VOL. 10 | NO. 37 | Saturday, September 9, 2017
SPECIAL EDITION: Small Business
Memphis Small Business Landscape Stable Amid Slow Economic Growth
By Michael Waddell
While the local small-business landscape mirrors the national environment of a slowly growing economy keeping things stable, the lack of population growth is holding the Memphis area back from truly breaking out.
Carmen Bassett Brown, co-owner of neMarc Professional Services, expects strong growth for her company. (Memphis News/Houston Cofield)
Big challenges many small businesses face right now, according to the Middle Tennessee State University’s Tennessee Business Barometer Index, include finding and keeping customers; finding, training and keeping high-quality employees; expenses, including those related to regulations and health care; financing growth; and a lack of focused marketing.
David Waddell, who runs financial services firm Waddell and Associates LLC and has many small-business owners as clients, agrees the biggest economic headwind for Memphis is the lack of population growth.
“With wages somewhat stagnant and economic growth subdued here and nationally, without population growth small businesses end of battling each other for market share,” Waddell said. “That can be somewhat of a zero sum game in that it often leads to price competition, which leads to lower profit margins for the winners and the losers to a certain extent.”
Waddell, who is also very active with the Greater Memphis Chamber’s Chairman’s Circle and a board member of the Entrepreneurship-Powered Innovation Center, also known as EPIcenter, cites how levels of success vary by industry, with certain retail sectors under duress due to the “Amazonification” of their market while many local construction-related businesses are doing quite well right now.
Adding to the problems for some, due to changes under the previous national economic agenda, small businesses pay a disproportionately higher tax rate than larger businesses, and they spend a higher percentage on regulatory compliance.
“Even though the current economic administration has not been productive, the threat of higher taxes and regulations is off the table,” he said. “So I think psychologically small business owners are feeling more optimistic. If there was a tax cut or a tax legislation reform, that would be a boon. If you cut my taxes here, I would hire people.”
Dr. Timothy R. Graeff, Middle Tennessee State University professor of marketing and director of the Office of Consumer Research, said Tennessee is an ideal location to operate a small business.
“The overall business climate is inviting and supportive,” he said. “The Tennessee economy is diversified enough, and solid enough, to lead to solid growth in the future. Consumer optimism among Tennessee residents has historically been higher (more positive) compared to consumers across the rest of the country.”
He also sees the climate for small business as improving, evidenced by the influx of large and small businesses to the state.
“It’s a regular occurrence to hear of a new business that is relocating to Tennessee – which further adds to employment, therefore improving the overall economic environment,” Graeff said. “This means more people have jobs, which makes them more likely to spend money, which means more customers for Tennessee businesses.”
Carmen Bassett Brown is co-owner of neMarc Professional Services, a local 35-employee temporary staffing agency. She started her company 14 years ago and has experienced turbulent times during that stretch, but she has her sights on growth in the years to come.
“There have been peaks and valleys at times,” Bassett Brown said. “It’s hard as a small business. You have some difficulties because you’re really trying to do everything, so it can be frustrating.”
The roughest stretch came during the Great Recession of 2009-2010.
“It was very bad. I had times when I asked, ‘Can I keep doing this?’ But when things were at their lowest, people would call that needed staffing. We hung in there,” she said.
Since then, neMarc’s business has been stable.
According to the July Small Business Optimism Index from the National Federation of Independent Businesses, the number of owners trying to fill positions and create new jobs is high. Many expect the economy to improve and feel like now is a good time to expand.
Waddell sees more businesses possibly expanding to cities experiencing stronger growth, such as Nashville, while still maintaining a solid presence here.
“It’s possible that we could import into Memphis some of the good fortune of the neighboring communities,” Waddell said. “I think Memphis benefits a little bit from what’s happening up there. Even if it feels competitive, it’s really more collaborative.”
Despite the challenges, Memphis remains a great place for entrepreneurs, and organizations like EPIcenter are working to help budding business owners realize their dreams. Working in their favor, Memphis is a low-cost place to start a business compared to other large markets, and there are highly developed support organizations like the Crews Center for Entrepreneurship, Start Co., Innova and others.
“If our campaign to raise $100 million for entrepreneurs comes to fruition – and we already have $20 million in matching funds committed – if you have the soil [resources] and the fertilizer [capital], then you can attract the seeds,” Waddell said. “So it is not a stretch of the imagination to look out five years or so and see the excitement that 1,000 entrepreneurs might bring to our self-confidence and our economic growth rate.”