Small, urban businesses can grow by capitalizing on the advantages of the inner city, rather than counting on government subsidies.
That's the essence of an economic development strategy gaining momentum across the country and taking hold in Baltimore through a management consulting firm created and run by local business people.
The newly formed Baltimore Advisors Inc. hopes to help promising, city-based businesses become more competitive by tapping the expertise -- and pocketbooks -- of partners from the corporate world.
The firm, which can charge below market rates for its services because of private financing and a nonprofit status, expects clients to see tangible results after three years -- a 15 percent annual increase in jobs and a 25 percent increase in net income.
"There are good reasons businesses locate in the city, despite all the liabilities," said Ursula Powidzki, the company's managing director. "You can't just grow businesses in the city by doing things like low-interest loans and tax incentives if you don't deal with the core competitiveness of the business.
"Part of what you do is keep in mind what the inherent competitive advantages are, whether it is access to a particular client market or warehousing and distribution."
Managed by a three-person staff and a local board of directors, Baltimore Advisors hopes to fill a gap in services for small businesses.
Most large management consulting firms won't take on the small, higher-risk companies -- even those that can afford the high-priced services.
That leaves many small companies on their own when it comes to strategic planning, which can hurt them as they try to expand.
"A venture capital company would not invest in a company unless it has a strategic plan and the managers know where they're taking the company," said C. Edward Spiva, a partner at Anthem Capital, a venture capital partnership.
"The types of companies Baltimore Advisors works with have never done that," said Spiva, also a member of the firm's board. "They're producing income but have never taken the time to step back and do that strategic thinking. And if you haven't, it's very difficult to get financing to do the right kind of expansion."
Since its inception last fall, the consulting firm has raised more than half its budget for the next three years through contributions from corporate heavyweights and foundations.
And while actively seeking new clients, it has begun to make a difference to its first few customers -- Waterford Caseworks Inc., a maker of high-end cabinets; Techmark Corp., a commercial fire and burglar alarm company, and Intelect, a transportation engineering company started in 1995.
Intelect had chosen Canton over dozens of other areas because of competitive rents and access to markets in Baltimore, Washington and Philadelphia. But the company didn't always know where to turn for answers to an endless array of management questions.
"As a company grows, there are a lot of issues that come up all the time," said owner Rohit Patel. "It's nice to have someone out there you can make a phone call to."
The consultants put Intelect in touch with a specialist who has helped the company negotiate contracts compensating senior employees and executives during the firm's expansion.
Baltimore Advisors also obtained legal advice for the client and researched the best deal on office furniture. And a marketing plan is being designed by Baltimore Advisors and graduate students at the Loyola College's Sellinger School of Business and Management.
Stewart Bainum Jr., Baltimore Advisors' founder who is chief executive officer of Manor Care Inc., modeled the consulting firm on a program developed by Harvard Business School Professor Michael E. Porter. A fan of Porter's business management theories, Bainum was intrigued by the idea of using those strategies to help create jobs in the inner cities.
"The greatest challenge facing our state and our country is how do we deal with the growing gap between the haves and the have nots," said Bainum, chairman of Baltimore Advisors' board. "We don't have solutions that are working. The answer lies in job and wealth creation, as well as enhancing the public education system."
In a 1995 Harvard Business Review article, Porter had argued that urban economic development programs relying on subsidies or preferences have not worked.
For one thing, such programs have too often targeted companies with poor management or little chance of competing.
He proposed finding companies with a significant chance of success, identifying their particular advantages in the city and giving them good management advice.
He has been testing his theories at his Boston-based national organization, Initiative for a Competitive Inner City. Its model is being tried in Boston, Oakland, Calif., and Kansas City. It calls for experienced, successful businesses to act as mentors to emerging companies, who can in turn become successful and help others.