Growing Jobs by Ones and Twos; Second-Stage Companies Take Center Stage in Michigan
Rick Haglund, independent journalist and blogger, created a special report for the The Center for Michigan this week on the prevalence of second-stage companies in Michigan, how they’re transforming the economy and why the state may need to rethink its economic development strategy.
A second-stage company has between 10 – 99 employees and $10 to $50 million in sales. Haglund notes while Fortune 500 companies such as General Motors, Kellogg and Dow Chemical have laid off thousands of employees during Michigan’s recession, second-stage companies continue to grow. These firms employed 1.3 million workers in 2007 and comprised Michigan's largest employment segment. The 57,000 second-stage firms in the state added 137,249 jobs between 1993 and 2007 according to an Edward Lowe Foundation report.
At a Small Business Association of Michigan (SBAM) event April 29 The Michigan 50 Companies to Watch were recognized. This year saw an unprecedented number of qualified applicants — namely, second-stage businesses.
Mark H. Clevey, director of entrepreneurship & commercialization at Saginaw Valley State University, called the entrepreneurs behind these enterprises “energizer bunnies of economic recovery,” and has the stats to back it up.
“A survey of economic impact of the 2009 Michigan 50 on Michigan’s economy found: $405 million in total annual revenue; $99 million increase in total annual revenue; 1,530 employees; and, 296 net new jobs. According to the event sponsors, in just four years (ending in 2008), ‘these companies generated $1.1 billion in revenue and added more than 700 employees, a 126 percent increase in revenue and 87 percent increase in jobs. That translates into a 31 percent annual revenue growth and a 23 percent annual growth in employees. These companies project continued growth in the coming year, with a 35 percent revenue increase and 24 percent growth in employees compared to 2008. If their projections hold, these companies will have generated $1.7 billion in revenue and added 1,076 employees over the last five years – a 228 percent increase in revenue and 132 percent increase in jobs since 2005.’”
Despite the success of these businesses, Michigan’s leadership on has largely overlooked these enterprising gems. The state government has been focusing its efforts chiefly on recruiting and investing in four industries — life sciences, alternative energy, advanced manufacturing and homeland security — with a heavy emphasis on larger projects.
Only 14 businesses in this year's Michigan 50 Companies to Watch are in the state's four targeted industries, SBAM President Rob Fowler pointed out.
Greg Main, president of the Michigan Economic Development Corp. echoes this sentiment.
"We're not going to be able to recruit our way out of this," Main said, "We have to grow our way out of this."
Despite earnest support for second-stage companies in Michigan, the firms often lack the resources and knowledge to grow their business to the next level. Additionally, banks and investors are unwilling to offer loans or supply capital.
Fowler said a solution could be the concept of “economic gardening.” States such as Colorado, Florida and Georgia have already embraced this model and are putting policies in place to offer promising businesses the set of resources needed for success and prosperity.
As a state with such strong agricultural roots, I hope we can get lawmakers to realize the importance of nurturing the crops of businesses we have now.
It is great to see small businesses recognized for the economic engines that they are!
-Todd Palmer
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