Business Support 101

Europe’s cities provide fertile ground for businesses to start and grow, and yet business support is rarely a statutory function of municipalities. Despite this, many local authorities invest significant resources to develop and deliver impactful programmes of business support. This contributes to the development of the local economy and creates jobs and prosperity for local people.

Business support was the thematic focus of the TechRevolution 2.0. network’s meeting in Alytus, Lithuania. This article considers 8 things that cities can do to support local businesses.

Define what business support means for you
When faced with doing some research into London’s business support landscape a couple of years ago, I found myself asking the question: ‘What even is business support anyway?’ After a great deal of discussion and consideration we came up with the following definition:

- Would normally be considered business support
- Would not normally be considered business support
- All business support schemes offered free of charge to the business
- Paid for schemes and one-off consultancy, unless part of a programme of services
- Paid for schemes if they offer a programme of support and work with the business, not for the business
- B2B support e.g. SEO support, digital advertising, agencies, consultancies
- Financial providers e.g. angel investors, banks, crowd funders, VC community
- Some financial providers e.g. 20%+ interest rates, pay-day load providers
- Open workspace providers if they provide a programme of business support for members
- Commercial workspace providers if they don’t provide business support to the wider community
- Umbrella organisations and networks
- Individual lawyers and accountants
- Education institutions

This definition might not work for all cities, but it is important to be clear, from the outset, how your city defines business support locally. It is also advisable to map what is already out there in terms of business support. You may be surprised what you find, and it will be important to ensure that you align the municipality’s offer with existing provision to add value and keep things simple for the user.

Segment your market
Businesses come in all shapes and sizes. From traditional manufacturing companies to hairdressers to fintech start-ups and beyond, it is important to segment the businesses before designing a programme of support. For example, it can be useful to segment local businesses by sector, size, sage, location, ownership and legal structure. These are explored further below.

Sector - it might be useful to use a recognised classification system for business activities or occupations. The EU’s ‘Statistical Classification of Economic Activities in the European Community’(otherwise known as NACE) provides a useful framework, although cities may prefer to use a national classification system.

For size, the European Union’s definition is also helpful as set out below. However, for most cities surprisingly few companies could be considered medium or large so it is definitely worth considering a further breakdown e.g. to include companies with 1-5 employees and freelancers.

- Company category

- Staff headcount

-Turnover or Balance sheet total
Medium sized
<250
< or = 50meuro
< or = 43meuro
Small
<50
< or = 10meuro
< or = 10meuro
Micro
<10
< or + 2meuro
< or = 2meuro

There are many different frameworks to determine the stage a company is at in its life cycle. Often, people use the number of years since company registration as a benchmark. However, for tech companies, it’s more common to refer to where the company is on its investment journey e.g. Seed, Venture, Growth, Established, Zombie or Dead (as used by Beauhurst). Harvard Business School’s 5 stages of small business growth are also useful here:

When it comes to location, the classification will vary enormously from city to city and it is important to use a methodology which fits with the way the rest of the municipality functions. The NUTS classification system may also be useful here.

There is less written on different types of legal structure and ownership, but cities want and need to understand e.g. how many companies are profit-making compared to those which may be not-for-profits or social enterprises. Usually, this data is available at a national level. As the importance of diversity, equity and inclusion becomes more recognised, cities may also find it useful (where it is possible) to collect data on company ownership by e.g. age, gender, disability, race or other protected characteristics.

Understand your customer
Once you have built a data-driven picture of the different businesses in your city, it is important to do some work to better understand their needs, challenges and pain points. This is often done through a combination of employer research tools which may, for example, include an annual business survey, focus groups, business events and anecdotal information from business meetings.

Most business support programmes will also need a more detailed assessment of business needs to identify challenges from the outset as these will be different for each person, team, or business, depending on where they are in their entrepreneurial or business journey. The diagnostic often includes an evaluation of a range of potential individual barriers to entrepreneurship and business development (e.g. confidence, resilience, lack of access to social, financial or human capital, lack of networks within the ecosystem etc). It will normally look at the venture from the demand side (the problem, or initial conditions); the supply side (the solution & offering) and the link between the two (drivers, insights, or reasoning on how the venture will create economic value & impact), the beliefs (people & culture).

You may also choose to explore what businesses perceive to be the gaps in the local business support landscape e.g. linked to access to markets, talent, space, funding, thought leadership activities or the need for business-friendly council services.

Target your support
Once you are clear on the needs and challenges of local businesses, you’ll need to decide your key priorities and where you believe you might be able to add most value.

For tech and digitally enabled companies – the focus of the TechRevolution network - support would normally fall into the following brackets of activity:

- Pre-start support – enabling local people to understand and explore what it takes to develop and grow a business

- Ideation – supporting individuals or teams of founders to develop and test a business idea which responds to an identified problem or challenge.

- Pre-accelerator - focused on early-stage start-ups, taking them from concept or idea stage to the development of a minimum viable product.

- Accelerator - typically provides space to start-up businesses or existing businesses (which might have been operating for several years) with the potential for fast growth and good financial returns. A key characteristic is the fiercely competitive nature of the selection process and dedicated support provided by the space management and/or investors who working closely with the business to guide their growth. In return for access to space and business support an accelerator often requires an equity stake. This support lasts for a defined short period, at which time the investor will decide to expand their involvement or exit the business, either of which will result in the business moving on from the accelerator space.

- Incubator - provides workspace designed to actively support the growth start-ups or a business in its early stage of development. A distinguishing feature of an incubator is the provision of business support. Businesses leasing space in an incubator are chosen through a competitive application process and do so to access business support facilities which may be provided by the incubator management or their partners. This support is often (but not always) provided in return for a share in profit or minor equity stake in the business. Funding-ready programmes - supports companies to discover & understand potential funding opportunities e.g. from investment, grants & loans, crowdfunding etc and then prepare applications and pitches for funding.

More generic business support programmes often focus on specifics areas of running a business e.g. access to (new) markets and marketing, finance, leadership, culture, sustainable growth, business growth planning, internationalisation etc. And, for several years now we have seen an increase in the number of support schemes enabling more traditional companies to develop a digital offering.

Be clear on why you are supporting businesses
Above we consider a range of different business support options. It is likely that most European cities will have limited resources to start and deliver a comprehensive programme which covers all these angles. So, it is essential that cities are clear on why they are supporting businesses in the first place. This will normally be aligned with the overall strategy for the city’s economy and may, for example, be linked to the need to grow more and better jobs or to adjust the local economy to structural change caused by the decline of traditional industry. You may simply want to ensure that local businesses are able to access council services efficiently and effectively. This was certainly the case in Alytus which used its participation in the TechRevolution 2.0. network to develop a OneStopShop for businesses and streamline the way they currently access the 40-odd business services provided by the city.

In any case, it is advisable to set out your desired outcomes at an early stage and to put in place a system which enables you to establish a baseline (linked to the business research point above) from which to measure and monitor progress towards these outcomes.

Start small and stay agile
For many smaller towns and cities in Europe all of this may feel quite overwhelming. It is however perfectly possible, and highly recommended, to start small and take an agile approach to business support. For example, a city may decide that its core priority is to enable migrants and refugees to start new businesses. In this case, the following approach might work:

- Agree desired outcome – in this case this may be e.g. around improving the integration of migrants and refugees and providing them with a viable economic future as well as enabling them to contribute to the growth of the local economy Identify local community groups working closely with migrants and refugees

- Actively listen to what they believe is needed within the community

- Work with them to co-create and test a small-scale project which takes say 10 individuals through a pre-start and ideation programme, perhaps delivered across a weekend Use this experience to get closer to the customer / user and gather qualitative and quantitative data on their needs, challenges and priorities

- Learn from this small-scale action, iterate and adapt as appropriate and then decide whether to pivot to a different approach or persevere with this one maybe doing it on a larger scale or working with a different community.

In short, in line with the lean-start-up approach, cities need to Build – Measure – Learn when it comes to business support. This will also enable them to respond to the constantly evolving needs of local businesses and avoid wasting money on interventions which have limited impact.

Explore external funding opportunities

The URBACT Toolbox is packed with some great guides and templates to help towns and cities find and access external funding. They were developed by URBACT experts in response to popular demand for more guidance in getting local plans and projects off the ground and into action. This will be particularly helpful as local authorities across the EU embark on new projects in the 2021-2027 programming period.

So, depending on the type and scale of business support project developed, there may well be an opportunity to bid for external funding to at least co-finance delivery and it’s well worth exploring these to leverage maximum value.

Remember, it’s a marathon, not a sprint

This article has provided a range of steps that a city can take to support local businesses to survive and thrive. Most cities that do this well have developed their programmes over several years and often refined them over decades. For the lead partner of the TechRevolution 2.0. programme, the recognised good practice, which is now a core council service - Enterprising Barnsley – started as a small European-funded time-limited project. This has now evolved into a plethora of interwoven activities which collectively employ around 30 people and support businesses to start, invest, innovate and grow in the town. This has all happened over a period of more than 12 years. It has taken a huge amount of energy and commitment from the local team who can now proudly say that over the last 4 years alone they have helped to attract over 120 companies to the area and secured over £62.3m of private sector investment, creating more than 665 new jobs.

So, if you’re considering where to start when it comes to business support, remember that you have to start somewhere and from small seeds great things can come.

Here are 8 things cities can consider to support local businesses to survive and thrive:

- Define what business support means for you
- Segment your market
- Understand your customer
- Target your support
- Be clear on why you are supporting business
- Start small and stay agile
- Explore external funding opportunities
- Remember, it’s a marathon, not a sprint