Lee Schafer: Invest in small business

That's where the economic recovery is bubbling up.

John Hoeschen, owner of St. Paul Corner Drug, made sure prescriptions didn’t slow while making room for customers to get vaccinations.
John Hoeschen, owner of St. Paul Corner Drug, made sure prescriptions didn’t slow while making room for customers to get vaccinations.

— Shari L. Gross, Star Tribune

Lee Schafer

There's an old nugget of wisdom that goes: the only thing that generates wealth for a company, town or region is to produce more than is consumed.

Far more cardiac pacemakers were produced here than Minnesota patients ever needed, and the pioneering Medtronic became one of the companies that led the region to higher standards of living through its pacemaker manufacturing.

Political leaders will eagerly praise small business owners, but every economic development program of the last 40 years seems to be aimed at another Medtronic.

This pursuit of big business — or at least big potential — may be one reason small business owners are often underappreciated. No one really gets excited about another burger restaurant or landscaping contractor. They often can't "scale," meaning get a lot bigger. No region really gets ahead if all they do is feed each other hamburgers and plant each other's birch trees.

It's why a startup with nothing but a free software app can still get more attention than a landscaper with 50 employees.

We in the region really do want more businesses that can get big, said Louis Johnston, a professor of economics at the College of St. Benedict and St. John's University, yet there's still more to the story.

He explained that local machine shops and other small suppliers solved a lot of manufacturing and design problems for companies like Medtronic, which helped fuel the growth in Twin Cities prosperity in the second half of the 20th century.

The value of small business bears out in the research that convincingly shows smokestack-chasing — trying to lure a big employer with taxpayer subsidies — is often a game for losers.

A region will be better off if its people go to work for themselves instead.

If state and local governments want to use taxpayer money wisely, they might provide these entrepreneurs with things like technical services, or invest more in training the whole workforce.

We also have to stop thinking only about what these small businesses do for our regional economy and appreciate what they can do for their owners.

It's long been understood that immigrants are more likely to start businesses than native-born people.

Starting a successful business is hard work, of course, made even harder if you've bootstrapped the business out of necessity or are doing so in a second (or fourth) language.

That's one reason the Federal Reserve Bank of Minneapolis added a section to its regionwide scan of economic conditions that focuses on businesses owned by women and people of color.

The effort goes back a few years, when "we were interested in highlighting a little more, and better understanding, the contributions of immigrants, not just in the Twin Cities but in a lot of our smaller communities," said Joe Mahon, the Minneapolis Fed's regional outreach director.

Service-based businesses of all kinds were clobbered during the COVID-19 pandemic as people stayed home — and didn't want other people in their homes. And the bad news was only worse for businesses owned by women and people of color.

A greater proportion of these entrepreneurs were in businesses that deliver face-to-face service, like serving food. They were less likely to have any financial cushion. They had a harder time getting bank loans through the Paycheck Protection Program or other financial assistance because many didn't have a relationship with a commercial bank.

Mahon said the Minneapolis Fed can't know for sure which business owners stopped responding to its surveys because they'd closed.

There's some indication, though, that new business formation has been growing, including in the areas most heavily damaged in Minneapolis' unrest last year. It makes sense that a lot of this startup activity could be owners who were put out of business last year simply starting over.

"East Lake Street will be back," explained Pinky Patel, co-owner of the rebuilding Elite Cleaners of Minneapolis earlier this fall. "We are hardworking immigrants that need to work."

That's the kind of grit you might expect from people who had decided to go into business for themselves. And maybe that's the reason to appreciate small business owners even more. We as customers came to depend on their mettle, or whatever it was that drove them to keep hustling and adapting, during a very difficult couple of years.

That was the point of an e-mail that arrived just before Halloween, as a friend shared his COVID-19 vaccine booster shot confirmation from a Thrifty White Pharmacy. An appreciative new customer as well as thoughtful observer of business, he wondered why he's never read much about Plymouth-based Thrifty White, which has almost all of its more than 50 Minnesota stores outside of the metro area.

That got me thinking about my own COVID-19 booster shot, hand-delivered by John Hoeschen, the owner and pharmacist at an even smaller Minnesota retailer. His St. Paul Corner Drug, a single store next to Macalester College's stadium, can't be more than 1, 200 square feet. It was closed last year to foot traffic because it's hard to remain 6 feet from anyone in a space that tight. Staffers rang up orders and walked them outside.

During the big spring vaccine push, Hoeschen had the whole front part of the store cleared out of shelving and merchandise to make room for booths where customers could be vaccinated.

At this traditional pharmacy, there was nothing old-fashioned about the slick online scheduling app customers used to book appointments. The work of filling other prescriptions didn't slow down and the store remained staffed to keep vaccinating all day, with the owner happily poking arms himself.

When I stopped in there last month to receive my booster shot, some of the store had been put back in place, but the soda fountain counter was still taken over by the vaccination operation. No hand-scooped ice cream cone was available that morning.

Hoeschen and his small team managed through it all.

We still highlight the work of entrepreneurs in this country. The business media publishes almost daily updates about the billionaire entrepreneurs funding their own personal space race, for example, and taunting one another about net worth. Well, God bless their significantly undersized hearts, they really have achieved a lot.

But if you want to celebrate the contribution of America's entrepreneurs, better candidates are just down the street. Their homegrown businesses just might lead the recovery.