, nothing developed, so at the beginning of this year we took it back as a local project and a joint effort between the (UW-Oshkosh) College of Business and New North Inc.”

The first installment of the quarterly index has just been released, but it took the better part of six to seven months to actually collect the data due to the added challenges of trying to collect data regionally compared with statewide.

One such difficulty, O’Donnell said, is that employment data is updated more quickly on a state level than it is on a county level. Another challenge was the fact that new business formation data is not collected on a county basis, but by mailing address. So that required O’Donnell’s team to build a database to analyze all the information based on zip codes.

“Plus there were a number of things they could measure on a statewide basis for the Dearborn study that we could not measure on a county basis here, such as venture capital. That information’s not available on a county basis; it’s barely available on a statewide basis. So that was a challenge, too,” said O’Donnell. “It’s technical challenges basically, but there are certainly more of them in doing this kind of research on a smaller scale.”

Few models to follow

VERY FEW REGIONS IN THE COUNTRY have done this kind of indexing of entrepreneurial activity. There are only about 10 or 15 states that are doing such an analysis at the state level.

“The Kaufman Foundation for Entrepreneurship does a national indexing project with statewide numbers. They’ve said they’d like to see more of it being done on a state level, but right now a lot of the states just rely on the Kaufman Index,” said O’Donnell. “We looked at the index, too, but we couldn’t bring the numbers down to a regional level. And that’s important too, because Milwaukee and Madison are different than northeast Wisconsin. If we’re looking at state numbers, those numbers are going to be skewed by what’s happening in those two metro areas. We’re the first economic development region in the state to actually do this.”

Murphy and O’Donnell agree the kind of data garnered for the index is important so people can see if the taxpayers are getting a good return on their investment.

“There are two general economic development strategies. One is to try and attract large employers to a region. The other is to encourage the growth of new businesses or businesses that already exist in the region, particularly small and medium-sized ventures,” said O’Donnell. “I think we’ve reached the point in economic development now that we recognize that it’s extremely difficult and expensive, if not downright impossible, to attract large businesses to any area of the United States. That type of activity is happening overseas now.”

New business development encouraged

“SO REALLY, THE ONE ECONOMIC DEVELOPMENT strategy we have left and the best one that we could pursue is to encourage the development of new businesses from within our region – from the entrepreneurs that are looking to start businesses and grow businesses,” O’Donnell continued. “And some type of gauge of how good a job we’re doing in that effort has a direct impact on job creation and the creation of wealth that we need for investment in new products, new services, and new businesses. So this is kind of a leading economic indicator of economic development for the whole region.”

The index is a number of different perspectives of how to modify, change or emphasize strategies or tactics that get implemented and specific programs or services that are provided to the regional entrepreneurship audience, said Murphy.

“This index suggests that there is an entrepreneurial community in the New North region that has vitality and vibrancy. But it also suggests the places where we need to do more work. The good thing is we now have a barometer of how to measure our success in that effort,” said Murphy. “What I really like about the index and the implications of the index metrics is it will help drive the tactics that are being instituted by New North task groups and by individuals that serve small businesses and entrepreneurs. It gives us the ability to adjust the dial about where we’re putting our energies and emphasis, where there might be gaps, and so forth… It will hopefully help steer us in the way we try to influence and support the success of the entrepreneurial economy.”

O’Donnell said the index will be updated and released quarterly to the media. It will also be distributed to policymakers at both the local, state and regional levels to demonstrate the return they’re getting on their investment in promoting entrepreneurship and to point out any issues, such as a lack of access to capital being a major impediment to the growth of entrepreneurship in the region. The research will continue to be done by a staff person from the Small Business Development Center and a student intern.

Cheryl Hentz is a freelance writer from Oshkosh with more than 25 years experience. Her articles have appeared in several newspapers and magazines, both in Wisconsin and elsewhere in the country, and cover a wide range of topics, including business and economic development, minority issues, family pets and animal rights, finance, politics and women’s issues. Cheryl also does corporate writing for businesses and personal writing for individuals. She can be reached at 920.426.4123 or via email at cheryl.hentz@gmail.com.