The Case For Small Businesses
Why enabling small businesses creates a stronger Galesburg
Last Saturday, November 27th 2021, was national Small Business Day. It’s a holiday created to promote shopping at small businesses to counter the shopping done at the mega stores on Black Friday. I had originally intended for this post to come out last week but here we are. I want to make the case that at in Galesburg we should do more to enable small businesses. I believe they are part of the path forward to having a happier, growing, and stronger Galesburg. So that begs the question, why small businesses instead of large businesses?
Most Businesses Fail
I know it’s not the most super optimistic way to start out my case for small businesses, but it’s a truth that we can’t dance around. According to Investopedia:
“Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.” New businesses don’t last forever.
It isn’t just new businesses though, we all know that old businesses fail all the time too. Remember Sears?
Sears had two different locations over its history in Galesburg, one on Main Street and one at the mall. Sears was once the biggest retailer in the world! It was so large that they built the world’s tallest building to house their offices, that being the Sears Tower. If you had told someone in 1973, the year the tower was completed, that Sears was going to be gone in 50 years, they would’ve thought you were crazy. How could the company that built the world’s tallest building end so soon?
We know now that they ended. Sears filed for chapter 11 bankruptcy protection in 2018 and just a few weeks ago the last Sears store in Illinois closed for good. The old space downtown was redeveloped into federal offices and the store at the mall continues to sit empty. Sears Tower was sold and is now the Willis Tower. The party wasn’t going to last forever, and it’s certainly over now.
So what am I trying to say here? Sears was the juggernaut of retail 50 years ago, now it’s a footnote to history. That footnote also left a big deteriorating building in our town that remains empty. It had seemed like a safe bet, but Sears failed like so many other businesses have.
The Risk of Big Business
Every business has to deal with something called risk. Risk in this context is the chance that a business loses, it’s similar to gambling. When someone establishes a business they are essentially saying “I believe that there are enough customers willing to buy what I’m selling to sustain this business”. So when Sears first opened up a store in Galesburg it was seen as a pretty safe bet, people wanted to shop at Sears. But because of changes over the years it would be an extremely risky bet to try and open a Sears store in town now, and especially if they wanted to build a new building for it.
No business is free from risk but the larger the business the riskier the bet. While larger businesses can often outcompete their smaller competitors on price and service, they are also more exposed to risk. This is because they need to do a larger number of sales in order to have the lower prices. It takes a lot of money to set up a large business which could all be lost if it doesn’t work out. Because of this bigger businesses tend to be more cautious when establishing new locations, because the cost of failure is pretty high.
In a town like Galesburg, essentially all the safe bets that big businesses can make have been made. With a town population in decline and no obvious way incomes are going to increase dramatically, there isn’t a real incentive for big businesses to come set up shop here. There isn’t a large number of workers available to work at a new factory if it came to town, there aren’t enough shoppers for another large grocery store/big box store, and there isn’t a large supply of white collar workers for any big offices to move to town. We’re maxed out on the big bets that large businesses are willing to make on their own in this town.
In addition to the risks the companies take there are the risks the community take. If a big business goes under, leaves a massive building and the community economically devastated, what do we do? We’ve had plenty of those and it’s still an issue we struggle with. What do we do with the mall? The old Maytag buildings sat empty for years before getting turned into businesses again, and even then a good portion of it ended up being a parking lot for windmills. The old Walmart building on Henderson sat vacant for years before it was redeveloped. While that building may have been empty because Walmart didn’t want more space for competition in town, that building still sat vacant for years. There are real risks attached to big businesses, both for the business itself and the community.
Attracting Large Businesses
Please indulge me in a little piece of history that may not seem relevant at first but is very relevant to our town.
During WWII the United States was fighting the Japanese in the Pacific Theater. From looking at a map we know that the Pacific Ocean is massive and has very little land in it, but has tiny islands scattered throughout. During the war these islands became a very valuable resource, they could provide a place to land planes and harbor ships. It was so valuable that the US military would clear runways and airdrop resources on these islands even if they were only going to be there for a short time.
On some of these islands there was native people who had never been in contact with the outside world. They were just living their lives like they always had and then one day magical flying objects landed on their island. Not only that but the people who came out of the flying machines possessed fascinating objects. They brought medicine, manufactured clothes, canned foods, tents, weapons, and more to people who had never seen anything like it.
Soldiers and natives would sometimes trade, and the natives loved it. They believed they were receiving such riches from the soldiers and wanted more of of their goods. But as the war went on the military would move to new islands as the warfront moved. As fast as they had come to these islands, they were gone again.
Some of the locals didn’t like them leaving, they wanted the riches that the planes had brought them. So what did they do? They started trying to get the airplanes to come back.
How do you get planes to land somewhere? They started by clearing out space for runways, building massive areas for planes to land. The thinking was that planes land on runways so if we build one the airplanes will land there. People also started dressing like US soldiers and doing military style drills around the perimeter of the runway hoping it would attract planes to land. There was even an instance where some natives built a small control tower where people would sit with makeshift headsets carved out of wood to imitate the air traffic controllers they had seen. They recreated everything they saw in connection with the airplanes, but none of it convinced any planes to land there again.
This phenomenon is called a Cargo Cult. It may seem a bit silly but it was nearly impossible for these people to know why the planes were there in the first place. From their perspective the planes showed up one day, brought marvels of the world that they couldn’t have dreamed of, and then left taking their supplies with them. The natives wanted the riches the planes brought and did everything they could to bring them back.
Everyone reading this can understand why those planes showed up and why they weren’t going back. Those reasons were totally beyond the control of natives. We can see why building a runway and having people perform drills around it isn’t going to bring back the planes. While we may see this as silly that doesn’t mean we aren’t guilty of using the same logic.
Our Cargo Cult
Everyone who lives in Galesburg is familiar with the basic story of the last 20 years. Essentially in the early 2000s all the factories in town closed shop and left. Maytag, Butler, and others ended operations in Galesburg causing massive amounts of economic harm. We lost many good paying jobs and those who were able to find different jobs had to work for pennies relative to what they were making. Many people left the area to find better work. We were left in such a rut of stagnation and decline that it feels we’ve only started to come out of now, at least in spirits.
We saw that the factories and big businesses leaving left our town was in decline. So we as a community(at least what I heard when I was a child) thought that in order to bring our town back from decline we needed to attract new factories and big businesses. One of the things we did was build a 350-acre business park to try and attract new big businesses to come to Galesburg. It’s right next to I-74, it has rail, street, and water connections ready to go whenever someone wants to build there. But when you drive past you’ll see the familiar sign advertising the space and a corn field. Since the business park was established 20-ish years ago, nobody has established a business there.
We did our own version of the Cargo Cult, it was a belief that big businesses would come with it’s riches if we built a nice area for them that looks like where businesses are in other towns. But now that we’ve come this far, it may seem like it was a bit ridiculous to spend money building a business park. Not that this was anything unique to Galesburg, towns big and small across the country tried similar projects and often got similar results.
Large businesses don’t take a risk on establishing themselves in an area just because it has a nice businesses park. If a location is what they need the company will develop it themselves. Just like the remote Pacific island natives, we tried to imitate what we see big businesses do. The planes landed on the islands because they had strategic importance, and big businesses opened up in Galesburg for similar reasons.
This may just be conjecture, but my general understanding is that factories came to Galesburg because we had a large supply of relatively cheap labor available here after manufacturing became too expensive in big cities. But just as we undercut big cities in labor costs, workers in foreign nations are undercutting us today. It stands that we probably won’t be able to compete on labor again. And since we don’t have abundant natural resources besides corn, aren’t in a strategic location, or have a climate/scenery that people will move to just to be in, we don’t have many ways to compete. It has been my belief that the only way to grow our town is to make our town a place people want to move to, and small businesses are part of that. They can bring life and soul to our communities which at least to me makes it nicer to live here. So we should be working to enable even the tiniest businesses to give it a try.
The Risks of Small Business
So then what are the risks of small businesses if the big ones are actually risky? The risk can be big or small for the owner depending on how much they need the money, but the risk can pretty small for the community.
Remember the picture at the beginning of the article? That’s Sprinkle & Spoon, an allergy conscious dessert shop that had it’s origins as a popup food stand. That was the result of someone having an idea, taking a small risk, the risk working out, and then being able to turn it into a proper shop. Would this business have existed if the only venue available to them was a large building on Henderson street with massive parking lots? I’m gonna to guess not.
But what’s even more incredible is that the risk the community takes on small businesses is almost non-existent. Look at where Sprinkle and Spoon is located. That building has housed so many businesses in my lifetime. It’s been a flower shop, a popcorn store, was originally a gas station when it was built, and now it’s an allergy conscious dessert stand. Not only that but when each of those previous businesses left that location it didn’t leave the town in turmoil. Sure it’s in a visible spot and if it sits empty that isn’t great for the block, but it doesn’t wreck the local economy like a big business exit would.
The risk for the community is nothing for small spaces, because the smaller the space the smaller the risk it is to open a shop and the greater the chance that someone will come along and open. With our small businesses we can keep trying out new ideas, keep our buildings filled, and make Galesburg stronger.
Lower Barriers for Small Business
As mentioned in my last post, I believe the biggest thing we can do to incentivize small business is change our zoning laws so that the smallest businesses can have spaces too. We can start by allowing businesses to operate in people’s homes as long as it takes up less than 500 square feet of the house.
From there we could allow for small businesses to establish themselves on any plot of land as long as the business is under 1000 square feet. This would allow businesses to establish very small storefronts in areas at a relatively low cost. It costs a lot to open a business on Henderson St, just look at this listing for the old Mattress Station. It’s a 4000 square foot space and the rent is $4250 a month which can be a massive amount for a small business. So we need to have smaller spaces that businesses can make their first bets in.
We also need to reduce parking minimums. I’ll someday do a whole post about them but here’s what you need to know right now. Having to build parking is quite costly for a business. It costs a lot to own all that extra land and to build and maintain the pavement. If the cost is too high then small businesses won’t be able to afford to open. That then leaves only bigger businesses, who at this point tend to be national brands, who are able to build because they can better absorb the cost of building more parking. This isn’t to say no business should ever provide parking, but I believe that business owners can decide for themselves how much they need.
If we are able to reduce the barriers for small businesses getting their own spaces, I believe we can organically grow our town. It gives more people the opportunity to try out their ideas. There may even be spots downtown that are very cheap to rent but I’d guess most potential entrepreneurs think it will cost too much. Most of these businesses will fail, but some will succeed and that’s what we need. It will also help make more walkable neighborhoods which increases living standards which can increase demand for the area.
While big bets are important to the life and image of a town, not every bet can be a big bet. We should treat our town’s commerce strategy like we’d invest our money. The best strategy is often to have most of your money invested in low-risk investments that have low returns but have a small amount of money invested in high risk investments because the payoff can be massive but you risk losing everything you invested. So currently we shouldn’t be chasing the big bets and instead try to enable as many small bets to be made as possible. The returns should be good for Galesburg, or at the very least help us trend in the right direction.