MidAmerican Journal of Business

Fall 2001

Pam Curry is the executive director of the Center for Economic Options located in Charleston, West Virginia. She and her organization were recognized in January 2001 with the Presidential Award for Excellence in Microbusiness Development for Program Innovation.  They received the award for addressing the special needs of rural entrepreneurs.

The MAJB selected Curry to provide her executive viewpoint for three important reasons. First, she provides business services to over 900 businesses annually. Second she works with microbusinesses, a growing area of interest in the business community. Third, and most importantly, Curry is keenly aware of the linkages between university research and programs and the business community.

-- Mike Hicks

Growing Microbusinesses:

The West Virginia Experience

Pam Curry, Executive Director
Center for Economic Options
Charleston, West Virginia

Background

Business ownership is one of the fastest growing segments of the national economy. Reflecting this trend, West Virginia is rapidly growing an entrepreneurial option that helps people and communities build wealth, retain assets, create jobs, energize local economies and control their economic destinies. This option is microbusiness development.

For nearly twenty years, the Center for Economic Options (CEO) has created innovative ways to help entrepreneurs—especially those in rural areas—become engaged in the economy and experience economic self-reliance. The historic prominence of West Virginia’s mining industries often eclipses the fact that West Virginians are inherently entrepreneurial and engaged in a broad range of business activities. Many of these businesses are home, forest, or farm-based and build on culturally and ecologically sustainable practices.

This population of businesses, often referred to as “microbusinesses” tend to have fewer than five employees, have low start-up and capital needs, and provide crucial flexibility within the labor market. Some argue that this type of entrepreneurism is not worth supporting. CEO, however, maintains that rural microentrepreneurs are providing income for their families, are more likely to stay in their communities, spend money locally, and help support the local economy.

In order for economic activity to truly prosper, it must be sustainable—able to meet the needs of the present without compromising the ability of future generations to meet theirs. Rural microenterprises with which CEO works depend on an unspoiled wilderness, clean water, and a healthy environment. Since these microbusiness owners live in the communities where they work, they are less likely to engage in activities that degrade the environment and therefore place their source of livelihood at risk. CEO believes that developing sustainable microenterprises will not only decrease the number of households falling below the poverty line and promote local control and economic stability, but also will increase the value placed on sustaining West Virginia’s natural resources.

Microbusinesses fill a void of services that larger businesses sometimes cannot. In fact, many larger firms outsource work to microbusinesses that have a particular specialty. West Virginia has the potential to be an attractive place for many more microbusinesses, especially if tax reform measures level the playing field.

Microbusiness does not mean microprofit. Many microbusinesses are operated on a part-time basis or are used to supplement income, but people can grow these businesses to become very profitable and provide employment opportunities for others. Discussions about West Virginia’s emerging “new economy” are gradually shifting from, “how can we get jobs” to “how to create our own sustainable jobs.” This will be no less than a cultural paradigm shift and will mark the turning point in West Virginia’s economic challenge.

Developing Entrepreneurial Programs
Although pervasive, microbusinesses in West Virginia are often discounted as an important part of the economy. In fact, many of the entrepreneurs with whom CEO works do not recognize their own enterprises as “businesses.” This is due to several factors. The history of mining industries and the emphasis on attracting industries with outside ownership has led to a culture that undervalues the entrepreneur and small, locally based businesses. Also, since many microenterprises are operated seasonally, or to “patch” household income during lean economic times, they are not viewed as primary employment. The fact that people who also hold traditional jobs run many microbusinesses seems to limit their perceived legitimacy. This in turn influences people to not seek broader markets and to underprice their products.
The value of a diversified economy and workers who control their own economic destiny cannot be over emphasized. Any community is hit hard when a primary industry collapses, but with West Virginia’s rugged terrain, challenging transportation routes, and economic barriers, it is unusually difficult for these communities to attract “replacement” employers in today’s market. CEO encourages rural entrepreneurs and microbusinesses, to develop a diverse customer base to reduce their dependence on one source of income.

Many rural microbusiness owners do not subscribe to the model of economic maximization, but rather are only sufficing. It is easy to assume that every entrepreneur wants to be the next Steve Jobs, Mrs. Fields, or Sam Walton. However, CEO’s practical research indicates that many entrepreneurs want to grow their businesses not to the “max” but to the level where they can comfortably maintain the balance between work, family, and community. If money were the primary motivator many of these people would have left West Virginia years ago. Instead, they have chosen to stay and through their entrepreneurial nature, have found ways to thrive. CEO helps these entrepreneurs by showing them how to recognize their enterprises as “businesses,” how to improve their business processes, connecting them with like businesses and, most importantly, connecting them with markets and marketing opportunities.

CEO’s business philosophy is to provide the right services to the right people at the right time. Over the years, CEO has formed long-standing relationship with many of the business owners with whom it works, and relies on responses from microbusiness owners to shape its services. Consistently, rural microenterpreneurs tell CEO they want and need access to markets. They also want relevant and practical training and technical assistance that meets their needs, budget, and timeframes.

Through experimental efforts, CEO discovered that the key to helping people develop their businesses, and thus their ability to reach and maintain economic self-reliance, was linking “just-in-time” business training to specific marketing efforts. The Appalachian Knitwear Network—a program that CEO spun-off as a 501(c)(3) organization called Appalachian by Design in 1995—brought together nearly fifty home-based machine knitters to produce items for ESPRIT Company. The availability of the market provided the incentive necessary for many of these knitters to formalize their businesses, set up accounting systems, and generally increase their business acuity through CEO’s custom trainings.

In the fall of 2000, CEO opened a retail store in the Charleston Town Center Mall featuring products of the microbusinesses throughout the mountains of West Virginia. In less than three weeks, CEO moved Showcase West Virginia from an idea, to an attractive, well-stocked retail store ready to serve Charleston’s holiday shoppers.

CEO planned to close Showcase West Virginia at the end of December 2000 but the response from the shoppers, the vendors and mall management indicated that CEO should continue. Microbusiness owners began contacting CEO to see if they could get their products in the shop. Soon development groups, mall owners, city planners, and resort developers wanted to know how they could get the retail store in their locations.

In May 2001, CEO quadrupled the store space of Showcase West Virginia by moving the store to a larger, more attractive space within the mall. Sales have increased significantly and continue to expand, over 130 entrepreneneurs have product lines in the store, and broad community support continues to grow, as well as the potential for replication in other commerce areas. Showcase West Virginia is also providing revenue to partially underwrite CEO’s cost of doing business.

Establishing Partnerships
Partnerships with colleges and universities offer significant resources for non-profit organizations. As an entrepreneurial non-profit organization that places great value on innovation and strategic resource partners, CEO has found that cultivating collaborative relationships with universities broadens the horizon of impact and potential. One of the most successful partnerships to date has been with Marshall University’s Lewis College of Business.

Based on information provided by clients, CEO understands that rural West Virginians typically do not engage in only one microenterprise but, rather, operate several microenterprises. The pervasiveness of multiple-enterprises prompted CEO to collaborate with Marshall University’s Center for Business and Economic Research to research the economic impact of microbusinesses on the state’s economy. CEO found that no study of this nature had been conducted, and very few economists worldwide had researched the topic.

As an alumni of the University and a member of the Lewis College of Business Advisory Committee, the Executive Director of CEO was aware that expertise was available through the University. The Director and CEO’s Manager of Research and Development approached Dr. Michael Hicks at Marshall University’s Center for Business and Economic Research (CBER) who expressed an interest in exploring this economic sector. The initial collaborative research findings, released in a press conference in November 2000 and published in major newspapers, reflected formal research by Marshall University and practical research conducted by CEO.

The project is ongoing, but preliminary research has identified that officially over 36,000 microbusinesses are registered in West Virginia, engaging over 73,000 people —over ten percent of the state’s workforce. These figures do not count unregistered microenterprises, nor does it count the number of people who are engaged in money generating activities and report this income on Schedule C tax returns. Researchers speculate that West Virginia’s economy, particularly in rural areas, is “insulated” by informal microenterprise activities that allow people to survive the most dire economic downturns. In West Virginia, small businesses are more productive than larger businesses. The dollar value of the goods and services produced per worker by smaller firms in the state is greater than in bigger businesses.

Research also indicates that the average West Virginian is earning anywhere from 15 percent to 25 percent more than their reported income by engaging in unreported business activities. Hicks maintains, “Most of these activities supplement their work and are related to their formal jobs.” While some of the activity may be illegal, the total proportion of illegal underground economy in West Virginia is much lower than the national average.

Based on these initial findings and lack of research in the field, Marshall’s CBER is now working with CEO to further concentrate research efforts on the economic impact of microbusiness on West Virginia’s economy. The research may be useful as a model for other states and rural nations to help generate support for small-scale entrepreneurs. CEO is also currently working with Dr. John Wallace, at Marshall University to assess the feasibility of, and develop a business plan for, CEO’s Showcase West Virginia retail store.

Linking with External Networks
CEO is part of a rich network of colleagues and organizations locally, regionally, nationally and internationally. CEO is a founding member of both the Rural Entrepreneurial Initiative that is underwritten by the Kauffman Foundation and of the Central Appalachian Network (CAN) that connects progressive development non-profits for information exchange, common projects, and learning from the field. A member of Association for Enterprise Opportunity, CEO often sponsors seminars at the annual meeting and provides access to West Virginia rural entrepreneurs in settings such as the “Money in the Mountains—Sustainable Options for Microbusinesses” conference. Internationally, CEO connects with organizations that share common missions and strategies. For example, at the “Money in the Mountains” conference, representatives from Ireland, Scotland, Wales and Nova Scotia presented information on their programs and learned about rural entrepreneurship and its strategies in West Virginia.

The Role of Business Colleges and Universities
Business colleges can play a vital role in helping people “think like an entrepreneur.” According to Dr. John Wallace, Marshall University. “Successful business owners can make good decisions, and to do this they need good tools, especially in the analytical stages of the decision-making process.” Business colleges provide a prime platform for this educational component that often is key to business success or failure. This education goes beyond traditional business management training and knowledge. Business colleges can encourage students to consider starting and operating their own business in addition to/instead of working for someone else. If youth can be engaged in entrepreneurship, they may consider staying in their communities and starting their own businesses instead of believing their only option is to leave to find work.

Universities can play important roles in helping to frame policy issues and actions in ways that non-profits cannot do alone. For instance, through Hicks’ research on microenterprise, he made three preliminary recommendations to further develop this sector:

• Extend our understanding of the richness, variability and economic consequences of microbusiness and small business in the state.
• Design outreach and policy options for university and non-profits in the state.
• Recommend policy change to the legislature and administration to enhance microbusiness success in the state.

Working in tandem, the university, the non-profit partner and their collective network of colleagues and organizations can create a powerful voice for needed changes and policies.