Small business growth: capital alone is not enough

Maybe businesspeople don’t live and die by song lyrics, but the old Motown tune “Money” contains one nugget of wisdom for small business owners – “Money don’t get everything, it’s true.”

As Congress nears approval of funds for small business lending, just ask Robin Petravic, owner of Heath Ceramics, why money alone isn’t enough.

“Financing is vital, but equally critical is mentorship from an experienced businessperson who’s been there and done that before."

The mentorship Robin refers to are executive-level volunteers deployed by the Business Advising program at Pacific Community Ventures, a California nonprofit dedicated to creating jobs and opportunities in low-income communities.

Heath Ceramics manufactures handcrafted tile and tableware, serving clients such as Chez Panisse and the Slanted Door. A year after taking ownership of the company, Petravic and co-owner Catherine Bailey sought guidance from PCV on issues regarding finance and human resources. The two former product designers were new to running a ceramic factory and store when they purchased the company.

PCV recruited business executives to volunteer to act as Heath Ceramics’ “Board of Directors” in a roundtable discussion that yielded concrete implementation steps.

Our organization then brought in two volunteers who continue to help Heath. The advisors provide knowledge and perspective in specific areas and act as a resource to call whenever a question arises. Petravic says that PCV advisors help validate his instincts. “When I can’t figure something out or am just looking for confirmation, I call PCV.”

Since 2003, Heath Ceramics has expanded from a staff of 24 to its current 95, tripled employee profit sharing in the past year and launched two new stores.

Like Robin Petravic, who knows the difference between handcrafted elegance and mass-produced wares, most small business owners know their “widget,” the content of their business, but need guidance when it comes to the content of “business.”

Unlike their corporate counterparts where consultants and boards of directors are common, small business owners typically do not have access to networks nor can they afford them. Yet, business acumen is the vital piece that can make or break a business.

Certainly, these businesses need capital to grow and that capital is scarce. I applaud President Obama’s efforts to get capital into the hands of small businesses.

But the equation isn’t as simple as capital + small business = jobs. In addition to creating over two-thirds of net new jobs nationwide, very small businesses also have the fastest rate of job losses, largely because they have a high failure rate. One-third of new businesses fail within two years; over 50% fail within four years. Lack of available capital undoubtedly contributes to failures, but capital alone will not ensure business survival, let alone propel growth.

Pacific Community Ventures’ volunteer-based business advising has proven a model for job creation and small business success. Over 12 years, our programs have helped more than 1,000 entrepreneurs create 5,000+ jobs in California. In 2009, three-quarters of small businesses PCV advised experienced revenue growth. Half added jobs. In the aggregate, PCV’s portfolio experienced 3% job growth, compared to 4% job losses in California. Business advising also provides a way for professionals to meaningfully engage in their community through high-impact volunteerism. 

We are all in this recession together. There’s a lot of business expertise in our country. It’s time for those of us who can to help small business owners. It’s time for our country to have an open conversation about what it’s going to take to fully support the backbone of our economy—small business. It’s time to bring businesspeople helping businesspeople in their local communities to national scale.