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December 02, 2019

Why Entrepreneurship Is the Key to Developing Local Economies

Everyone wants their local economy to flourish, since everyone within the community benefits from healthy economic conditions. But economies are complex systems, and it’s hard even for seasoned economists to fully predict or nurture them on a large scale.

However, there are some influencing factors that seem universally positive for local economies. For example, entrepreneurship may be one of the most important keys for developing a local economy; the more entrepreneurs we have starting new businesses, the better our local economic conditions seem to be.

That’s one reason why Venture X is offering complimentary coworking during Global Entrepreneurship Week; we’ll be releasing the scheduled programming for the week soon. In the meantime, you can take advantage of programs like Atlantis Networking to meet other entrepreneurs, or our Venture X Lunch and Learn series.

But why is entrepreneurship such a powerful influence on the economy, and what can we do about it?

The Economic Effects of Entrepreneurship

There are a few distinct and immediate effects of entrepreneurship that positively influence the surrounding economic conditions:

·         Job creation. Research shows that new businesses are responsible for nearly all net new job creation, and 20 percent of gross job creation. Job availability is one of the most important variables for measuring the health of a local economy; when unemployment is low, conditions are good, and when unemployment is high, conditions are bad. This suggests that new firms, and not just small businesses, are disproportionately responsible for the addition of new job opportunities. When entrepreneurs feel comfortable starting a business and making new hires, unemployment precipitously drops.

·         Finding needs. The whole point of entrepreneurship is to identify some key product or service that people need, and provide it to them at a reasonable rate. If you can do this, you can start and grow a successful business. Without entrepreneurship, those needs would go unmet—which means people would be spending less money and experiencing fewer benefits. Entrepreneurs seek to fill this gap, encouraging more spending and simultaneously addressing more consumer needs.

·         The “up or out” dynamic. New startups fall into an “up or out” dynamic, which naturally contributes to positive economic development. If a startup starts contributing positively to the economy, generating lots of sales, making lots of hires, and eventually expanding, it’s going to grow, eventually becoming a larger corporation and impacting the economy even further (and in more positive ways). If the company isn’t doing much for the economy, with low sales and few hires, it’s eventually going to fizzle out. This system naturally encourages its most positive economic contributors to thrive.

·         Economic diversity. There may be a Starbucks on every corner of your city, but isn’t it nicer to look at all the unique coffee shops that have sprouted up from local, independent minded founders? These cafés offer a similar environment and similar range of products, but completely unique décor, special products, and a “feel” that’s all their own. That’s because new entrepreneurs try their best to do something different, and if you have enough entrepreneurs in a given area or in a given industry, your economic diversity is going to increase. Consumers will have more choices, prices will be more competitive, and your city will be more appealing and unique to outsiders. In other words, an abundance of independent minded entrepreneurs will substantially benefit to the economic diversity of your area.

·         Competition. Though as an entrepreneur, you might see competition as a threat, the reality is that competition is a good thing for the local economy at large. More competitors in a given sector means prices are kept in check; companies are incentivized to offer the lowest prices they can (while still making a reasonable profit), so price gouging can’t take place. Competition also encourages innovation. There’s no better way to outdo a competitor than to offer something they can’t to consumers. Innovation, in turn, introduces more novelty to the economic environment, and in many cases enables the conservation of resources. In other words, entrepreneurship forces competition, and competition forces business owners to find more efficient ways of doing things. That efficiency typically has a ripple effect that positively affects everyone in the local area.

·         Individual opportunities for progression. Entrepreneurship is also a way for people to take charge of their own economic future. Rather than being forced to choose a career path in some other person’s business, an individual can choose to start their own enterprise. This enables them to do the work they want to do, work the hours they want to work, and in many cases, start generating enough revenue to fund a retirement plan—or build a business they can sell for a fortune.

Supporting Local Entrepreneurs

Local economies flourish when entrepreneurs feel comfortable enough to start businesses. So what can we do to improve entrepreneurial conditions and encourage more entrepreneurs to get started?

·         Entrepreneur-friendly laws and regulations. At the regulatory level, the more laws we have favoring entrepreneurship, the better. It needs to be easy and straightforward to create a business, or people won’t be willing to do the extra work, and we need to have incentives and protections in place to reduce the individual risks faced by entrepreneurs as well.

·         Coworking spaces and entrepreneurial environments. Even more importantly, we need to have spaces where entrepreneurs can connect with other professionals and start doing their work. Downtown office spaces are expensive and networking events are infrequent, so coworking spaces are often the best way to fill the gap. Coworking spaces are inexpensive, flexible workspaces that any entrepreneur, freelancer, or professional can use to advance their career—and contribute to the community at the same time. Venture X is one of these spaces, and we’ve had such a surge of interest that we’re opening Phase 2 of our space on November 1st! With 6,500 square feet and 20 new offices, our Phase 2 building will overlook the new dancing fountain in Rosemary Square. You can contact us to schedule a hard-hat, behind-the-scenes tour to learn more!

·         Local shopping. As an individual, you can’t immediately or easily change the law, nor do you likely have the power to start your own coworking space. However, you can choose to shop locally, and spend your money at businesses run by local entrepreneurs rather than major national corporations. Every little bit counts to nurture individual entrepreneurs.

If you’re interested in getting involved with your local entrepreneurial community, there’s no better place to start than one of West Palm Beach’s most popular coworking spaces—Venture X. Contact us to schedule a tour today, or learn how you can get involved in our entrepreneurial community!