While the author of a new report from the Urban Manufacturing Alliance says Milwaukee is “pretty squarely focused on manufacturing,” he also said there’s a perception those efforts are not aimed at growing smaller, less traditional businesses.
“The challenge it seems is where they were focusing those resources,” Mark Foggin said during an event at Gathering Place Brewing Co. “The perception among many of you was that it was really geared towards traditional, large scale manufacturing, so chasing after smokestacks, trying to attract the occasional business that has hundreds of employees or to retain the ones that are here.”
The report is one of six the UMA is producing on cities around the country including Baltimore, Cincinnati, Detroit, Milwaukee, Philadelphia and Portland, Oregon. Nationally, the work is supported by the Ewing Marion Kauffman Foundation, Bank of America Merrill Lynch, Google and Etsy, among others. In Milwaukee, the alliance partnered with the Greater Milwaukee Foundation and Bader Philanthropies to conduct surveys and focus groups.
The UAM is seeking to study smaller-scale manufacturers, often referred to as makers or artisans. In Milwaukee, the group gathered survey responses from 91 businesses with less than half making $100,000 in revenue. More than 60 percent had fewer than 10 employees.
“We’re talking about very small businesses,” Foggin said. “A lot of these are almost sort of proto-businesses. They’re not yet making enough money to support themselves. They probably have another job that pay their bills day-to-day and many are still in their homes.”
Foggin said he wasn’t suggesting a city shouldn’t try to attract new businesses but there are also many smaller firms having trouble scaling into larger ones.
“It could be, over the long term, a much more sustainable approach if different organizations and agencies thought about how they could take some of their resources and devote them not to the largest businesses, but to the many smaller ones where there’s potential for incremental job gains.”
He said local community development and business improvement organizations do seem to be filling some of the gap created by the focus on attracting businesses.
Surveys for the report were ongoing when Foxconn Technology Group’s plans for a $10 billion LCD plant in the state supported by $3 billion in state incentives drew renewed attention to government support for business site selection.
“I would remind everyone that it’s not an ‘either or,’ it’s an ‘and’ conversation,” said Katy Stanton, Urban Manufacturing Alliance program director. “Cities are never going to give up the quest to get a big employer, but I think at the same time as they’re doing that it is really important to try to cultivate those local, smaller businesses.”
The Milwaukee report found the top barriers to growth for those smaller businesses came in finding new customers, hiring new employees and getting access to capital.
Foggin said the research has found many of the business owners change their view of themselves the longer they stay in business. They start out thinking of themselves as a maker or artisan but are more likely to think they are a manufacturer or businessperson after a few years. Many of the entrepreneurs start their business because they have a passion for their craft, but are forced to undergo a mindset shift to move into production and commercialization, Foggin said.
“If we are marketing services to manufacturers, and the people we’re trying to target in the beginnings of their business lives are not thinking of themselves as manufacturers, we might be thinking about how we adjust the way we market those services,” he added.
Among all the firms participating in the survey, reaching new customers was listed as the top barrier to growth. Some expressed concerns that the Milwaukee area was not large enough to support their business growth while others said the area was oversaturated with vendors and venues for selling, cannibalizing the available customers.
Access to capital was the second most frequently cited barrier to growth overall and the top concern for sole proprietors. Foggin said the working capital to fund daily operations is a particular issue for smaller businesses.
“The working capital gap seems to be a huge challenge for folks that have successful products or a successful idea and are looking to scale,” he said.
Foggin said one thing that stood out about the results from Milwaukee was the degree to which organizations supporting smaller manufacturers are focused on doing so while advancing equity in the local economy.
“It wasn’t just about helping businesses grow because that will help tax revenue grow. It was we should do that for sure but do it in a way that provides opportunity for as broad of a segment of people in Milwaukee as possible,” Foggin said. “They had some real thoughts on what the challenges were in doing that and at least how to begin to start to address some of those problems.”
He also acknowledged that the report was limited by not having a representative sample of the smaller businesses as the data was collected from those willing to participate.
“It’s hard to say that this is representative as a whole, but it’s clear that some businesses default to the most natural, comfortable approach for trying to grow and hire in their businesses,” Foggin said. “They may need to be introduced to approaches that will help ensure that their business’ growth actually helps provide prosperity for a wider Milwaukee.”