There was an article in the Times-Union yesterday entitled, "Economy looking up in the Berkshires" (Eric Anderson, Business Editor). Mr. Anderson cites "blockbuster events, warm, dry weather, and a recovering economy" as being the reasons for the boost in tourist activity here this summer which has helped the local economy. He specifically cited the Wilco event at Mass MoCA, Tanglewood's strong summer season, and a "40% rise in ticket sales" at the Williamstown Theatre Festival as being some of the reasons behind the stronger than expected season.
Yet, for those of us who live here full-time who aren't involved in the tourist industry or cultural venues, the economy in the Berkshires isn't all roses.
I recently spoke to a realtor who told me that over 105 homes were on the market just in Williamstown. That was MLS listings alone and didn't include FSBO and Assist2Sell homes. A more typical number of homes on the market for Williamstown would be in the 40-60 units range.
The hospitals in North Adams and Pittsfield are both in deep fiscal distress.
My feeling is that it is incumbent upon those of us who live and work here to take a deep look at how we got to where we are in terms of our local economy. There is all kinds of data available that speaks to the fragility of economies who rely solely on consumptive industries like tourism, retail, and culture. We need our elected leadership and appointed personnel to work with local businesses and institutions on formulating a strategy that will bring real jobs here over the next 10 years.
Sustainability isn't just about the environment. Continuing down the same path we are on is not the answer.
I read with some interest an article on iBerkshires entitled Economic Expert Says Pittsfield Economy Weakened (Nicole Dupont, 8/2/2010). The picture presented by Charles Murray of the American Institute for Economic Research is not a pretty one.
“We look at wages and employment,” he said. “And we’ve concluded that the strongest areas have multiple primary industries such as farming, transportation and manufacturing. The weakest have smaller populations, an overdependence on a primary industry, or are overly reliant on consumptive industries such as tourism, construction, large local governments, services and retail trade.”
Later in the article, Ms. Dupont quoted an interesting comparison Mr. Murray made between the economies of Pittsfield and Fargo, ND. Evidently both cities were ranked similarly in 2004 with Pittsfield at #100 of the 366 metro areas studied and Fargo at #95. Since then, Pittsfield's economy has fallen to #245 while Fargo's has improved to #25. Mr. Murray attributed this substantial shift to Fargo focusing on primary industries (manufacturing, agriculture, and finance) while Pittsfield focused on consumptive industries (tourism, retail, and culture). Further, Mr. Murray suggested that our aging population locally is also a substantial drain on our economy. While not providing a comparison with Fargo on this factor, Mr. Murray pointed out that Pittsfield's aging population cashed over $400 million in Social Security checks in 2009.
So, where will Pittsfield and the rest of the Berkshires be in 2030 or 2035? Based on our recent past, the trend lines are not encouraging. Yet, on the one hand, Massachusetts was ranked a stunning #5 of the 50 states in "best places to do business" study by CNBC recently. And, on the other hand, for the "cost of doing business" portion of CNBC's evaluation, MA ranked #45 out of 50. Cost, of course, is a huge driving factor in any corporate investment decision. MA just isn't competitive for new investment by primary industries and we have no raw materials to exploit on the scale and scope required for massive investment. If we are going to reverse the trends, we need to address the fundamental cost of doing business issues that we have allowed to flourish here over time. (It was really easy to write that last sentence, but boy is it a mouthful!)
The 6th grade class at Williamstown Elementary School will have 45 kids in it this year, which is down from about 90 just 4 or 5 years ago. Half! Are other communities in Berkshire County seeing the same thing? Are we really on the right track here? We seem to know how to bring people to Berkshire County for a weekend in October, but we can't seem to figure out how to bring them here for a lifetime.
Can you imagine? Massachusetts was ranked #5 in CNBC's recent survey of the top states for business in 2010. While it should come as no surprise that the top four are:
1) Texas (1508 points)
2) Virginia (1477)
3) Colorado (1456)
4) North Carolina (1381)
I have to admit that as a small business owner who consults with a lot of other small businesses I am stunned about Massachusetts earning a #5 ranking, up from #8 in 2009 and #12 in 2007. To hear most people talk, Massachusetts is one tough place to do business. How did it happen?
Let's dig into the numbers a bit. According to CNBC.com, the states are ranked on 40 different metrics in 10 key categories. The maximum score possible is 2,500. #1 Texas scored 1,508 while Massachusetts scored 1,375. Although Massachusetts ranked relatively low in such areas as Cost of Doing Business (#39 out of 50), Transportation & Infrastructure (#39), and Cost of Living (#40), we ranked very well in such areas as Education (#1), Access to Capital (#2), Technology & Innovation (#3), and Quality of Life (#6).
Berkshire County's neighboring states certainly do not fair was well. New York is ranked #24, Connecticut is #35, and Vermont is #37. However, New York was second only to Pennsylvania in terms of year over year improvement in overall rank. Pennsylvania moved up from #33 in 2009 to #20 in 2010, while New York improved 12 spots from #36 to #24. PA's Economy improving from #37 to #15 fueled their big move. Likewise New York's economy improving from #20 to #2 drove their big gain in overall rank. At the other end of the spectrum, Vermont was the biggest decliner in 2010 versus 2009, falling seven spots from #30 to #37.
Looking at the specifics of how NY, CT, and VT faired ... New York is ranked #50 in Cost of Doing Business, #49 in Workforce, #45 in Business Friendliness, and #43 in Cost of Living. Those 4 low scores really hamper New York's ability to compete. Connecticut is #47 in Cost of Doing Business and #45 in Cost Living. Vermont went from #35 in 2009 to #42 in 2010 for the Cost of Doing Business factor and from #36 to #40 on Access to Capital which contributed to the decline in their overall ranking.
The rest of the Northeast/New England struggles, too. New Hampshire is overall #19, Maine is #39, and Rhode Island is #49 (ouch!), making Massachusetts truly the jewel of the Northeast. So, while it is expensive to do business here, you get what you pay for:
- an educated workforce who enjoy the quality of life they get here
-a tradition of incubating innovative, high-tech companies in and around our world-leading education institutions
One of my most important jobs as a business consultant is to listen. I go to networking events. I go to seminars. I meet with several different types of business clients each week. In general, I encounter people who seem to fall into two different camps:
Business owners who are excited about their work, are engaged in their businesses and actively participate in their professional communities.
Business owners who are tired, frustrated, and depressed - who have forgotten what they once loved about their chosen profession and feel enslaved by it.
Working with people from Camp#1 is exhilarating and inspiring. The collaborative work I do with the crew at Berkshire Direct is a privilege. In fact, our team at Custom Business Solutions is lucky to be able to work with a long list of clients that fall into that camp. We have diligently built a list of positive, motivated clients and partners.
Working with people from Camp#2 is also exhilarating and inspiring, but for different reasons. When I have the opportunity to work with small business owners from that camp it is because they have finally asked for help. Most of the entrepreneurs I encounter who feel out of control, helpless and stuck in their businesses either stopped analyzing the numbers when times got tough or didn’t know how to do it to begin with. There is no shame in not being an accounting expert when you start your own business. I wouldn’t call myself a very good plumber or electrician either, and like most people, I don’t call in the pros until something has really gone awry (and is maybe flooding the basement). We all put off asking for help in different areas.
Answer the old standard questions:
- Are you running your business or is it running you?
- Who’s driving the bus? (Do you have a vision? Do your people know it? Are they helping you move the business in the right direction under your leadership?)
- Where do you want to be in 5 or 10 years and do you know how you’re going to get there?
It’s scary to face reality sometimes, especially when we’ve taken a beating in a tough economy. It’s impossible to think creatively and to be excited about business when we are worried about being able to cover payroll and the mortgage. Knowing the truth and making a plan always feels better. It’s about taking control and taking responsibility for the future of your business and ultimately for your family.
Look at the numbers with a professional. Most of us will sit down with you for an hour and offer you a first look without it costing you anything but the time. Ask your accountant, your banker, your peers - someone you trust to give you an objective opinion or to recommend someone who can help you.
If your books are not in order enough for you to share your financials then it’s time to ask for help there. If you don’t know the truth, how can you fix what’s not working? It is usually cheaper in the long run to outsource those pieces of the business that you are not good at.
Once you know the truth and have some objective support, make some decisions, finds ways to adapt to the economic changes, look at selling, refinancing, or renegotiating your relationships.
You will feel better about your work. You will feel supported. You will know where you’re headed. And all of those “good feelings” come not from analyzing your emotions about what is going wrong with your business but instead they come from looking at the numbers and the cold hard facts. Only then can you solve what is stopping you from thriving in your business.
Ask for help. Look at the numbers. Take control. Breathe.