From the Ground Up

by

Published: April 5,1999

If you had a choice, what type of new business or other entity would you choose for your community? Before answering that question let’s consider what I’ll label as the seven characteristics of “the perfect industry.”

1. It would be headquartered in the community. A headquarters is where management is located, where major decisions are and usually where the money flows too. The bank accounts at the headquarters location are huge compared to the branches.

Let’s not discount non-headquarters locations. Branch operations are wonderful. Who wouldn’t want to have a branch of a large international company in town? A Wal-Mart distribution center and a GM parts distributor, for example, create jobs and activity. That’s good. Being branches however means that they are connected to something else. Perhaps a larger branch or even the trunk itself. In a branch the money and the management are centered somewhere else, not the local community.

Any industry sees its headquarters town literally and figuratively as its backyard. It is where corporate visitors will be brought. It is where most employees will be located. In short, it’s where the industry has the biggest investment in terms of real estate and human capital. Consequently more time and effort will be invested in the care and feeding of the local community if its headquarters is located there.

2. It would sell its services or products worldwide. The term “market area” is extremely important to any industry that sells anything. For some businesses, the market area may be only the immediate neighborhood, while for others it might be statewide. Generally, the larger the market area, the more economic activity in the headquarters town. A worldwide company therefore will usually generate more economic activity.

3. It would employ lots of people. In today’s high tech world it is possible to generate a lot of economic activity without employing a lot of workers. From the community’s standpoint, more employees mean more money in the community. For example, five people who each earn $1 million each would probably spend less in the local community than 100 people who earn $50,000 each.

4. It would pay lots of taxes. An industry that pays a lot in local taxes provides a community with a larger tax base thereby making it possible to have more services. However, all taxes are not equal. High property taxes indicate a large real estate investment. High sales or use taxes indicate a lot of economic activity.

5. It would be a good citizen. The perfect industry would be one that is not only located in, but involved in the local community. It would do more than just make contributions to local non-profit organizations, it would encourage its employees to participate in civic activities and even assume leadership roles in the community. It would not tolerate incompetent or dishonest public officials.

6. It would not pollute. The perfect industry would be “green.” There are not many of those. Even a service industry located in a large office building would not be considered environmentally friendly if its thousands of employees drove high-polluting vehicles that caused an air quality problem. That large office building would likewise be a polluter if it had poor indoor air quality.

7. It would be non-cyclical. Boom and bust cycles cause disruption in a community. Real estate prices that go up and down cause uncertainty and fear. The worst fear of any employee is being laid off. Before actual layoffs come rumors of layoffs. The perfect industry would always have steady growth.

AND THE WINNER IS…

Keeping these characteristics in mind, what would you consider to be the “perfect industry” for your community? The answer is different for every community. For, you see, there really is no one perfect industry for every community. The perfect industry for your community is the one that matches the resources your community already has.

Now, just as food for thought, would you rather have a new computer chip manufacturing company, a new four-year college, a worldwide telecommunications company or a new nationally-recognized hospital as the perfect industry for your community?

TRIVIA FOLLOW-UP

Congratulations to Chris in Tupelo for the first correct answer to last column’s trivia question. He knew that the reason Milton Hershey chose the location he did for his chocolate factory was the high production of milk in the area.

Phil Hardwick’s column appears regularly in the Mississippi Business Journal. His e-mail address is hardwickp@aol.com.

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