Even before COVID-19, the fragility of Philadelphia’s small and midsize businesses, which provide nearly 40% of all private-sector jobs in the city, was increasingly a matter of concern among local policymakers. The Pew Charitable Trusts published an in-depth look at these firms earlier this year, finding that they underperformed similar-size businesses in other large cities in a number of ways — with less new business formation and business density, as well as weaker overall financial health.
In addition, research by the Center City District showed that Philadelphia had just 1.8 Black-owned businesses for every 1,000 Black residents before the pandemic, compared with an average of 3.9 in four other major cities (New York, Washington, Atlanta, and Boston). And Pew’s work found that only 6% of Philadelphia businesses with employees are Black-owned, and only 4% are Hispanic-owned.
Now, the events of 2020 have brought the health of small businesses in Philadelphia to the front burner, prompting talk about what approaches would give them a better chance of success. Experts advise that in the short run, an influx of cash is crucial, in the form of government grants rather than loans. But what about beyond their short-term survival? We recently convened a group of advocates and city officials to answer that question; here are some of their suggestions.
Help small businesses get their financial houses in order. Many businesses missed out on the Paycheck Protection Program earlier this year, either because they didn’t have the banking relationships required to access the funds or because they didn’t have the internal systems in place to quickly generate the documents the federal government required.
Understand that not all small businesses have the same goals or face the same obstacles. Some businesses may want to get a bit bigger, maybe adding some employees or buying (rather than renting or leasing) their space; others dream of developing national or international customer bases. Others may simply want a comfortable income without expanding at all. Some would benefit from mentoring; others need help with business plans, access to capital, or skilled workers. The only way to find out what a business wants, or needs, is to ask.
Streamline the city regulatory processes that can make getting started or changing course a hassle. Put teeth into the city’s Business Owners’ Bill of Rights. Set timelines for how long it should take for businesses to get various sorts of approval from city agencies — and make the timelines public and enforce them. During the pandemic, some restaurants received the go-ahead to set up tables in streets within three days, showing that fast approvals are possible.
Make the process of becoming a vendor for Philadelphia city government more accessible and more worthwhile. Unbundle large city contracts so that small businesses have a shot at discrete aspects of a project. When the work is completed, have the city pay its bills more rapidly; for many small operations, cash flow is a real concern, and waiting months to get paid can push them closer to the edge. Better enforcement of city promises to hire local and minority contractors would help as well.
Communicate the importance of small business, and act to demonstrate it. Address the disconnect between what the city says about the importance of small business and what it does to support the sector. The Department of Commerce took one of the city’s biggest budget cuts in fiscal year 2020-21, hampering its ability to help neighborhood business corridors, provide hands-on services to entrepreneurs, and implement business tax incentives. Figure out what the city wants to accomplish when it comes to small and midsize businesses, and establish clear goals with metrics and accountability.
Some city agencies and private organizations — such as the joint venture between the city, the economic development agency PIDC, and the United Way — are trying to develop an equitable entrepreneurship strategy that goes far beyond a mere recovery to 2019′s pre-COVID levels.
Pew will continue its research to clarify the problems facing Philadelphia’s small businesses and identify solutions, drawing on lessons learned in other cities. Strengthening the city’s small-business ecosystem will be central to the city’s recovery from COVID-19. It won’t be easy. But the payoff could be high in terms of job creation, wealth-building, and hope.