Although Business Retention and Expansion (BRE) has unfortunately remained in the shadow of the more glamorous economic development practice of Business Attraction, BRE has shown it is more effective when it comes to addressing the fundamentals of growing and sustaining a healthy local economy.
The following are three key reasons why BRE is winning:
1. There are more local businesses than relocating businesses.
There are over 20 million businesses in the USA. Each year there are approximately 750,000 new or expanding (defined as growing to need an additional facility) businesses. (Source: US Bureau of Labor Statistics). The number of businesses relocating is tiny. Even a business attraction optimist would admit the site selection and business attraction market is much less than 5% of the business market that BRE professionals can serve. BRE can be for every business whereas Business Attraction is for a tiny sliver of businesses.
2. The local economy is driven by existing businesses, not new ones.
Local businesses are providing jobs, paying taxes that provide community services, generating economic multipliers, and, if they are an exporter of products or services, are bringing in money to your community. And they are providing them now. Not in the future. Not if they decide to locate in your community. Now.
3. The cost of retaining a customer is much less than acquiring a new one.
Numerous studies show that the cost of acquiring a new customer is between 5 and 25 times more expensive than retaining an existing customer. This is because you don’t have to spend the time and resources going to find and get a new customer and instead just need to keep your current customers happy. (Source: Harvard Business Review) Business Retention and Expansion is about keeping business customers happy in your community and it’s much more cost effective than business attraction.
Although Business Retention and Expansion is superior in many ways, it also has some disadvantages and limitations which need to be improved to elevate its status, broaden its reach, and reposition its leadership.
The following are three key things BRE must improve:
1. Marketing to policy makers and funders
BRE professionals need to better promote their work and show how it is a relatively more impactful and cost-effective economic development strategy. BRE pros are the hard workers doing the important labor that powers the core of economic development. However, they are poor at marketing.
One of the likely reasons that BRE is so poorly promoted is that ED marketing dollars are focused around external (to the local community or region) marketing to businesses that could move to the area to open a new facility from out of town. This allocation of marketing resources toward Business Attraction is evident in all of the out of town meetings, conferences, tradeshow booths, advertising, and even the research presented on EDO websites that make the case of why a local community is a good location for them to put an expansion facility or relocate. Compare that to the marketing that BRE gets. Just look around your own organization or that of the other local or regional EDOs in your area. It’s radically disproportional. BRE is not only not the focus, it is largely ignored from marketing activities. As such, BRE professionals have less marketing available to them to make the case that they are actually the relatively more effective economic development initiative.
Here’s an idea for how you can communicate BRE’s value to your managers, policy makers, and funders: send them a hyperlink to this article and share this article with your social network.
2. Expand BRE to more businesses using online services and computing
BRE is overly dependent on personal service delivery. As a result, only a small fraction of the total businesses can receive BRE services due to limitations in the number of staff and funding for BRE. Common BRE strategies include limiting service to strategic businesses and excluding the vast majority of all businesses. But remember that a key premise of BRE’s advantage as an economic development program is that it has a larger potential market of businesses to serve. However, if BRE programs are unable to expand to serve the larger market of businesses then it loses a key argument made by BRE advocates.
What BRE programs can do is expand services through computing and digital services. By doing so, it opens the possibility of scaling services in an unlimited manner. Through the internet everyone with a connection can be reached and access services every hour of the day. By leveraging online BRE programs using data-driven computing, local businesses can receive individualized services. Economic development organizations can now provide this using the SizeUp technology that the US Department of Commerce awarded it’s first place award for a business app that helps American businesses be more competitive, improve their success, foster prosperity, and create more jobs. BRE pros can quickly, easily, and affordably add SizeUp to their organization’s own website to expand business assistance services to all the companies in their area.
3. BRE professionals need promotions to the top of economic development
BRE pros need to get promoted to the top positions in economic development so that in those leadership positions they can ensure BRE as a priority.
A survey was submitted to the largest BRE Linkedin group with over 2,000 members asking them to name BRE professionals that have been promoted to CEO/President/Director of a prominent EDO. After 3 weeks there was not even one name put forward. In a related matter, the International Economic Development Council’s Board of Directors is made up of many economic development professionals with a background or current responsibility for business attraction. Because IEDC influences the direction of the profession, a larger quantity of its board leadership is oriented toward business attraction than BRE.
Until economic development professionals who have personally worked in BRE and experienced the benefits of a successful BRE program are in leadership positions, BRE is likely not going to be top of mind because it was never a previous professional priority for the organization’s leader.
In summary, BRE is a successful economic development program with built-in advantages over other initiatives. However, unless BRE programs are improved to address their weaknesses, they will not realize their full potential and neither will the economic developers working in BRE. The future of BRE is bright because the obstacles to success are achievable and the professionals working in this specialization are committed.
About the Author: Mark Hays has extensive expertise working with Chambers of Commerce and Economic Development Organizations across the USA implementing online programs to enable small business success. He is a sought-after thought leader in online small business assistance and speaking at National League of Cities, WACE, International Economic Development Council, C2ER, and state economic development conferences. Mark is Director of Business Development at SizeUp.