In recent months, many cities and municipalities have released requests for proposals (RFPs) seeking consulting help to craft a new economic development strategy, according to Mark Funkhouser, President of Funkhouser & Associates, a consulting firm specializing in government operations and public finance. For city economic development teams, these initiatives reflect a growing recognition that intentional planning is essential for attracting investment and sustaining long-term economic growth.
But here’s the challenge: too many municipalities focus their economic development strategies almost exclusively on recruiting new businesses, while overlooking the local companies already contributing to their community’s vitality. That approach is like trying to fill a bucket with holes in the bottom. Unless you strengthen the foundation of existing businesses, even the most aggressive business recruitment efforts will leak results.
The strongest economic development strategies begin with a simple principle: support, retain, and grow the businesses already serving your residents and paying taxes into your city’s coffers.
Why Existing Businesses Should Anchor Any Local Economic Development Strategy
While high-profile business recruitment often grabs headlines, existing businesses are the true backbone of local economies. Research consistently shows that business retention and expansion (BRE) efforts account for the majority of new jobs in most regions, far outweighing job gains from recruitment alone.
Neglecting these businesses creates multiple risks for any economic growth strategy:
- Tax Base Erosion. When established companies close or relocate, cities lose property, sales, and income taxes.
- Missed Job Growth. Existing employers are often best positioned to create new jobs if they have the right support from local government agencies.
- Negative Perception. If current businesses feel ignored by city leaders, they may discourage potential new entrants.
- Weakened Local Ecosystem. Local businesses often rely on one another for supply chains and partnerships; when one fails, others feel the impact.
For any city aiming to implement a resilient economic development plan, business retention and expansion must come first.
How Can Cities Engage Existing Businesses for Economic Development?
Supporting existing businesses isn’t just about offering grants or emergency funding. It’s about continuous communication, problem-solving, and partnership between city leadership and the business community.
Cities can strengthen engagement through the following proven methods:
- Business roundtables. Host quarterly sessions to hear directly from business owners across industries.
- Dedicated business liaisons. Assign staff to lead business retention and expansion programs (BRE), ensuring companies have a go-to resource at city hall.
- Data-driven surveys. Regularly collect feedback to identify infrastructure gaps, permitting pain points, or workforce challenges.
- Recognition programs. Celebrate local business achievements to foster pride and show appreciation for their contributions to the local economy.
These engagement strategies not only build trust but also create data-informed insights for refining your broader economic development strategy.
How Should Cities Balance Recruitment and Retention in Economic Development?
The most effective city economic development strategies strike a balance between business recruitment and retention. Recruitment matters, but only after existing businesses feel supported. Here’s how cities can achieve that balance:
- Retention First. Allocate meaningful funding and staff time to BRE efforts before chasing high-profile recruitment wins.
- Integrate Workforce Planning. Ensure that skills training and workforce development programs align with current employer needs.
- Improve Infrastructure. Address core issues like transportation, broadband access, and permitting efficiency to benefit both current and future businesses.
- Partner Broadly. Collaborate with chambers of commerce, regional economic development organizations, and higher education institutions for a unified economic growth strategy.
- Redefine Success Metrics. Go beyond ribbon cuttings. Measure business survival rates, expansions, and satisfaction within the business community.
By prioritizing retention within your economic development strategy, you create the stability and reputation that naturally attract new businesses.
A Call to Action for Local Governments: Focus on Retention and Engagement
At its core, an economic development strategy should not be about chasing headlines. It should be about cultivating an ecosystem where businesses—large and small, old and new—can thrive together.
When municipalities put retention and engagement at the heart of their community economic development strategy, they:
- Build a stronger, more resilient tax base
- Retain jobs and create opportunities for expansion
- Position themselves as attractive locations for new investment
Business recruitment may bring visibility. But retention and expansion build sustainability.
For city leaders, the message is clear: before launching your next economic development consulting engagement or designing incentives for new companies, ask yourself this — what are we doing to support the businesses already here?
That’s where real, lasting growth begins.
How Euna Solutions Supports Smarter Economic Development Strategies
At Euna Solutions, we understand that successful economic development strategies rely on more than just recruitment campaigns. They depend on data, collaboration, and community trust, the same principles that guide our work with governments every day.
Our suite of solutions empowers cities and local governments to:
- Strengthen Community Engagement with tools that make it easier to gather feedback and build lasting relationships with local businesses.
- Enhance Visibility into Resources and Budgets, ensuring that funds allocated for business retention and expansion are used effectively.
- Streamline Procurement and Grant Management so local governments can invest in infrastructure, workforce programs, and services that directly support economic growth.
- Foster Transparency and Trust by making decisions visible to residents, business owners, and stakeholders alike.
By equipping governments with the right technology, Euna Solutions helps communities design economic development strategies that aren’t just about attracting the next big company, but about creating environments where existing businesses can thrive, expand, and fuel long-term prosperity.
Key Takeaways
- Local First: Prioritize business retention and expansion as the foundation of economic growth.
- Engagement Matters: Build strong relationships with local employers through ongoing communication and support.
- Balanced Approach: Combine recruitment with robust support for existing businesses to maximize impact.
- Measure What Matters: Track business survival, satisfaction, and expansion—not just new arrivals.
- Collaborate for Success: Partner with regional organizations and leverage technology for smarter strategies.
Conclusion: Supporting Local Businesses Is the Key to Sustainable Economic Development
To create resilient, thriving communities, city leaders must prioritize supporting existing local businesses within their economic development strategy.
FAQ
Why is business retention more impactful than recruitment for economic growth?
Business retention and expansion (BRE) efforts generate most new jobs in local economies, making them more impactful than recruitment-focused strategies. Supporting existing businesses ensures a stable tax base and sustained job creation.
How can cities engage existing businesses more effectively?
Cities can engage local employers by hosting business roundtables, assigning dedicated liaisons, conducting regular surveys, and recognizing achievements. These approaches foster trust and yield actionable insights for economic development.
What are common risks of neglecting existing businesses in economic planning?
Neglecting local businesses can erode the tax base, reduce job opportunities, weaken the local economic ecosystem, and harm a city’s reputation among prospective investors and employers.
How should cities balance recruitment and retention in their strategies?
Cities should prioritize retention and expansion first, then integrate recruitment efforts. This balanced approach ensures current employers feel valued while attracting new investment.
What tools can help governments support smarter economic development?
Solutions like Euna Solutions’ technology platforms enable cities to enhance engagement, manage resources efficiently, streamline procurement, and foster transparency, all supporting comprehensive economic growth strategies.
