Urban revitalization really needs three things: available buildings or property, loyal developers or investors, and the right incentives to make the deal as profitable as a suburban project. Sounds simple enough and, after all, this is the way everyone has been doing it. However, this represents a tactic that does not fundamentally change very much very fast because individual projects don’t get to the root of the problem or offer a sustainable solution.
So instead of searching far and wide for more of the same benchmarks we all discuss over and over again, I thought it would be fun to take three exciting but basic ideas, mush them together and see if a new strategy emerges.
I’d like to introduce B.E.G.-2015!
B.E.G.-2015 is a plan to:
a) Attract smart people or BRAINS to Memphis.
b) Inspire commitment or ENERGY from existing Memphians to finish something big.
c) Exploit profit motivations or GREED to keep the process rolling along.
Phase One – BRAINS
In order to spur business growth, backfill empty office space, diversify our economy, build a culture of innovation, create a cool youthful atmosphere and set an example of why education is important, all we have to do is pay really smart people to move here. I AM NOT JOKING.
The Contest
Thanks to Tommy Pacello for the idea of creating a contest like the X-Prize where $10 million was offered to the first organization launching a reusable ship into space twice within two weeks. He thought we needed a cool contest for innovations in urban planning. I think we need a business plan contest on steroids.
B.E.G.-2015 will offer ten $500,000 prizes to winners of our business plan contest each year for five years. We will run ads in science and business publications soliciting entries. This will give Memphis much needed positive exposure. We will run ads in the most influential print medium left… college newspapers. This will make Memphis look exciting to future grads, even if not entering the contest. And we will send out recruiters to explain the contest at Ole Miss, Arkansas State, Vanderbilt and other schools close enough to be family but far enough away to be ignored until now.
The best start-up business plans will be judged by experts, local academicians and business leaders. The process can be run by Emerge Memphis, the FedEx Institute of Technology at the University of Memphis, and BioWorks, since they are already in this business.
Johnny, tell them what they’ve won!
Each winning business plan or contestant team wins the following:
- $50,000 cash up front and $10,000 at the end of each of the next five years
- 5-year lease on 1,500 square feet of office space valued at $135,000
- Legal services valued at $80,000
- Marketing services valued $80,000
- 5-year lease on a 2-bedroom apartment valued at $75,000
- Accounting services for five years valued at $30,000
- Semi-annual funding pitch to 15 qualified potential investors
Total retail value of this package… over $500,000!
Wow, how do we do that?
Today the Downtown office market has over 450,000 square feet of space available and the Airport Area has almost 650,000. This is the equivalent of two empty Clark Towers. I suspect five downtowners and five property owners near the airport would donate space for this endeavor in exchange for exposure, animation in their buildings and the chance to hook the next big thing for longer than five years. Half the businesses would be clustered in one area and half in the other. All together: 10 businesses a year X 5 years = 75,000 square feet total or less than 7% of available inventory. I think if divided amongst the different properties, they’d do it.
I also believe that in the spirit of community, in the spirit of winning awards, and in the spirit of establishing future business, a handful of Law Firms, Marketing Firms and Accounting firms would be willing to let some young partners work with these businesses to become established in Memphis.
Last time I looked, for-rent signs were popping up on everything. I bet we could find some apartment managers who would love telling prospective tenants that the President and CEO of SuperFantasticNewCompany lives right down the hall.
Finally, we have no shortage of successful people in this community that would entertain investing in the next wave of success… especially if they are prequalified, inspired with seed money, have professional assistance and don’t have to sweat rent for five years.
This leaves the cash prize of $100,000. Or more accurately: $100,000 x 10 winners x 5 years = $5,000,000.
How do we find $1,000,000 a year to fund this? First, let me say that this community doles out far, far more than $1,000,000 to less fruitful ventures. Next, we freely give incentives to big businesses moving from one side of town to the other and now we are talking about giving incentives to big businesses to just not do anything. Also, for perspective, we spend $600,000 a year maintaining an empty Pyramid, are putting over $1 million into a golf course sprinkler system, and are spending $30 million for Beale Street Landing. Finally, I think we have some interested parties with existing funding that could get creative about making this happen.
Small businesses are the largest employers in America. Locally grown businesses employ far more people than the one big company that could be wooed to Memphis from another city. This contest should be appealing to The State of Tennessee, Shelby County and City of Memphis economic development departments. I believe, with no doubt in my mind, each could come up with $250,000 a year for five years. The remaining $250,000 could perhaps be split between non-profit entities like the Chamber of Commerce’s Aerotropolis initiative and the Center City Commission.
Come to Memphis & Win the M-Prize for Brains
Think of the creative minds bumping into each other on the street and exchanging ideas. Think of the line for job applications. Think of the books written about the next great Memphis business breakthrough.
This sounds silly at first but the contest could be fun, would drive a tremendous amount of publicity and, in the end, produce a few new businesses we could all be proud of.
In the next post, we’ll discuss the biggest untapped resource in town… Energy.
This plan only suffers from you assuming people/businesses can be motivated by such a long term speculative goal. Lots of the money you compare this financial outlay to is most likely based on favors and politics, which would probably convince me more than your altruistic vision. Hopefully you can disprove my cynicism one day, but it sounds like pie in the sky to me.
You are right on the money, Roy… it is pie in the sky and why not? Its fun to think about an idea becoming the next big thing and how much more fun would it be if someone offered you a half-million to do it in their town?
Seriously, the favors and politics may not be bad. Bringing in a smart business-minded endeavor partnered with both other business favors and political backing sounds like what we need to make something work. Mount that on top of an altruistic vision and you might just have the perfect community supported enterprise. One where everyone has a chance to win.
Isn’t this what Chambers and Economic Development departments and neighbors are supposed to do? Work together, make some money, pay some taxes, eat hot dogs at ball games, etc.? This isn’t crazy, it should be normal.
Good idea but I think you’re a little too optimistic. I highly doubt any landlord, for office space or apartment, would sign up for a guaranteed loss for five years. The potential payoff is far too speculative for five years of straight loss.
I also think you’d limit yourself to people with some assets to begin with (beyond a big idea,) because $50,000 is certainly not going to be enough in start up costs for almost any business, even if rent is free and you get free marketing/legal aid.
Maybe if you shoehorned it into something with resources already in place like Emerge Memphis where they could pool resources with and cut down start up costs…. You should keep exploring this, it is a great concept!
I agree, Zach, Emerge, FedEx Institute, Bioworks all should be leaders in something like this. They are the experts and I love the idea of pooling/aligning resources.
Regarding the limitations of the package… Alot of people have done more with less. Got to start somewhere and this is way more than anyone has been willing to pony-up before. How’s that for a string of cliches? Really, we don’t want to give anything just to give it. A) The prospective business would likely need to have other success factors (like additional backing) to win and B) we are still talking in small business terms with cash and services having considerable value.
You may be right about the landlords BUT I still think the amount of space is a drop in the bucket for markets that have been 20% to 40% vacant for a long, long time. It’s not a loss if the space is going to be empty anyway. There is not an immediate wave of leases about to rush over us… unless we give it a push with something like this. I bet one or two would bite and then the others would follow for fear of being left out. Surely some will see the end reward?
To touch on the feasibility of the start up money/package, I guess I don’t know enough about the tech sector that you want to attract, but it seems to me if you need more than that your business plan probably wouldn’t have been selected, but I’m arguing too many hypothetical ideas.
So John, when is the pitch meeting with fed-ex, or are you just hoping someone else will do it?
Nobody said this was targeted ONLY to the tech sector. That’s part of it but we could have all sorts of businesses submit. Financial, service, agricultural even. If tech-only was implied, that wasn’t the intent. Personally, I want to fill office space. Locally, we need an emphasis on smarter jobs as opposed to box-toting jobs that we have plenty of. But not tech to the exclussion of anything else.
Once all the geniuses on this blog have put in their two-cents, perhaps the pitching will begin. Get your business plan ready!
Phase two of the BEG 2015 plan is up. Check out that post on Energy and continue the dialogue.
John: Thanks for always sparking our thinking in new and provocative ways.
John: You are on to something with the 5 year free lease. While it may not be feasible from a classic business standpoint, the reality is that commercial rents and leases are siphons that suck the energy out of small businesses-for that matter for homeowners as well.
One of the best books that I have read regarding land is a book called “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.”
This is a must-read book for truly understanding how wealth was created in this country and for understanding our current economic climate. The premises of book’s thesis which is based on a study that spanned over two decades is that by creating a formal/legal property structure where land could be easily capitalized, we were able to mysteriously assign value to land where there was previously none. It took me a couple reads on that chapter to truly appreciate that point.
While how we “acquired” the land from the Indians is a whole other story, what is often lost is the fact that much of land ownership was acquired by squatting followed by legal documentation/ownership (see the Homestead act of 1862 http://www.nathankramer.com/settle/article/homestead.htm). Within 5 years you could have 162 acres for a nominal fee which was then revised to have no fee!
So you settle the land and then assign it a monetary value and suddenly you have equity from thin air! This created unprecedented wealth and one could imagine that as long as there was land there was wealth to be created.
This all good and well until we run out of land and now the wealth pendulum starts to swing the other way and our hard earned money starts to sink mysteriously back into the land to pay our rent/mortgage as quickly as it appeared from back when land was being settled.
What you realize is that land was not earned it was settled and capitalized and yet today we who were not privy to settle land are now paying most of our working lives to have a piece.
So as long as we have land in a few select “hands” the money generated from work/ production or businesses will flow into those hands of banks or large property owners. A subtle thing happens during recessions or depressions, huge wealth transfer occurs when those with capital can buy off cheap land and their siphon on capital becomes that much larger as small businesses look to lease, rent or take out a loan on the land.
If we truly want to see our economy turn-around then we must have the land start giving the capital back to businesses but that will require the presence of “free land” again which I don’t see happening anytime soon. Just my two cents.
I think a larger issue about vacant rental properties throughout the city is that the tax code needs to be restructured to encourage owners to get their open spaces occupied (whether by new businesses or artist studios, etc.). It seems like the opposite is the case — there are actually disincentives to offering open spaces, for John’s plan as well as for occupants more generally.
Scott: A great idea that traces back to the concept of land rent (http://www.answersanswers.com/html/supporters.html).
Business space would become quite cheap per your idea as landlords would divest themselves of inactive or “nonproductive” space that was more expensive then productive space. In practice, it would happen about the same time the bank dropped my mortgage.
Still it’s how we need to be thinking if small businesses are to have a chance in our city and at large. It’s all about land IMHO.
I think we need some conversation about what it’s really all about. For instance, we hear that it’s all about rent or land. We hear it’s all about taxes. I advise people frequently that retail business is really all about the customer/customers.
If anybusinessusa is going to succeed, what is it really all about? Would be neat to have a list to compare thoughts and find simple things we could improve in our community.
I think I use the word “all ” too much. Your right, it’s a number of factors-I should know better.
No appologies needed here. Everyone has something that they think is a key thing and can, for the most part, tell you why. This is what we need. Some things are big hairy difficult things… but I am always surprised that many have solutions… let’s check those easy ones off and move on to the hard stuff.
I say we encourage people to tell us what it is ALL about to them and why.