Main Street’s Missing Ingredient: Small Scale Manufacturing — Episode 133 of Building Local Power

Date: 19 Aug 2021 | posted in: Building Local Power, Retail | 0 Facebooktwitterredditmail

Sanborn Fire Insurance Map from Baltimore, Md., 1936.

On this episode of Building Local Power, host Jess Del Fiacco, ILSR Co-Director Stacy Mitchell, and Senior Researcher Kennedy Smith are joined by Ilana Preuss, the founder of Recast City, a firm that works with city officials and local leaders to integrate space for small manufacturers into placed-based development projects. Ilana, Jess, Kennedy, and Stacy discuss how small, locally-scaled manufacturing fits into the broader small business landscape, and how it can contribute to vibrant downtowns and commercial districts.

Some highlights from their conversation include:

  • The history of manufacturing in America’s downtowns and how the modern small scale manufacturing movement compares.
  • How manufacturing can contribute to the vibrancy of downtowns and complement the benefits of retail shops, restaurants, and other businesses.
  • Small scale manufacturing’s role in equitable economic development.
  • Small scale manufacturing success stories from communities across the country and how funds from the American Rescue Plan Act have the potential to make a huge impact.

Purchase Ilana’s new book Recast Your City: How to Save Your Downtown With Small Scale Manufacturing at your local bookshop or through Island Press (enter the promo code RECAST at checkout for 20% off).

“One of the things that I find most exciting about working with small scale manufacturing business owners is they cut across every different part of our demographics. So when we’re working to build inclusive communities of business owners that really represent our demographic diversity, small scale manufacturing is a really exciting way to get there. It doesn’t matter what community divide we’re looking across, income, race, ethnicity, immigrant status, people make stuff. In fact, it’s the basis of a lot of people’s culture or heritage. And so the opportunity to teach entrepreneurship and to help build wealth in communities across the country across our demographics is really potent because so many people have this ability to make things and build wealth for themselves, their households and their communities because of it.”

 

“I think people are really at a moment where more people are open to what they deem new ideas even if they’re really old ideas like what you were describing. They want to do more good for more people in their community, which is great. They’re conscious or they’re aware of what they haven’t done for people in their community in their past. And so I do think we are at this really exciting transformational moment where communities can make these different decisions and say, we want to be not just a place that consumes but a place that produces. And how do we support that in all of the spending of the community and all of the ways, all of the decision-making that happens in the community can do this.”

 

Jess Del Fiacco: Welcome to Building Local Power, a podcast dedicated to thought provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and Communications Manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build thriving, equitable communities where power, wealth, and accountability remain in local hands.
Jess Del Fiacco: In today’s episode, we’re going to discuss how locally scaled manufacturing can fit into the broader small business landscape and how it can contribute to vibrant downtowns and commercial districts. I’m joined by my colleague, Stacy Mitchell and Kennedy Smith. Also joining us to talk about her work on small scale manufacturing in city design is Ilana Preuss. Ilana is the founder of Recast City, which is a firm that works with city officials and local leaders to integrate space for small manufacturers into place-based development projects. Her new book is called Recast Your City: How to Save Your Downtown with Small-Scale Manufacturing. Welcome to the show, Ilana.
Ilana Preuss: Thank you so much, Jess. I’m really happy to be here.
Jess Del Fiacco: And we’re here happy to have you and welcome to Kennedy and Stacy as well.
Stacy Mitchell: Always fun to be here.
Kennedy Smith: Thanks.
Jess Del Fiacco: And I think Ilana, you can get us started. Maybe you could just tell our listeners a little bit about your background and what brought you to the point of seeing small, independent manufacturers as key to revitalizing our communities.
Ilana Preuss: Sure, would be happy to talk about that. I come at all of this from a place perspective. My background’s in least formally is in city planning. I did a lot of policy work for a long time with different size communities all over the country, what I called the small P politics puzzle of how do you get decision-making to happen around housing choice and transportation choice, and really re-investing in downtowns before it was cool to invest in downtowns? And over the years, I realized that we kept talking about a jobs housing balance or local jobs or resilient economies but we never talked about what it took to create that and who played key roles in that.
Ilana Preuss: And so a bunch of years ago now I went through this exploration to look at what kinds of local businesses and what kinds of small businesses can make a really big difference and landed on small scale manufacturing, which are these businesses that create products. They’re generally businesses with 20 or 50 employees maximum all the way down to individual business owners. And they make a product, a tangible product, I call it hot sauce, handbags or hardware. You can refer to it as artisans through advanced manufacturing but it’s all of the different kinds of businesses that are in our communities that make stuff. And I looked at the role that these businesses serve in our community not only to create better paying jobs, but to fill vacant store fronts to create more opportunity for more people and to really start addressing how are we bringing economic resilience to places and to people that have been left behind in our economy?
Stacy Mitchell: I thought manufacturing was dead. I mean, that’s the conventional wisdom out there. So is that not true or did something change or is this like a particular segment of manufacturing?
Ilana Preuss: That’s a great question. The truth is right over the ’80s and ’90s in particular, large manufacturing really left the country. We have a lot of offshoring. We know the history of North Carolina with the 2,000 person textile company that disappeared almost overnight leaving people unemployed. And we have a long history of that in a lot of parts of our country unfortunately. What happened though in the years since then really looking over the last 20 years that I don’t think honestly many people were paying attention to it because manufacturing almost became this thing that nobody wanted for a long time. We had people who had the skills to make stuff that started doing it at a smaller scale. So the same textile company in North Carolina, the guy who was the former manager started his own t-shirt manufacturing plates and a shop, and is now all organic and green manufacturing building and at 20 employees.
Ilana Preuss: So we’re seeing it happen and succeed at a very different scale. And part of it is because of it’s very nimble, it’s able to respond to customization requests or quick requests where overseas is to at risk these days with supply chains. But we’re also seeing that because of online scales and the reach of any small business in our country, that it can be a successful and a positive revenue generating business anywhere in the country as well. And so small scale manufacturing really is seeing this. I don’t even think you can call it a resurgence because I don’t think we’ve seen it this way before. It’s so much a characteristic of having this online existence along with being placed in a lot of our communities. So it’s a new thing unto itself.
Ilana Preuss: At the same time over the last 10 years, we have seen what they call reassuring. There is some large manufacturing coming back to the country, but it’s a different animal. It’s very different than what’s going on at the smaller scale and honestly has different needs. One of the really exciting things to me about small scale manufacturing is it fits into our neighborhoods. It can go into downtown, it’s modern manufacturing. You can walk up to a storefront window and look in and see something being made, and that’s honestly the coolest thing in the world to most people. And so they can have this dynamic contribution to our communities as well.
Kennedy Smith: Ilana, who are the people who are starting these small scale manufacturing businesses, who are making the handbags, the hot sauce and the hardware?
Ilana Preuss: They’re all different kinds of people. And one of the things that I find most exciting about working with small scale manufacturing business owners is they cut across every different part of our demographics. So when we’re working to build inclusive communities of business owners that really represent our demographic diversity, small scale manufacturing is a really exciting way to get there. It doesn’t matter what community divide we’re looking across, income, race, ethnicity, immigrant status, people make stuff. In fact, it’s the basis of a lot of people’s culture or heritage. And so the opportunity to teach entrepreneurship and to help build wealth in communities across the country across our demographics is really potent because so many people have this ability to make things and build wealth for themselves, their households and their communities because of it.
Ilana Preuss: So they are all different kinds of businesses. The handbag maker in DC, the chocolate maker, I do find the chocolate maker in my travels as much as I can. The high end advanced manufacturing happening out of a small 1,000 square foot space because the tools are so efficient now. These kinds of businesses are tucked all over our communities.
Jess Del Fiacco: So in your book, you categorize the differences between the small makers and producers and then retail shops, restaurants, other things you might find in a city’s downtown. Could you talk about what some of those distinctions are, the roles those different things play? And what does the small-scale manufacturing bring into a neighborhood into a community that these other kinds of small businesses don’t?
Ilana Preuss: When we think about our main streets or our downtowns, people are in our storefronts. People are generally thinking about restaurants and bars or retail shops. It might be a mom and pop shop, it might be a retail chain, but a retail shop where somebody is walking in the door, buying something leaving, and that business is revenue is based on people walking into the door and buying something and leaving. What we’ve found, and this was true even before the pandemic, but even more so now with this need to think about our storefronts in a way of how do we disaster proof them in some way?
Ilana Preuss: And our businesses, how do we disaster proof our businesses? Small scale manufacturing businesses often are both selling online already and can sell in person, especially if it’s a consumer product so that you can have them in a storefront where maybe there isn’t so much foot traffic yet, where traditional retail isn’t going to survive because there isn’t enough foot traffic, but small scale manufacturing will do fine there because they are selling online either direct to consumers or wholesale to other businesses.
Ilana Preuss: And then they can be a draw for additional foot traffic not only because they fill the storefront, but because they are this dynamic experience of being able to look in the window and see things being made. And so they become almost an amenity for the downtown. So these businesses create all of these benefits for our community and they’re not dependent on only people coming in the front door. It’s a great benefit probably to the business but they’re not going to be solely dependent on that. And so there is this other type of business that most communities honestly haven’t really thought about and in our historic world of zoning, in land use planning, most places have said that they don’t permit this kind of use in downtown.
Ilana Preuss: And so one of the things that we do is run around the country, promoting this idea of an artisan manufacturing land use definition, so that at least you can make it a permitted use. And one of the communities we worked with a couple of years ago, Columbia, Missouri, they had a brand new mixed-use zone for this old corridor north of downtown. The mixed-use zone was exactly what anybody would want to see with residential or offices in retail, in an area that really has a lot of road traffic right now, and very little building there, but it didn’t allow artisan manufacturing. And just north of this corridor is all light manufacturing.
Ilana Preuss: And so it’s really a place where people come to do work and to create goods. And the community was really excited about being able to not only add to that as part of a place where people do business and create products, but really create a place where families can come together because in Columbia, Missouri downtown is really owned by the college students because that’s the base of Mizzou. So they wanted to create a neighborhood destination that is really for local families but also a place where small scale manufacturing businesses can come together. So they just recently in fact, got an artisan manufacturing land use definition approved as part of the addition to this neighborhood. And so it’s that kind of detailed stuff but also this broader question of how do we pull it all together from a storefront perspective?
Stacy Mitchell: I got into a lot of skepticism around economic development around the idea that small, anything can matter, like it just seems really marginal, like see small businesses with… you’re talking about businesses that are starting out as a one-person business or a handful of people, that doesn’t seem like it’s going to move the needle at all. And that’s the response that we run into a lot with local officials. I’m curious what you think about that and how you respond to that.
Ilana Preuss: It is something that I run into in a lot of places. I think that the winds of change has gotten stronger coming out of the pandemic, I don’t know if we can say coming out of the pandemic. Where we are in the pandemic, I think a lot of community leaders recognized how important their local small businesses are to just the identity of their community and the outcry of support that those small businesses got. So I think that’s an important first step. I think the other side of it is to realize that there are some places that focus solely on big business recruitment, we know that people throw money at that all over the country, but very few places win even if you… you can say it’s not actually winning but very few places win the recruitment bottles. And so the question then is, what does everybody else do? And that’s the vast majority of the country.
Ilana Preuss: And so if I just focus on the vast majority of the country that isn’t going to focus on recruitment that does believe in their downtown, well, then if we can find five businesses that might have five employees and help them grow to 20 employees, all of a sudden that’s a significant impact. It’s going to start looking the same as recruiting 100 person business to the community but this one is rooted, has very deep roots in the community and is going to reinvest in the community as well.
Ilana Preuss: And so starting to look at not just how do we help create more startups? We are a startup obsessed country I think in many ways, but finding these existing product businesses that are already there doing good business in the community, one person, two person, five person, 10 person, and helping them figure out how to be more resilient, increase their revenues, add staff if that’s what they’re interested in doing, all of those things are going to be benefits to the community and have ripple effects. Because the more that our small business community knows that we’re taking care of them as a team of local leaders or nonprofit and infrastructure around them, the more that we attract those kinds of people to our community and the more that people within the community are going to have mentors to be able to grow and scale their own businesses as well. So it builds its own feedback loop over time.
Kennedy Smith: So when you think about all the billions of dollars that communities are throwing away chasing smokestacks or the modern equivalent of smokestacks these days, big businesses that are never going to come there and even if they do, they’re only there as long as the incentive lasts and they’re not creating that volume of jobs, you can take that money and use it to really nurture this local talent and help these businesses grow from five workers to 20 workers. What is it that we need? What’s going to make that happen? What if you… suddenly Ilana said you have all this money, make it work.
Ilana Preuss: You mean just like everybody has all this American Rescue Plan money that they don’t know what to do?
Kennedy Smith: We’re going to get to that too.
Ilana Preuss: Sorry, I didn’t mean to jump to that. So there’s three major topics that I always come back to, that means that we’re building an infrastructure around this business sector that is robust like we’ve done for tech and like we’ve done for other sectors like biotech that we’ve deemed important. And I believe we are at a point now, and we’re starting to see venture capital get behind some of this infrastructure, which I think is a very interesting sort of winds of change thing to look at. So there’s three things that I always come back to. One is business development support. In some communities, we have incredibly robust business development training programs both for startups and scaling up businesses in the tech sector. We have existing models of those things for the small scale manufacturing sector, both for startup small scale manufacturers, artisan businesses, as well as those that are established and want to scale up.
Ilana Preuss: So we need the business development infrastructure and make sure that we’re doing it in a way that is inclusive, that we’re reaching all the different parts of the demographics in our community, that we’re building the partnerships to make that possible. That’s the first bucket. The second bucket is real estate. What kind of space do these businesses need from micro retail, a 400 square foot storefront, to a scaling production space that might be focused on wholesale, which is 5,000 square feet? Well could have a small retail frontage that’s still part of downtown. Those kinds of models don’t exist in most communities and in fact when we look at a lot of our small towns, we have a ton of either legacy property owners or distant property owners that are sitting on buildings that have been vacant for the last 10 to 15 years.
Ilana Preuss: And nobody has any idea how to bring them up to the current conditions and turn it into a welcoming place, the funding isn’t there in most of our small cities and towns to do it. And so creating the right kind of real estate for both small and growing small scale manufacturing businesses in our communities is going to be an important second bucket. And then the third bucket is capital. A lot of these businesses to go from five to 10 to 20 employees need to buy a really expensive piece of equipment, but it’s that catch 22 of I can’t afford the piece of equipment because I can’t make more of the product yet. And so if I can’t make more of a product yet, I can’t afford the piece of equipment. And so having financing that is friendly to small scale manufacturers and having people running that financing who understand small scale manufacturing is going to be an important part of it as well. So it’s those three buckets, business development support, real estate, and capital.
Jess Del Fiacco: I just want to… Oh, go ahead.
Kennedy Smith: Oh, go ahead. I have a related, a follow-on question I guess, and that is that, so we have these three buckets of things that we need but it seems to me like it’s going to take cities a little bit of rearranging their priorities. At the core of this, there needs to be a small business focused economic development strategy in place at certainly the local level and maybe at the state level and heaven forbid, the national level. Do you see that happening anywhere? Are you seeing communities retooling their economic development plans so that they’re focused more on small businesses and they are on the larger businesses they pursued in the past?
Ilana Preuss: I would say right now, we’re at a yes and moment. I think if we can get… I feel like I’m working with a lot of communities that aren’t particularly working on big recruitment anymore, but they’re not exactly sure what to do if they’re only focusing on small businesses. So they’re at a point where they’re saying, yes and we’re ready to take on this topic of small scale manufacturing, but nobody is clear yet about how do you take that to scale at a city-wide basis. For a smaller town, I think it’s going to be a little bit easier to integrate it as the basis of an economic development strategy, but I think that we have so much… I don’t know what the right phrase is. It’s almost like legacy neglect. Nobody’s been paying attention to these small businesses for so long that to build this back up from scratch is really building up an infrastructure from whole cloth.
Ilana Preuss: And so I find that when we can focus on a very tangible type of business in a very tangible kind of place, we show everybody how to do it and then you can replicate that model with a different business sector. And so obviously that’s the way I go about doing it. But I do think that if the cities look at things like procurement, the city, the local government and its spending and how much can it spend within the local economy to byproducts versus outside of it, working and creating matchmaking with anchor institutions about that, all of the ways that an economic development staff is doing work and focusing it on small business.
Ilana Preuss: And a lot of cases, I think it means a lot of retraining or new training of economic development staff because people coming out of economic development programs are learning more about small business these days as far as I can tell, but still are focused a lot on recruitment financing. And so I think there’s an interesting question about how do we change the training that a lot of people are getting as they’re coming out of these programs as well as a part of it?
Jess Del Fiacco: I was going to go back to a thing you mentioned briefly a couple of questions ago, which was talking about equity and how you see the role of small manufacturing in equitable economic development. If you could just expand on that.
Ilana Preuss: Absolutely. We know that the economic development investments and the planning and community development decisions of the past many, many decades are baked with systemic racism. It’s not news to anybody at this point, well, I hope it’s not. I think when we are looking forward on economic development, I work with communities to think about two key steps first always. One is, what is the outcome we’re trying to achieve? And getting really, really specific about it, which makes everybody uncomfortable. And then two is, who should benefit from this investment that we’re making? And that makes them even more uncomfortable, which is fine, that’s part of my job. But I think we have to be really clear about what it means to want to create more equitable outcomes.
Ilana Preuss: Equitable outcomes is going to mean something very different in each place potentially. And so when a community is looking at economic development strategies overall or small scale manufacturing specifically, I think we have a responsibility before we go into it to say, what is the major outcome we want to achieve? Is it that we want to fill the storefronts downtown no matter what? Is it that we want to fill the storefronts downtown with business owners that represent the demographic diversity of our community? And being really specific about who should benefit from the investments, because any work that the community does either within the local government or outside of it is an investment. It’s an investment of time, of money, of resources, of different kinds.
Ilana Preuss: And so we have to be specific to make sure that we know if we’ve succeeded, we have to be specific about who should benefit from it and achieving equitable and more equitable outcomes to me is really a major part of that, of saying there are black and brown business owners that have really been denied the opportunities of other business owners for decades, we need to make a difference around that. There are rural communities that have been left behind very purposefully in fact, in certain ways in some states, and we need to make sure that they’re benefiting in other ways now.
Ilana Preuss: And really thinking purposefully about the investments and the intention of what we’re doing and not just like we’ve done for decades, say oh, we want to create this loan fund, we’re just going to put it out there and just see what happens. Because we know that whoever was clued into that fund in the past and whoever benefited from it in the past is most likely the entity that will benefit from it in the future if we just put it out there. And if we go out and we build new partnerships with organizations or community leaders that are Connectors, I call them connectors with a capital C, if we find these Connectors into different parts of our demographics within the community, then we can purposefully get that information out there and we can purposefully learn about what that population needs and build programs specific to their needs so that we’re actually de-risking our investment when we know what they need and we’re building specifically to their needs.
Stacy Mitchell: Are there particular cities or towns that have done that well or particular strategies that you’ve seen work? Can you give some examples?
Ilana Preuss: Sure. Let me think. There’s a couple of different cities we can talk about. Baltimore is in fact my favorite poster child at the moment, they’ve done a whole bunch of stuff somewhat quietly and it’s all adding up to a lot more right now. Baltimore created the Made in Baltimore program five or six years ago originally in partnership between the city government and a federal grant from the U.S. Economic Development Administration. The person who led the program very purposefully reached out to a diversity of artisan community and cultural leaders and when they launched the Made in Baltimore brand, it was truly a party celebrating all that is Baltimore, diversity of Baltimore was in one room and really one of the most joyful events I think I’ve ever been to in a city.
Illana Preuss: And since that launch, they’ve created all sorts of partnerships. The Makerspace that’s in Baltimore called Open Works has a number of different entrepreneurship programs and workforce development programs around the machines at the maker space, which is a space open to the public with access to shared tools through classes or membership. But more recently, Made in Baltimore launched a program called Home-Run Accelerator, where they competed assistance and identified a cohort of existing business owners who are all home-based right now who want to scale and go into store friends.
Ilana Preuss: And so the business owners that qualified into this program went through about a 10 week training and at the end of the training, they qualify both for grant assistance to cover some of the costs of a space, but also the program makes matchmaking introductions to property owners who have space that is affordable, and who want to welcome small scale manufacturers.
Ilana Preuss: So it means that Made in Baltimore is really walking these business owners through the entire structure, business development, real estate, and capital to help them set up in one location to succeed. There’s a program like that that was in South Bend, Indiana, called Scaling Up! South Bend that also identified existing product business owners in South Bend. South Bend when they went to build their list, had never with a big manufacturing history and that city never knew if they had any small scale manufacturing, thought they might have a little bit within a couple of weeks, had a list of 1,000 small scale manufacturers in the city.
Ilana Preuss: It’s this hidden explosion, this hidden engine of the economy that was going on. And so they also competed assistance for this training program that was run by a business out of Chicago called 37 Oaks, which is run by a woman named Terrand Smith that is all specific to product businesses, pricing, e-commerce, distribution, the nuts and bolts of what it means to have a successful product business, and all geared towards existing product business owners that are interested in scaling.
Ilana Preuss: It’s exactly that economic growth focus that we think about in other places. So they’ve both done interesting things with that. Columbia, Missouri, one of the things that we do with all the communities that we work with is we’ve got to interview small-scale manufacturing business owners. So in their own words, we find out what works or what doesn’t work within the community. And one of the gaps that we found in Columbia, Missouri was that people had food product businesses at home that were bursting at the scenes, that they were making products at home through the state’s cottage food law, but they had reached their capacity.
Ilana Preuss: And so the need for a commercial shared kitchen, especially for women owned black and brown and business owners within the community was exploding and really important. And so the improvement district on this corridor that I called the loop partnered with the regional economic development authority to invest in a nonprofit mission-driven commercial shared kitchen in a space that was owned by the university. So it was this wonderful partnership and that’s all on the corridor that they were working on. So it was just this wonderful partnership. And it opened during the middle of the pandemic. And so this space has training for food product businesses, access to the commercial kitchen, and they rebranded the whole corridor about people who make things. And so it’s really creating this energy and this draw to this area for other businesses like this.
Kennedy Smith: I really think you’ve heard me talk about some of these businesses before in my travels. These are my favorites when you come across these businesses that are making amazing things. And in the middle of nowhere, I think you’ve heard me talk before about a woman I met in Iowa once who had a storefront space in a downtown with an antique shop in the front of it. And it got a couple of customers every now and then, but then she had these swinging cafe doors about halfway deep the store, and I asked her what was going on behind there and she said, “Oh,” well, she had been having dinner with her brother-in-law who was a civil engineer and he was saying one of the problems these small towns have is that when you are putting in water pipes and sewer pipes, the diameter changes and you have to get a step up ring and a special washer of every size.
Kennedy Smith: And in a small town, you might use five of those a year but you have to buy them as a gross. Then you have to buy them in every size and it’s expensive. And so she thought, hmm, there’s 24,000 small towns in the U.S., what if I buy a gross of all of these and when nobody is in my store which is most of the day, I’ll be back there with my shrink wrapping machine, putting together the fittings for just one step up or step down. And she had this booming, booming business.
Ilana Preuss: I love that so much.
Kennedy Smith: Yeah, the ingenuity is just amazing and I love them. I wondered if you’d come across any that you were particularly fond of that you think have done some pretty creative market research.
Ilana Preuss: I met… it’s hard to remember where they were. Somewhere in Indiana I think, I met these really interesting guys who were graphic designers and created crazy funky t-shirts. They had a really specific opinion about the kinds of silk screen they wanted that wasn’t thick plastic, it was very malleable. That’s about as much as I can understand from what they were explaining to me now many years ago. And so they couldn’t find somebody who could do the kind of fabrication that they wanted, so they invented it, they created their own separate contract, so pre-screening business for their own business to be able to create the quality silkscreen of like this it’s really soft shirts with really thin dyes that don’t leave, they don’t break, they’re not brittle.
Ilana Preuss: And they created enough capacity in the silk screening that they were then bringing in work from the entire region around them to use the silk screening capacity. So all of a sudden, these graphic designers created a silk screening business not just for their own production but with multiple revenue sources, which is one of the things I love about these businesses, so that they were now contract manufacturing silk screening for the broader region, and I think their staff at that point was up to 20 people just on the silk screening side. It was just this really exciting combination of pieces that you could see going on. The other favorite story I have is actually somebody who ended up buying the business, because I talked to them about this.
Ilana Preuss: There’s also in Indiana… I know I’m talking about Indiana so much. There’s a region in Indiana that I’m working with a cohort of small cities, really small cities and towns that we’re working with, but the guy who runs the regional economic entity, I was first talking to him about what are these businesses and what do they do? Evidently the next month that he was around his town and saw that the local chocolate maker wanted to sell their business and he bought it. So now he’s a chocolate tier and he runs his regional economic development organization which I thought was really one of the best stories ever.
Kennedy Smith: I love that, that’s great.
Stacy Mitchell: I just found out there’s a great business here, they’re actually several locations called Bull Moose Music and they do originally CDs and they had a whole use CD market and they also started doing used movies and books and video games, I think it was a lot of what they do now. And I’ve wondered how they’ve managed to keep going, given the nature of those products and how everything is moving to streaming. And it’s because they created for themselves an inventory system that apparently is fantastic and they now sell that to all these other retailers. But it was again driven by their own needs and has become initially a secondary business and now more and more, I think a primary business of what they do.
Ilana Preuss: The tech enabled side of the product business, I think is a really interesting one. One of the ones really exploded in that way is a business called Xometry that just went public a month or two ago. It’s IPO and it’s based in Maryland and they created two things. They created an AI software that is constantly figuring out how much to charge for additive or subtractive manufacturing product. So a business or an entity like NASA can upload its 3D specs and immediately get it price, which evidently was unheard of in the production world before that for high tech, very refined products. So they created the software around pricing it but then on the other side of it, they created a distributed production network across the country of small producers all over, which to me is a boon for small towns that go through a process with Xometry to make sure that they’re creating products at the really high quality level that’s needed.
Ilana Preuss: And so they might be making a widget for NASA or an automobile industry, or they might be making a small run of something using all sorts of different additives or subtractive technologies, but they also have folks in their system that do stitch embroidery. It’s like all of this whole wide spectrum of stuff but it’s responsive pricing and distributed production network. So it’s this completely different way to think about how we’re getting pieces need and how we’re being responsive to that need as well.
Stacy Mitchell: I am interested to go back to some of the policy questions and you’ve touched some on this in terms of some of the barriers. You talked a little bit about zoning, you mentioned capital and so on, but I wonder if we can unpack a little bit those because I wonder in thinking about small scale consumer product makers for example, like a world increasingly dominated by online retail where you have Amazon is a big gatekeeper to make much of the market. I’m also really struck by how difficult it is for small businesses even with great ideas or even a really proven track record to get capital in the way our capital markets, the way our banking system works. So I’m wondering if you could talk about both of those things a little bit and how you see them, how big of a barrier are they both the gatekeeper functions online and then the capital piece and how much should we be focusing on those things in terms of succeeding with the small scale manufacturing revitalization?
Ilana Preuss: That’s a great question. There’s definitely parts of that policy world at the federal level that I’m not nearly well versed enough on to know where some of those barriers are. I think on the e-commerce side, it’s a double edged sword. We have the internet, you can create your own e-commerce site overnight. There are all of these websites like Squarespace where you can set it up, you have the products today, set it up tonight and sell them tomorrow. Or existing sites like Etsy or all of the other ones that Etsy keeps buying up now. There’s a whole bunch of different markets out there that you can tap into. And in many cases, the question then becomes a marketing challenge and an outreach challenge more than an e-commerce challenge. I think the distribution question is a really interesting one. How do you create more of an elastic fulfillment opportunity where Amazon has trained us all to want it and want to get it in two days even though Amazon doesn’t do that so much anymore either.
Ilana Preuss: And so how do we create a more competitive environment? There’s a really interesting business I just learned about called Saltbox that is warehousing fulfillment for small product businesses. And so you can access staff onsite in five minute increments to be able to do fulfillment and distribution for your business and it’s growing, it just launched last year and it’s growing really fast and it’s basing itself generally in more urban locations, not out in industrial parks with the intention of saying that the small product businesses that we want to connect with, want to be near the coffee shop. They want to be in town, and so you cannot have access just to the fulfillment side, you can also have co-work space. They don’t have production space there but they have the other parts of the process.
Ilana Preuss: And so I do think… and they are venture capital backed, they just closed their series A. So I do think it’s really interesting to see that the funding world is backing the infrastructure around these businesses. And so then my question is, when will local governments recognize that this is a sector they really need to get behind and when will federal government recognize it too? Which is a big question. I think from the funding side, I think it’s going to take a lot of work. I think we know that people fund the things that they’re familiar with and the people that they’re familiar with and that introduces so much implicit and explicit bias in the process that I don’t even know where you start counting.
Ilana Preuss: And so I think there is enormous opportunity to educate the funding world, the finance world about what is the opportunity, but also potentially that we need other vehicles. What are the funding vehicles for a business who wants a $10,000 loan instead of $100,000 loan? Is there an investment option for a business at that scale that’s not just a loan where we have tech investments happening at all different scales because of the potential of it theoretically being that 1% unicorn where most of them obviously aren’t?
Ilana Preuss: And so how do we create more of that opportunity where we’re supporting more of them at a smaller scale and we do have ways for them to get to the unicorn status if that’s where they want their business to go? So I think the funding question needs to look at those biases that are baked into the system, the underwriting. Why do funders look at product businesses as risk mostly because they don’t understand what the potential is there and what kind of education we need to bring into those sectors? I don’t know how much of the policy barrier versus a mindset barrier but I’m sure there’s policies in there too in terms of the underwriting side of it.
Ilana Preuss: And then I think from a zoning and permitting perspective, we so carefully, we the royal we, so carefully separated all of our uses over time. And then over the last 30 years said okay, mixing certain uses is okay, but that people really need to understand that the vibrancy and the resilience really comes with having as many different options as we can in a place. And so having businesses like small scale manufacturers be able to be part of downtown or a neighborhood center or whatever it is, is going to be an important part of it but not just in a zoning decision, also in the permitting process so that you can get an occupancy permit quickly for any kind of small business, which is an enormous barrier to a lot of small businesses out there.
Kennedy Smith: One of the things that I’ve spent a lot of time on over the years is looking at old Sanborn Fire Insurance Maps, which are these maps that were created by the Sanborn Fire Insurance Company to basically look at how inherently risky different types of construction work for the purposes of insuring buildings. So they have these maps that they update every few years of probably half of the towns and cities in the U.S. but there are this amazing history lesson because you can go back and you can see when this town was at its most economically vibrant and successful, maybe it was in 1940 or 1938 or something, what were the uses? Because they wrote in the name of every single business and use that was there. And so I’ve been looking at these because so many people seem to think that downtowns have always been primarily retail.
Kennedy Smith: And in reality, they’ve been primarily small scale manufacturing, that’s been the dominant use. Retail only accounts for about 15 or 18%. It’s always been there, it’s always been there and it’s always been under everyone’s nose. And I think we’re at an amazing moment when it can really become this great untapped resource that we can grow in a way that we never have paid attention to before.
Ilana Preuss: I completely agree. I think we’re at a really exciting opportunity. I think people are really at a moment where more people are open to what they deem new ideas even if they’re really old ideas like what you were describing. They want to do more good for more people in their community, which is great. They’re conscious or they’re aware of what they haven’t done for people in their community in their past. And so I do think we are at this really exciting transformational moment where communities can make these different decisions and say, we want to be not just a place that consumes but a place that produces. And how do we support that in all of the spending of the community and all of the ways, all of the decision-making that happens in the community can do this.
Ilana Preuss: And the truth is the more that we can figure out how to support more successful small business owners from within our community, the more they’re likely to be able to afford that community as it rises again, as it improves again, as the prices of properties go up again. We want to include people not just through things like affordable housing, but because they’re building their own personal and household wealth as the community builds its wealth again as well.
Stacy Mitchell: So cities and towns have a great opportunity to make some of those kinds of investments right now with all of the recovery funds that the federal government is giving out. Can you highlight some of the… as we close here, highlight some of the opportunities and what you think cities ought to do and how they should be thinking about those funds?
Ilana Preuss: Absolutely. I think the American Rescue Plan Act, ARPA funds are some of the most exciting dollars that are out there. They’re so flexible, economic recovery is a huge part of how those funds can be spent and communities have an opportunity to be incredibly purposeful about how those dollars are spent and who should benefit from it. And I believe that we have this unique moment where communities can say, we want to invest in the business development programming specific to production, we want to invest in space and real estate and manage the affordability of space over time for product businesses. And we want to create capital funds for our own small businesses in a way that really does reach the population of business owners that maybe didn’t benefit from PPP or EIDL or other loan programs in the past, even there were community-based.
Ilana Preuss: And I think that those funds can really be used to build a whole new infrastructure around local business, around small scale manufacturing so that the outcome of it is honestly this perpetual economic engine that is creating this feedback loop and reinvesting in the community and draws other people to it because the community is doing so well for itself, which I think is really exciting.
Jess Del Fiacco: Yeah, that is very exciting and thank you so much for all those great examples, Ilana, and sharing your expertise with us. We are just about at the end of our time, so I wanted to make sure you had a chance if there’s anything we didn’t ask you about that you wanted to make sure we fit in, in this hour or Stacy or Kennedy, if there’s any last comments you want to add in, now’s the time.
Stacy Mitchell: Well, the book is great. Just to make sure people hear, Recast Your City is the title and it’s new out just a couple of months ago, and it’s really terrific and available at everyone who sells books, including independent bookstores. And where else can they find you and find the work that you’re doing?
Ilana Preuss: People can get the first chapter of the book for free at the book’s website, recastyourcity.com, very easy to remember if you remember the name of the book. You can go on there and you get the first chapter and get a hint into the whole story of the book and see it’s pretty bright yellow cover. If you want a signed copy of the book, look up Ivy Books in Baltimore, a wonderful independent bookstore in Baltimore that did an in-person event with me while we were still sitting in-person events and was really exciting to do and you can get it on bookshop.org, you can also order it directly from the publisher Island Press. And if you use the promo code Recast, you can get 20% off the price there as well.
Jess Del Fiacco: Great. Thank you so much. Thank you Ilana, thank you Kennedy, and thank you Stacy, this was a great conversation and loved having you on.
Kennedy Smith: Thanks so much.
Stacy Mitchell: Thanks, Jess.
Ilana Preuss: Thanks.
Jess Del Fiacco: Thank you for tuning into this episode of the Building Local Power Podcast from the Institute for Local Self Reliance. You can find links to everything we discussed today by going to ILSR.org and clicking on the show page for this episode. That’s ILSR.org. While you’re there, you can sign up for our many newsletters and connect with us on social media. We hope you’ll also take the opportunity to help us out with a gift that helps produce this very podcast and supports the research and resources we make available for free on our website. Finally, we ask that you let us know how we’re doing with a rating or review on Apple Podcasts, or wherever you find your podcasts. The show is produced by me, Jess Del Fiacco and edited by Drew Birschbach. Our theme music is Funk Interlude by Dysfunction_Al. For the Institute for Local Self Reliance, I’m Jess Del Fiacco and I hope you’ll join us again in two weeks for the next episode of Building Local Power.

 

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

Featured Photo Credit: iStock.com

Map Credit: Sanborn Fire Insurance Map from Baltimore, Baltimore County, Maryland. Sanborn Map Company, Vol. 5a, 1936.

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Jess Del Fiacco is ILSR’s Communications Manager. In this role, she works closely with program staff to develop and implement communications strategy that supports ILSR’s mission. She promotes ILSR’s work through the organization’s newsletters, website, social media, events, and more. Jess also hosts the Building Local Power podcast. Contact Jess for media inquiries.