e200

The Emerging 200 Initiative Helps Entrepreneurs Take their Businesses To Their Next Level

By Julie Moline

Picture this:  Nineteen adults, all strangers at first, meet every two weeks in Albuquerque.  The group is a mixture of ages, backgrounds and complexions.  Eight members are women; six are Hispanic, one is a Native American, and another is from the West Indies—a fairly representative sample of the New Mexico population. They meet at 5p.m., greet each other warmly, and then participate in a combination of lectures, workshops, presentations, moderated discussion sessions and peer critiques.  At 9p.m. the session formally ends, give or take a few lingering conversations. Then many of the participants go right back to the office. 

It sounds like a script out of a self-help group, and in a way it is, although not the 12-step kind. The only interventions here involve empathetic people trying to prevent someone from making a tragic business mistake. 

The Albuquerquians are all CEOs or other C-level executives of small businesses, and all are members of the inaugural class of the Emerging 200 Initiative, an innovative executive educational program underwritten by the Small Business Administration (SBA) that ran simultaneously in 10 cities this year. 

The program, also known as the e200, has another nickname: MBA Boot Camp, both for the rigor and for the compressed time period—13 sessions, from June to December. Between classroom study, peer mentoring sessions, a lengthy reading list and homework, it’s a “considerable time commitment,” says Steve Woods, a professor at the University of Baltimore and the facilitator for the Baltimore e200 group. “These are people who already work 60- to 80-hour weeks at their businesses, and we’re adding five to seven hours a week more.”

The intensity, the students say, is well worth it. By the end of the program, they will have crafted a tight, three-year plan for expanding their organizations. Along the way, they will have learned many of the skills they may have lacked as they ramped their businesses up: how to really understand a balance sheet; find and exploit new sources of capital; develop sophisticated cost-benefit analyses; mine customer metrics to identify marketing opportunities, and position their companies to make them visible to (and attractive to) government contractors. 

Many of the participants were looking for ways to add locations, seek new markets, or check the advisability of making a big acquisition; some, like Al Herrera of IPS Corp. in New Orleans, wanted help determining whether to expand by growing his existing business (a distributor of industrial products) or by manufacturing some or all of what the company distributes.  Others wanted to beef up their skill set, generate a surge in momentum, retool their business plan to adjust for an economy in recession, or all three. 

“This program really got me in gear,” says DJ Heckes, CEO of EXHIB-IT!, a trade show marketing firm based in Albuquerque. From 2004 to 2008, her company doubled in size (from five to 10 employees) and revenue, from $500,000 a year to more than $1.2 million. “There I got stuck,” she admits. “I wanted to grow, but had no clue how. I had tried growing by adding another location in Texas, but I had to close it down because it was losing too much money.”

Another vexing challenge was a weak number two, a friend she put in as director of operations, which meant Heckes was squandering time, money and effectiveness.  She stayed loyal to him “far too long,” even though they both knew he was overwhelmed and floundering. Midway through the program, she learned how numbers should trump emotion. “I’ve put in a mini P&L in each department so I can see precisely where the money is going,” she explains. “That way I can be more strategic, and have better control.” She steeled herself, and fired her friend.

JUMP-STARTING GROWTH

What sets the e200 apart from most programs for small businesses, whether funded by the public sector or not, is both format and focus. Instead of a one-day seminar or an industry- specific program, such as how to get started in retail or manufacturing, this is a six-month, sequential program designed for an entirely different constituency: the existing small business that is already profitable, but could benefit from ideas on how to jump-start growth. “The objectiveis to help successful small businesses amplify their success through training and networking,” says Ellen Thrasher, Director of the Office of Entrepreneurship Education for the SBA. “We already offer a diverse portfolio of services to small businesses, through SBDCs [Small Business Development Centers], Women’s Business Centers and SCORE.” 

To qualify for a spot, the participants had to be running profitable businesses at least three years old, have at least one employee besides the participating C-level exec, and generate annual revenues of between $400,000 and $5 million per year. Adds Thrasher,“We also required that the participant commit to an intense curriculum and a demanding schedule.”

THE E200 BEGINNINGS

The e200 was the brainchild of Steve Preston, the former head of the SBA who left that agency to become Secretary of the U.S. Department of Housing and Urban Development in June. Preston, a former investment banker and private-sector CFO, was looking for ways to increase the return on investment for SBA-funded programs.  According to Thrasher, Preston was inspired by Michael Porter’s philosophy of building and sustaining inner-city businesses; Porter, a Harvard Business School professor and cofounder of the Initiative for a Competitive Inner City (ICIC), speaks often, and persuasively, on the transformational power these enterprises have in their communities.

How transformative?  Small businesses represent more than 99 percent of all employer firms nationwide, according to research from SCORE, the SBA and ICIC. These companies, defined as having fewer than 100 employees, have generated the vast majority of jobs in the United States and produce the vast majority of innovations. In the inner city, small businesses play an even more crucial role in the vitality of the local economy. According to SBA’s Office of Advocacy, small businesses are the greatest source of net new employment in inner cities and account for a staggering 80 percent of total employment. Still, the job growth rate in inner cities lags behind the rest of metropolitan areas, which is why the SBA chose to focus the e200 exclusively on inner city businesses.

Not just any inner city, either. The SBA, which has made stimulating economic activity in depressed markets a high priority, was looking for a way to deliver the highest value to the cities that needed a leg up the most. To support its decision with fresh metrics, the agency commissioned research by ICIC in October 2007 to identify the cities with more than 40,000 inner city jobs that also had low (below 1 percent) or negative compound annual job growth rates.

Fifty-five eligible cities met those criteria, and the SBA reached out to the inner city economic development communities in each. Agency officials held conference calls with the Inner City Economic Forum membership, and local SBA district offices reached out to their constituents—first to determine their interest, commitment and capacity for participation, and then to encourage those cities that were game to apply to participate in the pilot.

A seven-member panel from the SBA reviewed each application.  Of the 55 cities that responded, 23 proposals were received and evaluated on the basis of local support, vision for program development and ability to support the venture. 

Local support was critical, because SBA district and regional offices, along with local supporters, were expected to be deeply involved in the pilot’s organization and administration. They were to arrange for in-kind training facilities, market the program to potential participants, handle registration and on-site logistics, and, most important, develop an ongoing relationship with the chosen e200 businesses both during the formal program and after it was over. “What we looked for from the individual communities was a coalition of businesses and community leaders who had an investment in growing small businesses,” says Thrasher, “so that they would have access to other portals of services as they graduate from the program.”

In the end, Albuquerque, Atlanta, Baltimore, Boston, Chicago, Des Moines, Memphis, Milwaukee, New Orleans and Philadelphia made the final cut. Several of them marked their accomplishment with fanfare. In Baltimore, Mayor Sheila Dixon held a press conference with a dais filled with marquee names: Senator Benjamin Cardin, Congressmen Elijah Cummings and John Sarbanes, SBA Deputy Administrator Jovita Carranza, and a variety of local business leaders.

The presence of Senator Cardin was particularly noteworthy:  He’s a member of the Senate Committee on Small Business & Entrepreneurship. Congressman Sarbanes’ remarks showed he was as well-briefed on the subject as his colleague in the Senate.  “Successful businesses can leverage this kind of federal investment to really kick-start growth,” he said, adding to Mayor Dixon’s observation that “successful small businesses are economic engines capable of powering entire cities forward.” 

Although all cities were required to offer the identical curriculum, The SBA district director and partners did have some autonomy, and were given the option of narrowing the geographic scope to certain quadrants within their inner cities. The rules allowed no further customization; to fill the 200 slots, the companies that met the e200 criteria were interviewed and vetted on a first-come, first served basis. 

Participants in the program vary widely. There are restaurateurs, bakers, engineers, software developers, transportation companies, contractors, building supply firms, marketing specialists, insurance companies, distributors, printers, publishers, consultants and, in Boston, an artist who specializes in jewelry for people with body piercings. There is also an interestingly high proportion of environment-related firms, from metal recyclers to designers of organic cotton clothing to a green builder who is seeking ways to finance an energy-efficient retrofit of its own offices. 

All costs of preparing, training and assembling the initiative’s coalition were assumed by the SBA, which kicked in $400,000, and by local partners. The lion’s share of the cost went toward instruction.

THE ICE CONNECTION

The SBA was just as careful about the selecting a curriculum provider as it was about finding suitable host cities. After a long, strenuous search, the contract went to Boston-based Inner City Entrepreneurs (ICE), a much-lauded nonprofit organization that focuses on education for established, urban small businesses. Founded in 2003, ICE was one of the first nonprofits to win an Innovation Award from the Small Business Association of New England and has been profiled by (among others) Business Week, which called the organization’s results “impressive.”

ICE’s track record in helping established urban small businesses learn to grow was one of the reasons the SBA chose it to deliver the curriculum, a modified version of its “StreetWise MBA™” program,” says Jean Horstman, ICE’s CEO. That curriculum, which culminates in a nine-month certificate program sponsored by Boston University School of Management, was modified slightly for the e200 program, but the essentials remain the same. 

Horstman explains that the program’s curriculum is organized around four basic services: management training, peer-to-peer learning, one-on-one coaching and networking opportunities.  Correspondingly, the syllabus covers business and leadership assessment, applied financial statement analysis, marketing, sales and sources of capital.

To the SBA, another advantage of ICE was that the e200 curriculum could be offered through one national provider, which kept costs down and offered what Thrasher calls “a single standard of excellence.” That single standard, she adds, would make results tracking and analysis more sound. 

One of the biggest challenges for ICE as a curriculum provider was speed and scale. It was awarded the e200 contract in May, and had less than two months to line up instructors in the 10 cities, then train them. That task fell to Alison Bergland, a consultant specializing in business development, and Beth Goldstein, a marketing consultant for Boston’s Marketing Edge Consulting Group and author of “The Ultimate Small Business Marketing Toolkit.” Most of the instructors are business professors with expertise in entrepreneurship, and many run their own small businesses as either venture capitalists or consultants.

Finding the right faculty wasn’t just about C.V.s, Goldstein maintains. “I was looking for the same level of commitment and passion as the students ended up showing,” she says. “They certainly weren’t in this for the money—let’s just say the compensation was modest. What we did end up finding were 10 partners who really understood the whole mission, and the logic of a public-private enterprise like this.”

REPORT CARD TO FOLLOW

Part of the e200’s mission involves sustainability. Using ICE’s past experience as a guide, each of the e200 graduates is projected to add two jobs and increase their sales by more than 40 percent in two years (see “By the Numbers” on page 32). “We’re watching the ROI carefully,” says Thrasher. “It’s not just good governance, but will be a way to make the case for continued expansion.”

ICE will be measuring performance, providing a “report card” on the 200 businesses a year after graduation. “We’ll look at how many jobs the participants created, how many jobs they’ve retained, what kind of loans they have in process—in essence, what value this experience has brought to their businesses,” says Horstman.

In addition, the SBA will follow up with each company six months after the training to assess how it’s moving forward with its three-year action plan.

A longer-term goal, Thrasher says, is for the SBA to develop a report on inner-city small-business best practices, a compendium of tools and strategies developed by alumni of the Streetwise program.

In the meantime, Thrasher says, the SBA is so pleased by the smooth administration of the e200 and by feedback from students, teachers and local business leaders that it has allocated funds to continue the initiative in 2009.

With a pilot that looks, by all measures, to be a rampant success, Thrasher is energized by the implications. “Any gains made here have an exponential benefit,” she says. “The vibrancy of the inner city is the key to generating wealth, employment and community.”

To find out more about the 2009 e200 program, watch the SBA Web site home page at www.sba.gov.

Julie Moline is a freelance writer based in New York City and Salem, New York.