Glimmer of Hope
By: Matthew Albright | New Orleans Times-Picayune | 08/08/2010
With the recent flurry of bad economic news — the BP oil spill, the announced closing of Avondale shipyard and the wind down of space shuttle-related work at the Michoud Assembly Facility — local economic leaders are looking carefully at the state of small business in the region. And while the outlook may not necessarily be rosy, many leaders say these events are an opportunity for entrepreneurial growth. “Avondale and Michoud have validated a trend where existing companies have net job loss,” said Tim Williamson, CEO of The Idea Village, a New Orleans organization that nurtures entrepreneurial ventures. “We need to focus on entrepreneurs.” Williamson says that start-ups are the driving force behind the economy, both locally and nationally. He cites a Brookings Institute report released Wednesday that illustrates some emerging positive trends indicating that “the city and metro area have been recovering from (Hurricane) Katrina and, in fact, may even be on the path to transformation.” That report said that entrepreneurship in the New Orleans area has spiked recently, surpassing the national average for the first time in a decade. Williams — like the study — points to entrepreneurship as a leading factor in “economic resiliency.” He says it puts new talent on the market, creates jobs for more employees and creates fringe economic benefits for suppliers and other related businesses. “New Orleans is becoming a laboratory for entrepreneurs to solve problems,” he said. Carmen Sunda, director of the Louisiana Small Business Development Center, says disasters often bring increased entrepreneurial activity. “It’s a phenomenon I’ve seen after Katrina/Rita,” she said. Sunda says her organization has been swamped trying to help both existing customers, whose business is being affected by the spill, and people looking to start a new business. “We’ve seen an uptick in clients getting loans, starting a business,” she said. Sunda says that, while negative shocks like the oil spill and the plant closings are painful for small businesses, they can actually provide an opportunity for new businesses to open. “When you have voids in the markets, you see people taking up that business,” she said. Sunda also says that start-ups have advantages over existing companies in an economic environment under sudden duress. They aren’t saddled with disaster debt like existing companies, and they don’t have to reinvent or re-tool their business to adjust to new market realities. And Sunda says prospective small-business owners can find a suitable lending environment. “We’ve got lenders coming to us, saying ‘bring us the packages’ — we’re just trying to find businesses that can use them,” she said. Michael Hecht, president and CEO of Greater New Orleans Inc., a regional economic development group, says New Orleans has strong fundamentals for entrepreneurial growth. He pointed to a strong city culture, business conditions that are largely healthier than the national average and government incentives like technology development tax credits. Like Sunda, he says that disasters can sometimes spur new businesses. “When you have crises, it’s just like they say — necessity is the mother of invention.” Hecht says that, after mass layoffs, workers are often “forced” into starting work for themselves, which can spur entrepreneurship and diversify the local economy. But that isn’t necessarily a good thing — just because someone’s starting a new business after a crisis certainly doesn’t mean that business will succeed. The same Brookings report commending entrepreneurial growth in New Orleans warns that such news may not be all good. “Entrepreneurship during a recession or periods of economic shock can mean that individuals fail to find employment and start businesses out of necessity; or they may be more likely to fail, given the weak consumer and market climate,” it cautioned. Indeed, Sunda points out that opening a business is a risk, a risk not everyone is well-suited to take. “What percentage of people can actually do it?” she asked. “Not every employee makes a good entrepreneur.” As Hecht said: “It’s potentially a silver lining — but we don’t know that yet.”
