October 11, 2010
A Crain's Special Report: Where does small business fit in Chicago?
By Steve Hendershot | Crain's Chicago Business
Entrepreneurs love to dream; they are visionaries who can imagine
their ideas blossoming into multinational business empires. They also
love to complain; they are acutely aware of each external factor
standing between their actual businesses and the ones they envision.
As
a result, nearly all entrepreneurs have strong feelings about their
cities—positive, negative or a mixture. They know what they're grateful
for, they know what they wish they could change and they daydream about
what it would be like to run their businesses elsewhere.
We
asked area entrepreneurs and small-business experts what Chicago has
going for it as a launching pad for small businesses, as well as what's
holding the city back:
• A close-knit community of entrepreneurs.
Chicago business people know each other. Especially within a particular
industry, the entrepreneurs and employees of Chicago's small businesses
are likely to be on friendly terms and to share information if it's not
related to competition.
“Within (industry) categories,
everybody knows everybody. You ask someone, ‘Do you know this person?'
And they say, ‘Yes. Here are the 17 different ways I know that person,' “
Northbrook-based business strategist Carol Roth says. “With the amount
of (sharing) going on, people are brought in on new trends by osmosis.”
For
example, Ms. Roth says, Chicago's small businesses are ahead of their
peers elsewhere in adopting social-media strategies, in part, because
small media- marketing firms have popped up to fill demand from
advertising agencies such as Edelman and also because their success
stories spread quickly through the city's network of small businesses.
• A low appetite for risk.
Not every aspect of the close community is beneficial, however. Several
entrepreneurs noted that Chicago's business community has a tendency to
write off people with failed ventures even though plenty of successes
are the products of an entrepreneur's second, third or fourth effort.
“Risks
are necessary in building great businesses, and sometimes they don't
work out; we need to accept that instead of placing a stigma on
entrepreneurial risk- taking and failure,” says Brad Keywell, a
co-founder of Groupon Inc. and tech-startup investment firm Lightbank
Inc. “In other parts of the country, starting a business and being
successful is just as much a part of the culture as starting and
failing. You succeed or you fail, but either way you move on and do it
again. If you can get there, it's a crazy great place to be for
entrepreneurs.”
• Loyal, discerning consumers.
“Consumers in the Chicago market tend to be fairly sophisticated and
brand-loyal. Even in tough economic times, consumers here have become
more discriminating in their purchases, and that means that smaller
companies are excelling by providing customer service, quality and
personal attention; and in turn, loyalty is being built up from the
consumer side,” says Chuck Bailey, senior vice-president of operations
at BrightStar Franchising LLC, a Gurnee-based home health care provider
that was No. 181 in Inc. magazine's 2010 list of
fastest-growing U.S. companies. “I think that (trait) will transcend
changes to the economic climate and that smaller companies have an
opportunity to improve marketshare.”
The city also has a broad
range of consumers who cut across almost every demographic. As a result,
products and services that connect with customers here are
well-positioned to succeed elsewhere. And, conveniently, Chicago's
consumers are located in Chicago.
“It might be less expensive to go into business in Indianapolis
or St. Louis or Detroit, but the companies there just turn around and
try to sell into Chicago because of the potential here,” says Kelly
Cutler, president of the board of the Entrepreneurs' Organization's
Chicago chapter and CEO of Chicago-based marketing firm Marcel Media.
“Chicago is a hub, and small businesses have a huge opportunity to sell
here, as long as what they are offering is different and relevant in the
market.”
• Aldermania. Entrepreneurs
the world over are convinced that their particular municipality sets the
standard for high taxes and red tape. But Chicago, in part because of
its unique aldermanic system, really does stand out.
“Your
alderman can be your best friend. The regulatory processes here are so
complicated, and it's an advantage to have someone like that in your
corner to make calls for you. But it's also another layer of
bureaucracy,” says Elizabeth Milnikel, director of the Clinic on
Entrepreneurship at the University of Chicago Law School. “It's a stage
in the system that's typical Chicago—you can't get anything done unless
you have approval of your alderman. And whether or not the alderman
expects it, a lot of people believe the only way to ensure approval is
to make a campaign contribution, which might not even be an option for a
cash-strapped small business.”
• The long arm of the law.
Entrepreneurs and experts appreciate local and state government's
overtures to encourage small-business activity, ranging from a recent
panel of tech business experts that Mayor Richard M. Daley convened in
Chicago, to the state sales tax holiday in August.
“I'm not sure
if small businesses saw more than a blip in revenues (from the sales
tax holiday), but they were pleased that it happened,” says Raman
Chadha, executive director of DePaul University's Coleman
Entrepreneurship Center. The holiday was an indication that government
“recognized that businesses need consumers to spend money, and that we
have to create incentives to get consumers to increase their spending.”
There
are plenty of ways in which local entrepreneurs would like to see
Chicago improve, but there also is plenty to like. Besides, there are
some advantages to working in a market that's not overrun by startups:
“I would love to get to the point where we have so many startups that
it's a liability because every good idea and every resource has been
taken,” Lightbank's Mr. Keywell says. “But we can handle more, which
means that those who take risks well will be rewarded.”
© 2010 by Crain Communications Inc.
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