Economic Development Reference Guide

Business Retention and Expansion

Healthy communities have strong, healthy businesses. As competition among communities for increasingly footloose businesses heats up, business retention programs have become the most popular economic development efforts of communities nation-wide. While retention programs emerged in response to business defections and the negative impacts those defections have on the local economy, they have increased in importance as communities recognized that real job growth over time comes from local business expansion. Surveys of U.S. economic development organizations rank it as the number one economic development activity.

Business retention programs assist small businesses to prevent their relocation and to help them survive in difficult times. Retention programs typically involve partnerships among public and private organizations that assess the assets and opportunities of individual companies through periodic surveys, interviews, and visitations. The purpose is to establish relationships between community businesses and economic developers to strengthen existing companies, establish early warning systems to flag at-risk businesses that require assistance, and ensure that public programs meet local business needs. Business retention initiatives usually include a mechanism for linking expanding businesses with public programs designed to mitigate growing pains and regulatory issues.

Trends in Business Retention and Expansion

BRE is the one of the main priorities of state and local development professionals. Local businesses have strong community ties, reducing the risk of leaving and BRE programs are often less expensive than business attraction, yielding more jobs on average.

• Low-interest loans, available to businesses purchasing land, refurbishing buildings, and new equipment.

• Bond programs are created to help lower the cost of borrowing for a business; the interest on a bond is much lower than on traditional bank loans.

• Increased use of zoning to encourage and discourage desirable and undesirable business expansion and retention

• Low-cost training provided for the workforce of businesses and industries, allowing them to remain competitive, this is usually provided locally through a variety of counties or state programs.

• Tax credits for businesses encouraging business retention and expansion.

• Business cluster group strategies are increasingly used to assist BRE. Sharing concerns such as infrastructure, zoning and quality of life enables a more powerful voice to be heard, influencing business climate improvement.

• One-stop permitting centers enable businesses to begin or expand operations quickly.

• Ensuring business finance availability is an important part of BRE. Many cities now work on identifying and promoting financial incentives often through one stop services linking companies to services in the key areas of:

  • Finance
  • Incentives
  • Taxes
  • Real estate
  • Workforce issues
  • Regulations
  • Technology

• A recent trend in BRE has been further expansion of Planned Manufacturing Districts (PMDs) which create tiered zoning reserving the core of an area for manufacturing and creates a buffer area for commercial use, separating residential properties from the heavy manufacturing area. This allows for heavy industry and upscale residential property to coexist, reducing sprawl.

Benchmarking and Evaluating Business Retention and Expansion Programs

Business retention programs are concerned with relationship building, so they should have an important influence on how businesses view their community and the activities of the local government.

Business retention programs may not be directly involved with service provision, but they need to know how to get a business the assistance it requires. The degree to which business retention programs are linked to other community programs such as loan funds or workforce training initiatives can have a significant impact on program effectiveness.

Quantitative Measures

• Number jobs created/retained
• Number of retained businesses
• Cost per job created/retained
• Number of businesses visited
• Number of businesses surveyed
• Number of at-risk businesses assisted
• Percent of jobs held by local residents/low income persons
• Average salary of jobs created
• Spinoff private investment

Qualitative Measures

• Business perceptions of local government
• Business perceptions of the community
• Relationship between business retention programs and city services available to businesses (e.g. workforce development initiatives)
• Involvement of assisted businesses in other community activities

Web-based Resources for Business Retention and Expansion

• U.S. Department of Commerce
• U.S. Department of Commerce International Trade Administration
• U.S. Department of Labor
• U.S. Small Business Administration
• U.S. Small Business Administration Office of International Trade
• Business Retention & Expansion International (BREI)

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• Economic Development Strategic Planning
August 5-6 | San Francisco, CA

• Technology-led Economic Development
August 26-27 | Lansing, MI

• Workforce Development
September 23-24 | Columbus, OH

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