Assessment

Building an Entrepreneurial Development System

When you have determined that your community is ready for entrepreneurship development, you need to turn your attention to building an Entrepreneurial Development System (EDS). In this section, we explore the nuts and bolts of assessment in building such a system. But first, let’s focus a bit more on this concept of an EDS. The idea of an EDS is relatively, but not entirely, new.

A quick scan of cutting-edge recent work illustrates some examples:

• In our early work with the Rural Entrepreneurship Initiative in Minnesota, the idea of entrepreneurial support organizations (ESOs) emerged. ESOs were communities, regions or areas served by development organizations that provided comprehensive support for entrepreneurs.
• Erik Pages, President and CEO of EntreWorks Consulting, employs the concept of an entrepreneurial environment. He talks about creating an environment in which entrepreneurs can thrive, just as living organisms do in the natural world. When the environment is robust and healthy, it can support more life. He argues the same is true with communities, regions and nations, and the entrepreneurs they support.
• Patrick Von Bargen, CEO of the Center for Venture Education, employs the concept of entrepreneurial ecology, similar to that advocated by Erik Pages. He considers factors that can create a thriving ecology with high rates of entrepreneurship. As with ecology, there are keystone species. In entrepreneurial ecology, the keystone species is the high growth entrepreneur.
• Tom Lyons and Gregg Lichtenstein have offered another view employing a baseball farm system analogy. Their Entrepreneurial League System® (ELS) embraces this idea of a comprehensive, on-going system of support targeting entrepreneurs with different skill levels.
• Finally, Brian Dabson, Associate Director of the Rural Policy Research Institute and Co-Director of the RUPRI Center for Rural Entrepreneurship, in the landmark study by CFED for the W.K. Kellogg Foundation, Mapping Rural Entrepreneurship, employs the term entrepreneurial development system (EDS). An EDS is a comprehensive system of support for entrepreneurs with five key components:
  • Entrepreneurship education
  • Training and technical assistance for entrepreneurs
  • Capital access for entrepreneurs
  • Entrepreneurial networks
  • Entrepreneurial culture

Best practice about entrepreneurship around the world generally embraces a system of support approach. These systems are structured so that support focuses on the entrepreneurs or entrepreneurial team first and the business second. There is recognition that this is largely a human development strategy as much as it is an economic development strategy. Like public education in the United States, where educational access leads to an inherently stronger society and economy, the EDS invests in entrepreneurs who in turn build stronger communities and economies.

Successful entrepreneurial development practice generally embraces an asset-based development approach. Simply restated, asset-based development focuses on those assets that a community already has to create an entrepreneurial economy and society and builds from this starting point.

Our ultimate goal is to build an entrepreneurial development system that can encourage, nurture and support entrepreneurs. Given that the most strategic and effective way to build an EDS over time is through asset-based development, then assessment becomes critically important.

Why Assessment?

Knowledge is the foundation for effective action. The process of assessment enables a community to collectively discover itself and create the opportunity for action. The assessment process must be specific and clearly linked to building better entrepreneurial development strategies. This process must be (1) on-going and (2) quick paced.

Assessment is fundamental to fully understanding the assets present in our communities for energizing economies and societies through entrepreneurship. Most community planning processes focus on things, such as schools, streets and taxes. Most economic development planning processes focus on sectors, businesses and jobs. This information is important, but it does not give a community all that is needed to build a strong entrepreneurship strategy.

An entrepreneurship assessment needs to provide insight on four basic assets. To begin, we need a good understanding of our community and its economy. Most traditional community and economic development studies can provide this information. Insight on demographics, economic structure, businesses, income, jobs and trends are all helpful. Chances are this part of the assessment process has already been done, and much of this information is sitting on a shelf at the chamber of commerce, development corporation, county or city offices.

Next, we need to clarify what the collective expectations for community economic development are, at the stakeholder and community levels. It is vitally important to clarify what kind of community we envision and know what kinds of development outcomes are broadly supported within the community. Again, chances are much of this work is already done, but it may be necessary to dust it off and review it. Building a development strategy without a community vision is a formula for disaster.

Entrepreneurs are the key to an entrepreneurial development strategy. Therefore, the next assessment process focuses on the entrepreneurial talent present in the community. At this point, we are looking for people with the passion and desire to build better businesses and community institutions. Later in this section we will explore a step-by-step process for identifying, visiting and targeting entrepreneurial talent.

Finally, we need to take stock of development assets and build on traditional work in this area. Infrastructure, such as workforce, capital, buildings and water rates, are the foundation. A weak development infrastructure makes this work a lot harder. However, we want to explore the kinds of development assets that are particularly important to entrepreneurs and their creative development process. The presence of business services, mentors, resource networks, training programs and access to capital are very important.

Clarifying our development goals in light of our community’s entrepreneurial talent and entrepreneurial development assets gives us the building blocks for highly strategic and effective system development. Understanding the reasoning behind assessment is important, because many rural communities and regions are often reluctant to do additional surveys, studies and assessments. By doing sound assessment, however, we can build a strategic game plan that is more likely to achieve desired economic and social development results.

Earlier in this section we provided an overview of entrepreneurial development systems or EDSs. Next we want to explore in more depth the elements of entrepreneurial environment with a strong rural community grounding. This information is based on our extensive travels throughout rural America since 1999 and the resulting insights about real communities supporting their local entrepreneurs.

Elements of an Entrepreneurial Environment

The concept of an entrepreneurial environment is one that most rural residents can relate to. It provides a ready way to understand assets, identify where the gaps are and set priorities for capacity building. As you review this information, start reflecting on where your community is exceptionally strong and where you think additional work needs to be done. Steve Buttress, former head of state economic development agencies for Nebraska and Florida, offers one of our favorite definitions of economic development:

Economic development is a choice. It is willed within an economy.
Economic development occurs when local leaders choose to identify, invest in, and develop their comparative advantages to enable workers, firms, farms, and industries to better compete.

This definition implies a very intentional approach to economic development on the part of community leaders. Each generation of community leaders chooses (or does not choose) to enact development strategies that they hope will create economic opportunities for the community and its residents. They choose to create an environment in which entrepreneurs can flourish.

Ideally, entrepreneurs live and work within a circle of support that encourages and assists in the creative process of venture development. Within this circle of support is a community environment that at a minimum recognizes and values the role of entrepreneurs (both private and public) in developing the community. Optimally, this environment includes specific initiatives or activities. Three elements constitute a community’s entrepreneurial environment: climate, infrastructure and support.

Community Climate
Local communities have little to say about macro economic issues such as trade, fiscal or monetary policies. The cost of money or regulations governing the export of food products is the purview of national governments. However, communities do play a fundamental role in creating a supportive and stimulating climate for entrepreneurship. A strong entrepreneurial climate can be characterized as follows:

AWARENESS of the potential role that entrepreneurs, particularly growth entrepreneurs, play in economic development.

RECOGNITION that entrepreneurs face many challenges including the likelihood of failure in one or more ventures. Communities must understand the essence of entrepreneurship and its dynamic nature of creation, growth and sometimes failure. Fair weather support for entrepreneurs will not create an enduring supportive entrepreneurial environment.

CULTURE that is accepting of the challenges that entrepreneurial failure and success can bring to social order. Rural culture can play a critically important role in supporting or limiting entrepreneurial behavior. In rural communities, a business failure may well mean that your neighbor does not get paid and your daughter is not invited to a birthday party. On the other hand, too much success may mean that your family becomes socially marginalized from the mainstream community. Rural communities by their very size are intimate and demand that residents contribute to social harmony. Too much failure, as well as too much success, can unbalance a rural community, creating strife and conflict.

ANONYMITY so that entrepreneurs have the space they need to succeed. To a traditional and socially ordered rural community, the behavior of an entrepreneur may seem odd or unacceptable. Rural communities, because of their small size and close personal nature, often cannot offer entrepreneurs the space and anonymity they need to be creative. While this may be difficult for the coffee shop crowd, it is one more element in creating a strong entrepreneurial environment.

QUALITY OF LIFE amenities are essential to meeting the private needs of entrepreneurs, their families, and workers. Entrepreneurs generally have families and, like everyone else in the community, they want good schools, churches, recreational facilities and entertainment amenities. Rural communities that are able to strike a good balance between local tax rates and high quality public services are best able to retain and recruit entrepreneurs. The low-cost community may have had the competitive advantage during the recruitment wars of the past generation, but entrepreneurship support requires a different decision-making calculus.

Community Infrastructure
Rural communities are often situated in high cost and low density markets or markets where access to diverse, high quality and affordable infrastructure is harder to develop and sustain. Government programs have worked to ensure universal infrastructure ranging from banking services to telecommunications. However, in the era of deregulation, rural America is increasingly challenged to keep pace with state of the art infrastructure.

REAL ESTATE. Entrepreneurs need different kinds of space in which to operate during different stages of development. In the early stages, an entrepreneur may need to set up the enterprise in a spare room in the home or a garage. Eventually, as the entrepreneurial enterprise grows, different kinds of space ranging from downtown storefronts to industrial park space will be needed. Availability of a range of real estate, or the ability to meet these needs as the entrepreneur grows the firm, is a critical element in building a supportive entrepreneurial environment.

UTILITIES. Water, power and telecommunications are fundamental utilities central to the needs of commerce. Like any business, entrepreneurial businesses require sound and affordable utilities to be competitive. Rural communities often operate or regulate these utilities and therefore have influence over their offering and cost.

SERVICES. Access to general business services such as banking, insurance, freight and accounting are as important to entrepreneurs as to any business. Massive consolidation of such services has changed and often reduced access to these basic services. Rural communities that are committed to ensuring local access to basic business services will create a more competitive entrepreneurial environment.

TAXES AND REGULATIONS. No matter where entrepreneurs operate, they will face a wide range of local taxes and regulations. The nature and rates of taxation and regulation can be a barrier to entrepreneurial development, particularly in the start-up phase of an enterprise. However, often the size of the tax or complying with a certain regulation is not as big a challenge as the administration of these policies. Clear information on what a business must comply with and one-stop servicing can ease the burden of red tape and create a more supportive entrepreneurial environment.

Here’s a final thought about infrastructure. To be equally competitive, rural communities must basically provide the same economic infrastructure that much larger and richer places provide. Successful communities pursue “real time” infrastructure development. Through their active communications with businesses and entrepreneurs, these communities have a good idea of what infrastructure investments are necessary to keep their entrepreneurs growing, and they act on those needs. This is one of the more powerful approaches to offset the size (or lack of size) challenge faced by most rural communities.

Community Support
A community can do a wide range of things to proactively support entrepreneurs. There is no single set of actions that a community should adopt. However, we find it useful to think about possible investments in three categories: basic, advanced and high performing levels of support.

BASIC SUPPORT. Investment in a basic support package is the starting point to building a broader and more sophisticated community support system for entrepreneurs.

• A community should address any issues related to creating a positive climate and strong infrastructure for entrepreneurs. The greatest entrepreneurship development program operating in a weak climate with poor infrastructure will come up short.
• Before public programs are created, a community should take stock of its current access to appropriate business services (e.g., legal, marketing, production, financial, accounting). Access to the right services is important. Remember, having these services within the community is great, but not necessary to ensuring access.
• A community should create a focus on entrepreneurs, both public (those who build communities) and private (those who build businesses). Creating a focus on entrepreneurs might include raising the awareness level of community residents and leaders about the role of entrepreneurship within the community. Going a bit further, a community might identify entrepreneurs and provide periodic recognition for their contributions to the community. Most importantly, a community should value entrepreneurs and their unique role in building the community and the economy.
• Entrepreneurs themselves indicate that the most important support they can receive is networking with other entrepreneurs and access to mentors. Communities can create regular opportunities that encourage networking and mentoring.

ADVANCED SUPPORT. Once the basic elements of a support system are in place, a community can consider a number of advanced activities to further energize entrepreneurs. Remember, more advanced support doesn’t mean that things should become more complicated for the entrepreneur. Massive directories and complicated pathways for entrepreneurs to access support can be counterproductive. We urge communities at this level to create some kind of simple organization (probably using existing organizations) to ensure that entrepreneurial support efforts are understandable, easy to access and seamless.

• A community might want to offer an entrepreneurial training resource such as FastTrac, NxLeveL, or REAL (Rural Entrepreneurship through Action Learning). These programs are particularly helpful to start-up and early stage businesses.
• A community may want to ensure that an entrepreneur has access to appropriate financial capital beyond that provided by local banking institutions. The development of micro lending services for smaller start-up entrepreneurs and revolving loan programs for growing and restructuring businesses are likely first steps in building a stronger financial capital system for entrepreneurs.
• A community may want to implement programs that increase local entrepreneurs’ awareness of and access to new markets. In rural areas particularly, entrepreneurs may need assistance to develop strong skills in identifying market opportunities and assessing the commercial feasibility of various opportunities. Sending delegations to conferences, trade shows and trade missions are all good ways to increase market awareness.
• Communities should consider programming that introduces youth (the younger the better, starting in kindergarten) to entrepreneurship. Young people are a driving cultural force in our nation and communities. Sooner or later, these same young people will form the backbone of our economies and communities. Creating opportunities for young people to engage in venture and community building is critically important.

HIGH PERFORMING SUPPORT. To be a high performing community that is optimally supporting entrepreneurs requires considerable community commitment and investment.

• Communities should consider strategies that offer customized help to the full range of local entrepreneurs. It requires a major community commitment to hire skilled entrepreneurial facilitators or coaches who work one on one with entrepreneurs.
• Sooner or later, growing ventures need more sophisticated forms of capital, including access to equity capital. Communities should consider building on current financing resources by creating area-based angel investment networks and pathways to more traditional venture capital resources (generally external to the community). As entrepreneurial deals emerge and grow, the ability to help these ventures meet their capital needs is key to keeping these businesses within the community.
• High performing communities find ways to integrate entrepreneurial opportunities into the core curriculum of their K-16 educational systems. Trying to engage youth in entrepreneurship via extracurricular activities is a real challenge and promises only marginal support. Quality time for entrepreneurship is a critical next step in building an entrepreneurial culture.
• Places with higher levels of entrepreneurial activity are often places with high capacity organizations dedicated to supporting entrepreneurs. These entrepreneurial support organizations (ESOs) are rooted in communities and provide a more comprehensive and sophisticated package of support that energizes start-up entrepreneurs and grows entrepreneurial growth companies.

Relatively few communities in rural America meet the standards for a high performing support environment. Places like Fairfield, Iowa; Littleton, Colorado; and Douglas, Georgia, come close. Many more rural communities are providing advanced support to their entrepreneurs and even more have in place the basic elements of support. We hope you can use this information to gain some insight into where your region or community might be. However, you will likely need to engage in assessment to gain a deeper understanding, highlight your assets and craft the optimal game plan. In the next section, we explore a four-part assessment process that can help you do exactly that.

A Four-Part Assessment Process

As described earlier in this chapter, the four-part assessment process includes the following activities:

• Developing your baseline
• Articulating your development vision and goals
• Mapping and targeting your entrepreneurial talent
• Identifying your entrepreneurial development assets

Let’s explore each part of this process in detail.

Part I. Developing Your Baseline
The baseline assessment is an important first step. In many ways, it provides the overall context for building a community entrepreneurship strategy that makes the best sense. Most of the time, this is review work. Many communities have multiple economic and demographic studies already on the shelf. Local universities and state/regional development agencies have much of this information. As a first step, we urge you to review these reports and pull out information that would be helpful to building an entrepreneurship strategy.

The baseline assessment should include an understanding of these community elements:

• The community’s socio-economic profile, including some history of culture and tradition, particularly related to entrepreneurship; the structure of the local economy, including your Main Street businesses; any community specific information such as large numbers of Main Street entrepreneurs near retirement or the impending construction of a regional health care facility.
• Leadership and civic capacity, including an understanding of who are the champions for entrepreneurship and the capacity of local development organizations.
• Development capacity, an initial scan of economic development goals and where entrepreneurship fits, along with any specific tools or capacities for entrepreneurship development that exist in your community.
• Entrepreneurial talent, initial insights from knowledgeable leaders about the entrepreneurs in your community. While much of this baseline assessment will be review, it’s important to look at past studies with a new eye focused on entrepreneurship. Identify those aspects of your community’s economy that create particular opportunities for or challenges to entrepreneurs. You may want to put together some summary observations and share them with others in your community. Making a brief presentation to the chamber or to local government officials can help you gain additional insights about your local community that will contribute to developing your baseline.

Part II. Articulating Development Vision and Goals
Clarifying a community’s development vision and goals is an important step in this process. We suggest two key activities. First, have your working team review existing community studies and surveys where vision and goal information has already been compiled. Pull out those items that relate to building an entrepreneurial community. This information ensures that you build from earlier work. However, it is also important to give your community a chance to gain current insight.

Under Tools for this section, you will find Identifying Community Economic Development Outcomes, to help you identify what your community hopes to achieve, consistent with the vision and goals you’ve established. Start by summarizing the vision and goals information from previous studies. Remember, we’re building on all the good work your community has done already! Then you can use this survey in several ways.

Start with your leadership team and explore their attitudes, desires and thinking about development needs and goals. Then, engage your stakeholder groups—the folks you want on your team, and cannot afford to have off the team! These might include the local chamber executive, economic developer, local government officials, or editor of the local paper, among others. Finally, create some opportunities for broader community awareness building and engagement. You might consider conducting forums at civic club meetings, doing stories through your local media that include the survey or creating display boards for public places with surveys attached.

At this point, we have completed two important assessments. We have organized existing community and economic information to provide the context for strategy building. We have also revised our community’s vision and development expectations. We are now ready to undertake the third assessment—discovering entrepreneurial talent.

Part III. Mapping and Targeting Entrepreneurial Talent
Entrepreneurship is an American value, rooted in our culture. We see ourselves as entrepreneurial in our passion to create and our motivation to build. Everyone who is in business probably has some entrepreneurial traits. But most business people are not entrepreneurs. True entrepreneurs represent a relatively small segment of American society. Entrepreneurs are those who have a passion for creating and a capacity for growing enterprises. Entrepreneurial talent is rooted in motivation and capacity. Both are learned traits and can be developed, expanding the nucleus of entrepreneurs at the community level.

Every community has a range of entrepreneurial talent. This part of the assessment helps economic development practitioners and community leaders better understand the local pool of entrepreneurial talent. One way to assess the types of entrepreneurial talent present in your community or region is through the use of talent mapping. A group of informed citizens can begin to identify specific entrepreneurs based on the typology presented here. Once you’ve mapped your entrepreneurs, you can begin to target specific entrepreneurs (for example, aspiring or growth-oriented) for visitation. Visitation, employing a business retention and expansion model, can provide deeper insight with respect to entrepreneurship traits and enterprise needs.

There are five steps to mapping and targeting entrepreneurial talent:

STEP 1 – BUILD A TEAM. Pull together a team of folks who have considerable familiarity with the community, its residents and businesses. This team will provide the expertise for the entrepreneurial talent mapping work. Possible team members might include someone from the newspaper, local government, chamber of commerce, development corporation or bank.

STEP 2 – GATHER INFORMATIONAL RESOURCES. Before the team meets to begin the mapping work, gather various information resources that might help identify possible entrepreneurial talent. These resources might include the local business directory, telephone book or other directories of local business people.

STEP 3 – IDENTIFY ENTREPRENEURIAL TALENT. Once the team is gathered, we have provided Identifying Entrepreneurial Talent under Tools for this section to identify and categorize businesses within the main entrepreneurial talent categories. Use the Entrepreneurial Talent Checklist as a guide to classify local entrepreneurs on the worksheet that follows. Remember, an entrepreneur doesn’t need to meet all the items on a specific checklist to fall into that category. Use these characteristics as a guide in placing entrepreneurs. Use the Entrepreneurial Talent Mapping Worksheet to list as many entrepreneurs in each category as you can identify in your community. This is a first cut so don’t worry about exact placement. This list will be used for further targeting.

STEP 4 – FOCUS, FOCUS, FOCUS. Few communities or organizations have the capacity initially to work with all types of entrepreneurial talent. Focusing on those entrepreneurial talent groups that best fit your community’s economic development
needs and support capacities is important. Use the two-part Targeting Entrepreneurial Talent under Tools for this section to help with this targeting activity. Start by working through the Entrepreneurial Talent Pros and Cons Checklist to get a better understanding of some of the benefits and challenges of targeting different types of entrepreneurial talent. Then, use the Entrepreneurial Talent Pros and Cons Worksheet to create your own list of pros and cons for targeting each type of talent in your community or region.

STEP 5 – VISITATION. Once your group has focused on the type of entrepreneurial talent that you will work with, plan visits to each and every entrepreneur on your list. The RUPRI Center for Rural Entrepreneurship has developed interview and survey tools that can guide you (check under Tools for this section).

By working through these steps, you should have a good idea of who the entrepreneurs in your community are and what type of entrepreneurs your community should target initially as part of an entrepreneurship development strategy.

Part IV. Identifying Entrepreneurial Development Assets
Energizing local entrepreneurial talent requires a supportive environment that can meet the needs of entrepreneurs on a real time basis. The Entrepreneurship Asset Mapping Process is intended to help a community identify and mobilize elements of a supportive system and environment.

A three-step process is recommended that moves the community from discovery of what it has (as well as where the gaps are) to the beginning stages of building a system of support.

STEP 1 – SCANNING EXERCISE. The first step in this process is the scanning exercise. A facilitated focus group is recommended as the best way to get this step completed. You should recruit three to seven individuals with good knowledge of development resources available to the community. You can use the team you put together to map your entrepreneurial talent, but you should also consider including members from outside the community who may help you complete this step more effectively. The group should meet for 90 minutes to three hours (depending upon the size of the community). The Entrepreneurship Asset Mapping Tool provided under Tools for this section should be used to guide the scanning work.

We recommend that you start with the Entrepreneurial Assets Checklist and check off all the programs and resources available in your community and region. Then complete a worksheet for each of the main categories in the checklist. Start with “Programs” and proceed to “Business Services,” and then “Capital.” (Remember, you’ve already identified your entrepreneurial talent in Part III above.) Try to be specific and identify known resources that fit into the categories within the checklist. Ultimately, these identified resources can be organized into a resource directory that the community can use to trigger assistance for entrepreneurs once needs and opportunities are identified.

STEP 2 – DOCUMENTATION. Step two involves documenting that the assets identified during the scanning process really exist. It can also involve verifying the quality and capability of each resource. For example, the community may have sound attorneys, but their scope of service might not include specialized law such as intellectual property rights. The documentation process can best be undertaken as entrepreneurs are identified and visited, and as assistance programs are launched. This approach allows the community to focus on finding resources necessary to meet the immediate needs of its targeted entrepreneurs.

STEP 3 – SYSTEM BUILDING. Ultimately, entrepreneurs need and want a system of support. They do not want a directory or an alphabet soup of supposed resources. What they need and want are safe (confidential) pathways to those resources that can help them with today’s pressing challenges and opportunities. From the community’s point of view, knowing what resources exist to help your entrepreneurs puts you in a stronger position to be responsive to the needs of entrepreneurs as they emerge.

Additional Resources

The final step in completing the Mapping and Targeting Entrepreneurial Talent assessment is to visit entrepreneurs in your community. To help guide this visitation process, we have developed a number of tools or visitation protocols. In addition to the generic Entrepreneur Visitation Protocol that you can find under Tools in this section, there are tools for you to use with entrepreneurs engaged in different types of businesses:

• Tourism Related Visitation Protocol
• Transfer Business Visitation Protocol
• Growth Business Visitation Protocol

We invite you to use and adapt these tools with the entrepreneurs you visit in your communities.

The Center has more resources and can provide additional assistance to you as you support entrepreneurs in your community. To access Center Resources, click on our logo.