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Sunnyside Neighborhood Micro-Entrepreneurship Feasibility Study

January 2011

Presented to:
TheSunnysideNeighborhoodAssociationofFlagstaff,Inc. 2304NorthThirdStreetFlagstaff,Arizona86004(928)2135900

Basic Project Overview Micro-Entrepreneurship Centers provide dedicated services to certain geographical areas. These centers provide assistance to micro-businesses located within its service area. These services may include business seminars, counseling, referrals to other agencies and co-working space. Micro entrepreneurs are the owners of small businesses that have fewer than five employees and have startup costs of less than $35,000 and annual revenue of less than $100,000. There are nearly 21.5 million micro entrepreneurs in the U.S. Examples of micro entrepreneurs are owners of bakeries, beauty parlors, child care facilities, repair shops, arts and crafts shops, painting businesses, contracting businesses, family-owned shops, auto body shops, small-scale restaurants, and small-inventory trading businesses. Micro entrepreneurs face many hurdles in getting startup financing, and they sometimes lack the skills necessary to manage the financial aspect of their business. As a result, many micro entrepreneurs cannot grow and develop their business beyond a micro enterprise. Various micro enterprise development programs have helped micro entrepreneurs achieve great success and growth. These micro enterprise development programs have immensely helped micro entrepreneurs who lack collateral needed to secure a loan or those who have low or no credit by providing them with training, support, help in developing a solid business plan, and assistance in building their businesses. Successful micro entrepreneurs have contributed much to society by creating wealth, economic assets, and jobs. A Micro-Entrepreneurship Centers main goal is to produce successful micro-businesses, businesses that are financially viable and freestanding within their community. A study was performed in the 4th quarter of 2010 to assess if a Micro-Entrepreneurship Center could serve the Sunnyside community. Surveys were carried out in both English and Spanish to people identified by the Sunnyside Neighborhood association as well as a sampling of businesses located on 4th Street in Flagstaff as well as other areas within the Sunnyside Community. The survey was carried out by staff at the Northern Arizona Center for Entrepreneurship (NACET) and Technology and Sunnyside staff. Analysis and findings were determined by staff at NACET. The survey was carried out to 14 entrepreneurs and potential entrepreneurs and 15 high profile community stakeholders. While the number of entrepreneurs and potential entrepreneurs is a little low, it was very diverse in scope. The survey was carried out in both English and Spanish. Current Overview of Sunnyside and Weed & Seed Strategy (Provided by Sunnyside) The Sunnyside Neighborhood Association of Flagstaff, Inc. (SNA) is seeking to implement a neighborhood initiative called Destination SunnysideBlending Cultures & Enriching Lives (Destination Sunnyside). A part of this initiative may involve the development of a MicroEntrepreneurship Center.

Directly related to the Sunnyside neighborhoods Weed & Seed Strategy, Destination Sunnyside, falls within the Weed & Seed Strategys Neighborhood & Business Redevelopment area of interest. The concept behind Destination Sunnyside is to 1) bring people from outside of the neighborhood into the neighborhood to enjoy the rich culture that the neighborhood offers, 2) enhance the economic possibilities for local neighborhood businesses (due to the increase in visitors to the area) while providing support for micro-entrepreneurs in the area, and 3) encourage people to go green, park their cars and walk the neighborhood (look what you can do in one square mile, no car needed!) The Sunnyside neighborhood area is one square mile in size and is one of the Citys only traditional neighborhoods; Sunnyside is home to over 400 small and medium sized businesses. Within the Sunnyside neighborhood residents (and visitors) have access to almost all the amenities that a City the size of Flagstaff has to offer; grocery stores, doctors, educational facilities (P/K through College), clothing stores, restaurants and coffee shops, specialty stores, recreational facilities and parks, churches, administrative services, accountants, hardware stores, social service and civic organizations, hotels, bars, connivance stores, dry cleaners, florists, tailors, a radio station, etc. In fact the only thing that is not available in Sunnyside is a grave yard (which is why the residents often say you can be born, married and almost buried in Sunnyside (Sunnyside does have a funeral home which offers cremation services). Project Details SNA plans to promote the Destination Sunnyside initiative in the following ways: Newspaper Ads over the course of the summer which lists the wide variety of businesses and services provided in the area (SNA intents to request assistance from the Arizona Daily Sun for this nonprofit, neighborhood redevelopment initiative). SNA will not sell spaces on the ad nor will any businesses in the area be excluded from being listed in the ad due to non-membership. SNA IS NOT A MEMBERSHIP ORGANIZATION AND DOES NOT COLLECT MEMBERSHIP DUES/FEES FROM ANY RESIDENT/BUSINESS OR ORGANIZATION IN THE SUNNYSIDE NEIGHBORHOOD AREA. Summarized Organizational History: Started as a neighborhood block watch over 28 years ago, SNA is a resident-lead organization that provides neighborhood-based programs and services to residents of the Sunnyside neighborhood. Enriching lives by mobilizing residents to create continual improvement is SNAs mission. SNA received official 501 (c) 3 designation in 2000. As for the Sunnyside Neighborhood Association (SNA), there is no better example of local residents taking charge of the quality of their daily lives through grassroots programs in

education, redevelopment, job creation and cultural revitalization. (The AZ Daily Sun, p. A6, Sun., 1/1/06). SNA utilizes a volunteer base of approximately 150 individuals/37 businesses to assist in delivery of its programs and services. Volunteer contributions in 2008 included: tutoring, lifeskills training, youth/resident leadership development, community pride events and translation services. Radio PSAs over the course of the summer which highlight Destination Sunnyside and its tag line Blending Cultures Enriching Lives and invite people to come, park their cars and experience all that a traditional neighborhood has to offer. Door/Window Clings for Businesses SNA has purchased 100 Destination Sunnyside Door/Window clings for Businesses to display. Again the Door/Window clings have the slogan and tag line on it as well as a picture of a sun at the end of a rainbow (this is available for review). Bumper Stickers and Buttons for residents and neighborhood visitors Sunnyside Businesses and organizations will be given Destination Sunnyside bumper stickers and buttons to hand out to residents and visitors (the SNA office will also have these on hand and people will be encouraged to visit their local neighborhood association Hands-Across-Sunnyside Day we are in the process of working with Killip Elementary School and at the end of the summer/start of the new school year we would like to hold a hands-acrossSunnyside Day. The intent is to form a line down Sixth Avenue of people holding hands to celebrate the Sunnyside neighborhood and its enriching culture. What is Needed SNA was able to utilize a small amount of monies from its neighborhood Weed & Seed strategy to put towards the Destination Sunnyside Initiative. At this time they have window/door clings, bumper stickers and buttons. Sunnyside Micro-Entrepreneurship Center Survey A survey of potential users of the center was conducted using the following introduction to the survey: Sunnyside is considering a Micro-Entrepreneurship Center for its community. A MicroEntrepreneurship Center would help small startup and existing businesses in Sunnyside to be more successful. The Micro-Entrepreneurship Center might provide access to shared services such as conference rooms, copiers, fax machines, the internet, etc. Additional business assistance is sometimes

given through workshops and one to one business counseling. The center may or may not offer shared workspace. To help Sunnyside best determine if this might be of use in its community we are asking that you take a few moments to complete this survey and appreciate your views.

1. Are you in business now? 80% Yes 20% No If yes, is your business a: 8% Start up business 93% Existing If yes, for how many years? 3-52 The majority of people surveyed were already in business numerous years. A couple of people were not but were interested in what assistance they could receive in getting started. 2. Including yourself, how many employees does your business currently employ? 33% 1-2 33% 3-4 8.5% 5-6 8.5% 7-10 8.5% 11-25 8.5% Over 25 Most of the people in business are classified as micro-business owners with total employees being below 4 for 2/3 of the respondents. One restaurant surveyed did employ more than 25 people. 3. What best describes your business? 42% Service 58% Retail 0% Technology 0% Arts

0% Value Added 0% Mfrg

All of the businesses surveyed self-identified as service or retail. However, several of them are actually a combination of both. No respondent identified themselves as technology, value added, manufacturing or arts related. 4. What are your products or services? Samples: Convenience store, motorcycles, restaurant, tire store, upholstery, retail, clothing, music, party supplies, food, apparel, wigs 5. Do you consider your business? 92% Full Time 8% Part Time

0% Hobby

0% Supplemental Income

Almost all respondents to the survey are in business full-time for themselves. 6. In what facilities are you currently conducting your business? Store front, home, warehouse, business building 7. Are the facilities adequate for your needs? 33% Yes 67% No If not, why? Zoning, needs better store front, parking, needs larger building, security issues

We were somewhat surprised at the large number of respondents who felt their current space was not adequate for their needs. Several retailers felt they needed more exposure to passing traffic and several others identified the need for additional workspace. Security was also identified several times with one sharing a story of being robbed early before opening for business. Overall, however, respondents seemed happy to be in the neighborhood and none shared an interest in relocating out of Sunnyside.

8. What types of customers are you currently targeting or do you plan to reach? Walk-in, wide range, Navajo, college students, word of mouth, females, young families, blue collar, Caucasian and Hispanics 9. Do you have a current business plan? 33% Yes If not, could you use help writing one? 33% Yes 67% No 67% No

A clear 2/3 of those surveyed did not have a current business plan and some did not feel a need to do one. However, this sentiment was not reflected in questions later on in regards to obtaining help in writing a plan. 10. If you have an idea for a business but have not yet invested a significant amount of time and money, what assistance is needed to determine the feasibility of your idea, help you to get the business started or provide you with the skills so that you have confidence moving forward? Access to capital, how to determine feasibility 11. Would you attend any of the following seminars or classes if offered at no or a nominal fee? (Check as many as apply) 75% Prepare a business plan 42% Start a business legally 67% Obtaining and using credit 100% Marketing assistance 83% Developing markets for new products 42% Self-employment opportunities 67% Introduction to business accounting: taxes, payroll, capital expenses, etc. 42% How to present at trade shows 8% Other: How to start a business in Flagstaff Marketing was a high priority for all respondents followed by preparing a business plan and how to properly do business accounting. Overall, the responses offered showed a high interest in seminars and classes.

12. Sometimes businesses benefit from efficiencies when sharing capital costs of equipment and /or clerical services with other growing businesses. Would your business be interested in the following shared services? (Please check all that apply) 33% Secretarial Reception 17% Copy Machine 25% Fax Machine 25% Phone Answering Service 17% Internet Access 8% Other: Contract Labor 8% Other: Conference Room Respondents to this question did not show an overall need for actual space to rent. Most responding to this question indicated a much stronger need for seminars and mentoring relationships. 13. Have you sought any services in our area? If so, please check all that apply. 42% Community College Small Business Development Center 0% Economic Development 25% Chamber of Commerce 0% Workforce Investment Board 50% Attorney 58% Accountant 0% Consultant 75% Banker 42% Website Designer 8% Northern Arizona Center for Emerging Technologies _____ Other_____________________________________________________________ Was the service helpful? Yes: 100% No: 0% 14. In what areas of your business would you like more help? 42% Business Planning 67% Finding Financing 83% Marketing 50% Finding Qualified Employees 25% Product Development 25% Manufacturing Process 50% Market Analysis 33% Financial Analysis 58% Taxes 16% Incorporation

33% 25%

Legal Managing People

Again, marketing was identified as a major barrier to respondents expansion. Financing and taxes were also self-identified areas of need. 15. Remembering that a Entrepreneurship Center is for both new and existing small business, is this something that your business would be interested in? 100% 0% No All respondents to the survey indicated that regardless of their size, length of time in business and area of focus that they would use such a center if it was developed within Sunnyside. 16. Which of the following best reflect your level of interest in an such a center? 8% I would consider renting shared space in the center if it opens in this area 50% I would use resources and business assistance services, but may not rent space 42% I might use resources and business assistance services, but may not rent space 0% My Company would probably not be interested in locating in or using the services

17. If you would be interested in locating your business in the center, please mark all of the following that best describe the types of space you would need: 8% Office space 8% Production/Assembly space 0% Manufacturing space 16% Retail 8% Service space 0% Loading dock 8% Storage outdoor 8% Storage indoor 8% Arts/Crafts studio 0% Light laboratory space 46% Other: None 18. How much square footage do you need? 8% 500-1,000 sq ft 92% None

Testing Community Reaction A second survey was performed solely by NACET staff to determine how community stakeholders would react to the creation of such a center using the following survey:

Background: Micro-Entrepreneurship Centers provide dedicated services to certain geographical areas. These centers provide assistance to micro-businesses located within its service area. These services may include business seminars, counseling, referrals to other agencies and co-working space. A Micro-Entrepreneurship Centers main goal is to produce successful micro-businesses, businesses that are financially viable and freestanding within their community. A study is underway to assess if a Micro-Entrepreneurship Center could serve the Sunnyside community. Please be candid and honest in your answers and feel free to share additional ideas and information you may deem pertinent. 1. On a scale of 1 to 10 with 10 being the highest, how would you rank your knowledge of micro-businesses? Ranges of 2 to 10 with a 6.5 average Most respondents to this question had a general knowledge of micro-business. However, based on the responses, should the center be established there is a minimal amount of stakeholder education needed in order to fully gain support. 2. Would you support the project if it could be demonstrated that success could be measured and achieved? Yes: 93% No: 0% Maybe: 7% *Document demand first A clear majority would support such a project as long there were clear measures of success both documented and achieved. 3. What role would your organization have in the creation of the center if any? Seed Money: 7% High Interest: 14% Student Interns: 21% Planning: 29% Unknown: 23% Advising: 14% Most the respondents requested additional information about how such a center would be established and operated before becoming too involved. 4. What role, if any, will your organization have in the center after it is established such as volunteering time, providing resources or donating staff time? Little: 50% Referrals: 14% Presence: 7% Volunteer Staff Time: 24% Many stakeholders, while supportive of the concept did not feel that their organizations would be able to provide resources. However, 50% of stakeholders indicated an interest in assisting in some way. 5. What financial support would your organization provide either in the initial creation of the center or in its ongoing operations?

Seed Money: 14% None: 64% Staff Time: 7% In-Kind: 14% Grants: 14%* *Total is greater than 100% as some respondents indicated support in multiple areas 33% of stakeholders indicated an interest in providing some type of support for start-up and ongoing operations of the center. 6. Should the center be a central resource area for potential entrepreneurs and local service providers within the Sunnyside community? Yes: 93% No: 7%* *Should serve anyone, not just Sunnyside 7. Are there potential partners you feel that could help manage the center? Sunnyside Neighborhood Association, Financial institutions, Insurance companies, City of Flagstaff, Coconino Community College, Small Business Development Center, Steve Saville, SEDI, NACET, NAU, SCORE 8. What type of corporate structure would be appropriate for the center? 501C3: 72% Use Existing Sunnyside Neighborhood Association: 14% No idea: 14% 9. What reasons would you think would make the project fail? Lack of leadership, lack of funding, location, lack of demand, sustainability, too much government, not sharing successes, high failure rate of micro-businesses Stakeholders clearly would require a very detailed program that was able to provide this assistance and then share that with the community. The area of sustainability was of more concern than others to this group as they felt the program would have to demonstrate how it would manage to survive multiple years even if there was a strong demand for its services. 10. What would be a reasonable measure of success? Businesses sustainable, legal businesses, number of clients, number of jobs produced, revenues, capital accessed Stakeholders want to see a very visible program with very visible results given back to the community. Accountability was a clear desire of all stakeholders interviewed. 11. Would a member of your organization be willing to serve on a planning team and/or Board of Advisors? Yes: 79% No: 7% Maybe: 14% 12. Is there any reason you think a Micro-Entrepreneurship Center should not be created? Yes: 29% No: 71%

*Unless fiscal issues can be addressed, agencies are already doing that, lack of ongoing financial support, demonstrate financial viability A main area of concern of stakeholders who questioned the establishment of such a center was duplication of other programs already in existence. Many wanted to see a clear tie in to existing programs and demonstration of how this program would be sustainable. However, a clear majority was in favor of seeing such a center established.

13. What issues, if any affect new businesses that should be considered? Economy, SB1070, marketing skills, education, working capital, zoning, how to be legal, taxes 14. What resources should the center provide? Mentoring, internet, access to capital, accounting assistance, billing, human resources, how to be legal, late hours and Saturdays 15. Should the center support businesses that promote tourism? Yes: 79% No: 14%* Not Sure: 7% *Tourism produces only low wage jobs 16. What screening process should be used for potential clients for the center? Good initial evaluation, require business plan, use NACET model, evaluate existing business skills, must demonstrate they are coachable 17. Is there any business types that you feel should not be served by the center? Adult oriented, retail, technology, high pollution, high water use, large businesses, tourism, low wage, use of heavy equipment 18. Do you feel shared workspace clients should receive below market rental rates? Graduated rates? Market rates? Below: 7% Graduated: 84% Market: 7% 19. Would you support the center having an anchor tenant if it makes the center feasible? Yes: 93% No: 7%* *Businesses only

Conclusions and Recommendations

Based on this survey, it is clear that there is a desire for the services that would be offered by a micro-business center within Sunnyside. While there are numerous agencies in Flagstaff jffoffofferoffering someof these offering some of the services a micro-business center would, those surveyed indicated a need within Sunnyside. There is a need for assistance with marketing, business planning, obtaining capital as well as how to operate legally in Flagstaff. There is also a very strong need for assistance in obtaining the correct space in which to operate a majority of the businesses surveyed. It would be appropriate for Sunnyside to share this need with Mr. Steve Saville Manager of Enhanced Service Districts for the City of Flagstaff as he is already working on this issue. From a stakeholder point of view, it will be very important for the program to be very visible to the community and to clearly demonstrate early success. It is also imperative for the program to work closely with other organizations especially the Small Business Development Center and SCORE to avoid a duplication of services. Partnerships with both organizations as well as the countys existing small business program are critical to stakeholder acceptance of a microbusiness center within Sunnyside. If the center does not or cannot effectively establish those partnerships, the stakeholders within the community will immediately deem the center as a failure. Based upon the responses given, it is recommended that Sunnyside move forward with the establishment of a virtual center. A partnership with the SBDC and SCORE could assist in offering classes within Sunnyside and be supplemented by the center. Such classes should primarily be offered in the evenings and weekends to ensure strong attendance. Should the center decide to establish physical space, it should be small and offer some shared space. Over time, as the center becomes more well-known and can demonstrate a critical mass of aspiring business owners there could certainly be anticipated growth and expansion.

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