Main Street developers have their work cut out for them—maintaining a unique sense of place while increasing the economic value of the (often) oldest part of town can be challenging. One of the biggest pain points we hear about from Main Street developers is ensuring that the businesses that start on Main actually stay.
The Dangers of Turnover
Everyone loves to see new businesses on Main Street.
But if those new businesses are replacing other businesses that have closed down—only to close down themselves after a year or two—it can lead to negative perceptions of the local economy:
“Nothing ever works here.”
“It’s so expensive to open a business there.”
“I’m excited there’s a new restaurant in that spot, but we’ll see how long it stays there.”
Even before the pandemic and current labor shortage, starting and keeping a thriving business on Main Street hasn’t been easy.
There are business-related reasons for this. 50 percent of new businesses fail within five years. Entrepreneurs who lack business training can be duped into a “if we build it they will come” mindset, signing leases they’ll never afford.
But there are also ecosystem-driven factors. Main Streets and other high-traffic corridors tend to charge high rents for commercial tenants. Economic developers tend to put off Main Street investment in favor of high-growth unicorns or national corporation bids. The majority of a community’s jobs do not usually come from Main Street, so why put money there?
It’s easy to see why Main Street organizations might resort to wooing established chains that already have financial support and a proven business model. But communities that take this approach lose their sense of uniqueness.
Ultimately, low survival rates on Main Street are bad for the community. High turnover says that entrepreneurship is too risky, stifles local enthusiasm, and further strengthens the narrative that small business isn’t worth the investment.
So how do you ensure that the businesses that start on Main actually stay?
Increasing Your Business Survival Rate
You can increase the survival rate of local businesses by providing a number of resources and ongoing support.
According to this article from Investopedia, the top reason for business failure is a lack of cash flow. But that’s pretty obvious—to prevent business failure, it’s more important to understand why businesses run out of money.
The other reasons for failure become really important here: lack of research, poor product/market fit, and lack of community support.
The good news is that there are powerful antidotes to these problems:
Business model validation
As an entrepreneur support organization, you’re able to provide local entrepreneurs with opportunities to test their assumptions about how their business will work before they open a storefront. At CO.STARTERS, we call this process “validating your business model.”
Establishing product/market fit and conducting research are crucial steps to validating a business model, since a business’s ability to make money completely depends on there being a market for whatever it is that business is selling.
A clear business model canvas—like the CO.STARTERS Canvas—makes this process much easier, since it forces the entrepreneur to organize their business model so that it can be seen neatly on one piece of paper.
By filling out the Canvas, an entrepreneur can identify all the assumptions they need to test—like whether or not their business is actually solving a real problem people have, or whether their pricing structure will allow them to ever break even.
So how can entrepreneurs actually go out, conduct accurate research, and test their assumptions? They have to talk to prospective customers! Customer discovery is likely the single most important thing an entrepreneur can do to improve their business’s chance of survival.
Entrepreneurs should make sure they’re constantly seeking out customers to talk to as they build out their business. When they host pop-ups or participate in pitch nights or offer free samples, they should probe customers with questions to find out if their solution is actually solving a problem, or how it compares to the competition.
If an entrepreneur begins customer discovery and learns that no one really has the problem they are trying to solve, they shouldn’t get discouraged! This is the time to learn, innovate, and adapt. Their business will be stronger, and live longer, than it would have otherwise.
Your organization can equip entrepreneurs to invest time in customer discovery before the business opens. One great tool for this could be a business launching program like CO.STARTERS Core, where entrepreneurs meet regularly for a set period of time to learn with and from each other.
During CO.STARTERS Core, participants are reminded every week that they should be talking to customers, and prizes are awarded to the entrepreneurs who conduct the most customer interviews.
If implementing a multi-week business launching program is too demanding, you could offer Wayfinding meetings. These quick meetings are designed to assess entrepreneurs’ business models quickly and point them in the right direction (that direction usually involves talking to more customers).
There’s an infectious misunderstanding that entrepreneurship is an individual endeavor: you work for hours in your basement until you’re ready to see if your idea can float.
But as we’ve said before, the most successful entrepreneurs aren’t born in basements—they’re made on Main Street. They’re creative and embedded in their local community, not lone wolves hustling in search of “passive income.” They get ahead, not by “working harder” on their own, but by learning from the experiences of mentors, other entrepreneurs, and their customers.
This is why all of CO.STARTERS’ programs are cohort-based. Group learning environments push even the most introverted of entrepreneurs to collaborate and learn from other perspectives. It builds trust and forges connection.
If you start building trust and collaboration at the earliest stages of business, you will foster an environment of collaboration and trust within the larger business community.
As an entrepreneur support organization, you have the opportunity to facilitate these connections and to create a web of support where entrepreneurs feel like the rest of the business community has their back.
A small way to establish an atmosphere of collaboration is to hire the businesses you support! Whenever you host an event, hire the local photographer and the local restaurant to cater. Get creative with ways to show off the talent on your Main Street while patroning the businesses you support.
And when other people have your back, you’re much less likely to fail or quit.
An Expectation of Reinvestment
Finally, it’s important to cultivate a culture of reinvestment in the local community. When local businesses are expected to give back, it strengthens the bond between them, the rest of the business ecosystem, and everyone else in the community.
Giving back doesn’t have to mean money. Mentorship programs are great ways to get seasoned entrepreneurs to reinvest in the community with their time. Successful CO.STARTERS alumni often volunteer to come back as program facilitators or guest speakers.
Of course, financial reinvestment is powerful too. Local business owners can sponsor new business owners by covering your organization’s program fees or contributing to your pitch night award pool.
Stronger Main Streets make for stronger communities. So much of Main Street work involves real estate development, beautification, and shiny projects that are easy to raise money for. But the backbone of Main Street will always be the businesses that line it. With the right kind of support—before and after businesses launch—you can ensure that those businesses stay.