When the city of Detroit filed for Chapter 9 bankruptcy in July 2013, it was the largest municipal bankruptcy in U.S. history. Observers wondered how the city would ever emerge from the dark cloud of financial emergency.
Detroit still has a long way to go toward recovery. But that hasn’t stopped business leaders from looking toward the city as a potential turnaround location.
That spirit of optimism was underscored on September 18 as internationally recognized financial leaders like Goldman Sachs CEO Lloyd Blankfein, former New York City Mayor Michael Bloomberg and investor Warren Buffett gathered with state and local leaders in a spirit of celebration.
The reason: to mark the graduation of 64 Detroit-area entrepreneurs from the Goldman Sachs 10,000 Small Businesses (10KSB) initiative at Wayne State University.
“The growth of small businesses depends on strong local leadership, practical and effective education and access to capital,” Blankfein said at the event. “Thanks to the dedication of our local partners in 10,000 Small Businesses, today’s graduates are poised to grow their businesses and create jobs, contributing to the revival of Detroit’s economy.”
Blankfein’s words distill the essence of the Goldman Sachs 10KSB program, which the investment banking leader launched in 2009.
The $500 million initiative aims to help small businesses develop by providing a program of training and education for entrepreneurs, in partnership with local community colleges; peer-mentoring from other established business owners and managers; and access to the capital they need to expand.
The 10KSB program is now active in 20 locations around the United States, ranging from large metropolitan areas like Chicago and Detroit to smaller cities like London, Kentucky.
The program’s goal is to help business owners expand their companies, increase revenues and spur new job creation, which Buffett said could have a positive effect on the broader economy.
“A thriving small business sector is critical to the health of both the local and national economy,” said Buffett, who serves as co-chair of the 10KSB Advisory Council. “As we are seeing with the graduates in Detroit today, 10,000 Small Businesses is helping small business owners gain access to education and capital to take their businesses to the next level.”
Charting The Progress
Initial assessments of 10KSB indicate the program is having a positive impact on its participants. A progress report on the initiative prepared by Boston’s Babson College, where the 10KSB curriculum was designed, finds that program participants “grew their revenues and increased their employee base in ways that outperform trends in the larger economy.”
Among the positive outcomes the Babson report identified as of 2013 (a full copy of the report is available for download here):
44.8% of 10KSB graduates reported adding new jobs in their businesses within six months of graduation from the program (at a time when only 18% of small businesses reported increasing their employee numbers);
63.7% of program participants reported increasing their business revenues within six months of graduation (compared to 37% of small businesses overall);
80% reported that they had collaborated with their 10KSB classmates to develop new business opportunities, secure contracts or provide referrals.
Access to capital is a principal challenge for business owners at every level. 10KSB participants reported improvements in their relationships with banks and financial providers as they came to better understand how business funding works. Although the share of participants receiving funding grew only slightly — to 63% from 59% — the real improvement is the total amount of funding received.
“While the approval rate perhaps only improved modestly, the average amount of funding received rose dramatically, by 258%, from $287,180 to $1,028,391,” the Babson report says.
Finally, the Babson researchers conclude that one of the key lessons for program participants is how to “gain a new perspective” by learning “to take a step back and delegate some measure of control to their employees.”
“This is a critical first step for participants to gain the space to begin to think and act strategically,” the report concludes. “Training is important, support is important, capital is important, but a new perspective is essential to grow a small business and create jobs.”
In Their Own Words
But the statistics only tell part of the story. For a fuller sense of the 10KSB initiative’s promise, consider the testimonials of the program’s participants:
“I applied for the program because I spent years being a stagnant company and needed help. With the training I got through the program, I was able to put together a five-year plan.” Fred Johring, president of Golden State Express, Inc., a trucking company in Long Beach, Calif.
“Before the program, I couldn’t tell you what an income statement was or anything about cash flows or balance sheets, but Salt Lake Community College faculty helped me focus on my business financials. Now not only do I understand my numbers, I also am using them to grow my business.” Sterling Lyman, owner of Triumph Youth Services LLC in Salt Lake City, Utah.
“I applied to the program in hopes of increasing my knowledge of business practices, especially in areas of finance, negotiations and marketing. The course encouraged my cohort to think in innovative ways about our businesses, which led to the development of my growth plan for a new division of CAD services and custom designs, which we believe will grow to $700,000 I revenues and create five new jobs.” Amy Voloshin, owner of Printfresh LLC in Philadelphia.