How can cities increase their local productivity and prevent decline? An Endeavor Insight report titled “How Cities can Identify the BEST Businesses for Local Economic Growth” found that developing BEST businesses is the best way to develop local economies.
So what are the differences between focusing on BEST Business and the traditional strategies for economic growth?
Traditional local economic development strategies tend to focus on supporting small businesses, increasing the financial and human capital in local regions, and attracting corporations to move parts of their operations into local areas. Despite the fact that 80% of cities use traditional strategies, there are great variations in the productivity generated by each city that are explained when BEST businesses are taken into consideration.
BEST businesses are defined as:
Big: Companies that grow to have at least 50 employees. They often grow to employ over 400 employees, pay higher wages, hire more workers from underrepresented groups, and generate more revenue than smaller businesses.
Entrepreneurial: Ventures created and led by local founders. They have the potential to create other local successes primarily by inspiring former employees to pursue their own entrepreneurial ventures. This creates a loop that inspires future generations of entrepreneurs to continue to grow their businesses in the local area.
Super-productive: Businesses that generate $100,000 in average productivity per employee each year.
Tech-Enabled: Firms that employ more STEM workers than the average business. Typically, these companies are knowledge-intensive and found in sectors such as advanced manufacturing, high-value research and consulting, software development, and investment banking.
Analysis of cities recovering from the 2008 financial crisis shows that top performing cities added 2.7 new BEST businesses per 100,000 residents each year from 2012 to 2016. In contrast, bottom-performing cities were found to only generate 0.6 BEST businesses per 100,000 residents in the same time frame. Percentage growth in GDP per capita from 2012 to 2016 was 4.4% on average for bottom performing cities and 6.8% on average in top performing cities. The difference is accentuated when looking at the growth in dollar amounts per capita with bottom-performing cities generating $1,637 per 100,000 residents and top-performing cities generating $3,838 per 100,000 residents, over double the amount bottom-performers earned.
In top-performing cities, entrepreneurs from the BEST businesses lead economic development by playing three critical leadership roles:
- Demonstrating where local entrepreneurial strengths exist through the growth of their companies.
- Constructing networks that enable successful entrepreneurs to effectively support the growth of upcoming companies.
- Taking action to increase the supply of resources, capital, and talent that local companies need to grow.
Endeavor Insight identified Miami as a top-performing city with a local concentration of BEST businesses being 2.9 times greater than what is found in the rest of the United States. We also have six major business sectors that fall under the BEST categorization:
- Passenger Transit and Transportation Service Companies
- Financial Intermediary Businesses
- Consulting Firms
- Pharmaceuticals and Medical Device Companies
- Software and Software-Enabled Companies
- Advertising Firms
At Endeavor Miami we support 22 companies and 39 entrepreneurs that contribute to our total number of BEST businesses, leading the growth of our local economy with entrepreneur-led economic development. Moreover, our entrepreneurs generated $340M in revenues and 3,000 jobs in South Florida in 2020.
In 2021 we will continue to service our Endeavor Entrepreneurs, welcoming new businesses into our portfolio. We will also support 50 companies through our EndeavorLAB and ScaleUP accelerator programs, with the purpose of catalyzing more BEST businesses this year. We hope other cities take into consideration the benefits of BEST businesses to build strong entrepreneurial communities in order to increase their local economic growth.
Research for this blog post can be found on Endeavor’s Insight Report, “How Cities can Identify the BEST Businesses for Local Economic Growth”. Additional reporting provided by Endeavor staff member Eric Marroquin.