The activities of small and mid-size businesses may not make news the way the operations of larger corporations do, but this doesn’t mean that small businesses don’t play a vital role in the American economy. In fact, more than 60 percent of the American workforce is employed by small firms, most with fewer than 100 employees. Small businesses stimulate economic growth, spurring investment and innovation at the local level to complement the offerings of larger companies. As the American economy emerges from the Great Recession, small firms will be critical in stabilizing the recovery.
Small firms may be more nimble than larger corporations, but most do not enjoy the amount of capital, investment, and other resources held by large businesses—and can be more vulnerable than larger entities to the side effects of economic slowdowns, such as lower sales and revenue, limited access to the equity markets, and fluctuations in the workforce.
In the Baltimore region, the Center for Closely Held Firms (CFCHF) at Loyola University Maryland is dedicated to helping these small businesses—private organizations with a limited number of owners and primarily local and regional operations—survive and prosper. The Center offers members access to an extensive network of business contacts, including experts in finance, law, accounting, marketing, and insurance, and a forum for the dissemination of ideas and exchange of information that can help their businesses thrive.
In this month’s feature Mark Debinski, MBA ’95, chief talent officer for Bluewater Advisory and newly named director of the Center for Closely Held Firms, explains how the Center helps move small businesses forward, talks about his plans and ideas for the Center’s members, and explains how networks like these can affect the business community.
You have been involved with the Center for Closely Held Firms as a member for many years. How did you become its director?
I initially became aware of the Loyola Center for Closely Held Firms from one of my former professors as I launched an Internet services business shortly after graduating from the Sellinger School’s Executive MBA program in the mid-1990s. I joined shortly thereafter and have remained a member and occasional speaker. Recently, Sellinger School Dean Karyl Leggio asked me to serve as the Center’s next director due to my experience running closely held firms over the last 20 years, my connection to Loyola, and strong business network in the area.
What makes starting a small business so risky? What are some of the obstacles new businesses face at the onset and some of the obstacles they continually face?
The risk to a start-up small business lies in the myriad factors that must all come together for things to work. Ask yourself, “Why does one batch of gumbo win accolades and awards while the gumbo sitting beside the first tastes flat?” They both share similar ingredients, so why does one turn out to be a success while the other fails? The answer, as most people know, lies in the quality and relative amount of each ingredient.
Notwithstanding the gumbo analogy, the success of a small business depends on the owner’s ability to sustain cash flow while simultaneously balancing the three legs of the business stool: finance, operations, and marketing (sales). At the onset, access to capital (from banks, angel investors, etc.) has been severely restricted in recent years, which puts an even higher emphasis on positive cash flow from the start. As a small business grows and matures, in addition to the ongoing cash obstacle, owners face the challenge of regulations and taxes, healthcare for employees, risk management and others, all while the pace of change is more frenetic in history. As a result, five- and 10-year strategic plans, many would argue, are a thing of the past. Most forward-thinking businesses have moved to 18-month plans, rolling forward every six months to accommodate the rate of business, technology, and market changes.
Why is it so important, for both individual prosperity and the strength of the overall economy, for people to keep trying?
First, small businesses are the driving force of innovation and change. While larger businesses often scale these innovations—technological, pharmaceutical, etc.—after acquiring intellectual property or a small business itself, most of the innovation, new products, new technology, and new services are developed at the small business level. On the personal side, the satisfaction, pride, and independence that comes from owning or participating in a successful small business is hard to match, and something in the sights of all those planning or daring enough to embark on the journey. Indeed, small business ownership is risky and challenges must not be underestimated. But when the ingredients are right and required effort is put forth, the feeling and benefits of success are unparalleled.
What roles do closely held firms play in the economy and why are they important to the Baltimore business community and beyond?
With the exodus of Fortune 500 companies from the region, many would argue that closely held firms are Baltimore’s business community. Recent statistics estimate that there are almost a half-million small businesses in Maryland, more than 130,000 with employees. If you take a moment to think about all of the local businesses with which you deal and have regular contact, you may be surprised at the percentage of closely held firms.
What are some of the relevant topics that you plan to discuss at your membership meetings?
An extensive survey was conducted over the summer and we plan to provide content and explore topics called for directly by Center members and other contributors. Planned topics include growth, organizational development and leadership, marketing, succession planning, strategies for building winning teams, and more. We also plan on hosting guest speakers who will be accomplished business professionals from the region and beyond.
There is a perception that many small to mid-size businesses are struggling in the current economic climate. What are the primary concerns that closely held firms face today and what are the Loyola Center’s plans to address those concerns?
One’s perception depends upon their filter and disposition. Most businesses struggle at one time or another; however, for every struggling business there is a peer or related business that is thriving. Baltimore and the surrounding region is one of the hottest markets in the country. We will infuse speakers, members, and peer groups into the CFCHF for optimal networking and knowledge-sharing. For example, our first meeting in November features an internationally recognized speaker on small business growth strategy, and we are in discussions with two local peer advisory groups and one strategic marketing group on how to create opportunity by combining our offerings from time to time.
Is it necessary to add larger companies to the network, and if so, how will the current membership of firms benefit from these additions? What benefits will larger firms gain by joining the Center?
Larger firms can add a wealth of knowledge and experience to smaller firms. Like a mentor-protégé relationship, the larger firms have often “been there and done that,” having had challenges similar to those of smaller businesses or made similar mistakes. The opportunity for owners and executives of smaller firms to learn from larger firms is tremendous. Conversely, larger firms will also benefit—learning is rarely a one-way path. Whether they are new ideas or services, or approaches to marketing or hiring, closely held firms of all sizes are guaranteed to take away applicable benefits.
Would you encourage all businesses or business people to join peer networks?
Absolutely. I have participated—and continue to participate—in a variety of groups and always benefit and contribute in one way or another. The Baltimore region also offers one of the richest and broadest selections of peer groups and networks in the country, but I encourage both individuals and closely held businesses to seek out networking opportunities everywhere. One must give to get, and learning and networking never stop.