Reliance on one industry for economic growth is never a good strategy, akin to “putting all of your eggs in one basket.” If that “basket” fails, the local economy collapses. This is why diversification is key, and entrepreneurship-led economic development (also known as ELED) can help with that. Diversification is a critical part of sustainable economic growth.
A healthy economy needs new businesses and the growth of existing ones to be sustainable through economic downturns and industry fluctuations. Many companies close due to bad ideas, mismanagement of resources, inability to adapt to market changes, and unforeseen circumstances like disasters. When businesses close, a drop in revenue generation is recorded, and the local economy loses money. That is why economic developers need to implement effective diversification strategies to not only attract established organizations and industries to the area, but to support new, local business startups as well as existing small businesses to keep them thriving within and contributing to the local economy as they grow.
Entrepreneurship can foster sustainable economic growth through job creation, and “shop local” efforts can encourage local spending, but an enabling environment must be created to fully support businesses through their various stages of growth. In today’s global economy, countries, states, regions, and cities must implement effective strategies to encourage entrepreneurship and innovation. Below are the top 10 strategies to build your community’s entrepreneurship-led economic development ecosystem.
Develop a clear vision and intent
You need a clear vision to develop an ELED ecosystem. This means identifying the strengths and resources of your environment and capitalizing on them to create a supportive ecosystem for entrepreneurs. Having a current resource compass that connects entrepreneurs to service providers and assistance, from ideation to scale, is critical. A needs assessment and a gap analysis is the first step toward mapping, expanding and refining the ecosystem so that it works cohesively. The ecosystem should provide resources–from funding, to mentorship, to education and community connectivity–with plenty of diversification and little overlap to work most effectively. And most importantly, the resource compass should be current and adaptable to the moving pieces within the ecosystem as services are added or providers change.
Understand the challenges
Entrepreneurs are bound to face challenges, especially during the early stages of the business. As an economic developer, if you’ve never started a business before, you may be unaware of the barriers an entrepreneur faces. One way to understand and show empathy for their plight is to shadow a local entrepreneur and take note of their challenges. Take note of how Government-backed agencies and private bodies can remove systemic barriers for entrepreneurs by relaxing some requirements.
Create an entrepreneurial mindset
An entrepreneurial mindset is critical for a budding entrepreneur and is also important to understand as a business support organization. One of the ways to instill this mindset in founders is to promote educational training programs and organize seminars that discuss entrepreneurship. Government and private organizations can also create a supportive environment for new businesses by mentoring them and telling them the dos and don’ts of running a business.
Build a strong network of support
New businesses or startups are fragile for the first five years. They need a strong network of support to thrive. You can develop a strong network of support for businesses by fostering collaboration with accelerators, incubators, investors, and various government and private agencies. These partnerships will help startups and small businesses navigate through the stages of a business life cycle conveniently, from ideation to scale-up. It will also provide the necessary support for small businesses and entrepreneurs looking for funding and access to networks.
Focus on partnership
No business stands on its own without partners. Create partnerships between investors, entrepreneurs, government and private agencies, universities, and other stakeholders to form a thriving entrepreneurial ecosystem. This will ease access to new ideas, resources, and market opportunities, leading to economic growth and increased innovation.
Add online services
Entrepreneurs need the information to implement smarter decisions and become more successful. Unlike big corporations that have the liberty to hire IT specialists and management consultants, entrepreneurs who are just getting started typically can’t afford to access the intelligence required to grow a business or test a business model. The government and private sectors can provide training and guidance to local entrepreneurs through cost-effective service solutions.
Provide access to funds
Capital is critical to the success of any business, especially in the early stages of a new business. Entrepreneurs require capital to turn their ideas into successful ventures. Responsible authorities and government bodies must build an environment that eases access to financial products through various sources, like angel investors, venture capital, grants, and loans. The government and private sectors can play a massive role in facilitating easy access to some of these resources.
Reduce barriers to entrepreneurship
Becoming an entrepreneur is challenging when you discover the complex regulations and policies involved in starting a business. Regulatory policies can affect economic development. The first step to ease the barrier to entry is to simplify or make the regulations more flexible for entrepreneurs to build their businesses conveniently instead of navigating through complicated policies. Tax incentives can also be provided for entrepreneurship.
Invest in digital infrastructure
The business world has gone beyond borders or physical locations. It now operates digitally to cater to customers’ services outside the business’s jurisdiction. An entrepreneurial ecosystem needs digital infrastructure. Therefore, you need to invest in digital infrastructure, such as high-speed internet. State and local governments can subsidize internet services to make access to the internet more affordable, especially for entrepreneurs in rural or remote areas. It can help entrepreneurs access resources critical for growth and innovation.
Improve and adapt
Learning is a continuous process, and ways of executing businesses evolve. Evaluate the current business models and the benefits of entrepreneurship-led economic development initiatives, and use them to improve your entrepreneurial ecosystem. It will drive more innovation and lead to economic growth and prosperity. One of the ways to keep entrepreneurs updated with new business technologies and models is through education. Economic development organizations can provide seminars, training, or sponsor an entrepreneurship event to help startup owners become acquainted with new business models and policies.
Building an entrepreneurship-led economic development ecosystem needs a multi-faceted approach and resources to support small businesses and entrepreneurs. By implementing these strategies, you can create an ecosystem that will result in economic prosperity and create jobs.
At Economic Impact Catalyst, our mission is to activate a world where there is equitable and inclusive access to entrepreneurship. We believe that entrepreneurship is the key to equitable and inclusive economic development. Our team’s main focus every day is to make it easier for founders to launch businesses in order to create wealth for themselves, for their teams, and for their communities. To learn more about our technology and market research solutions, built exclusively to catalyze entrepreneurship-led economic development efforts, book a call with us today.