Avoiding the Red Tape and Building a Business in Detroit

t should all be so simple: You have an idea-a potentially fabulous business idea to fill a critical need for something missing in Detroit. So you quit the 9-to-5 job, drop your nest egg on a storefront, announce your grand opening and boom! You're the next great comeback story out of the Motor City. And the start of your business is considered a major turning point in Detroit's revitalization.

Only it's never that simple.

Notwithstanding the risks of opening any business, opening a business in Detroit can especially be a Herculean task. Not because of lack of clients or too much competition-and regardless of the property's "location, location, location"-many businesses in Detroit fail within the first few years, even months, because of city policies and ordinances in place that complicate the process with hidden costs.

As a result, many aspiring business owners are turning to new local business incubators to help find funding, resources and build their brands, while eschewing the risks and the red tape that comes with owning a brick-and-mortar space in Detroit.

Baking a business

Small-business owner Yvette Jenkins participated in several pop-up business opportunities offered by local incubators before she decided to give her Love. Travels. Imports. boutique its physical location on the Avenue of Fashion. Pop-ups in different neighborhoods gave her the opportunity to test the market, she explains.

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"It provided an opportunity, in a very affordable way, to be able to operate within that community and to determine if that is a community that I would want to locate in," says Jenkins. "And to get an understanding and validate if that's my demographic and target market over there. So that was extremely helpful."

After submitting a proposal to Revolve Detroit, a collaborative program of the nonprofit Detroit Economic Growth Corporation, Jenkins says she was ultimately introduced to other incubators and opportunities for business development, such as TechTown's Blocks Retail Boot Camp-which prepares retail concept entrepreneurs for the launch of their brick-and-mortar businesses.

"I would say the biggest challenge in Detroit is finding a good location. A lot of the buildings in this city are older and landlords have not kept them up," says Jenkins. "So consequently, there is a lot of work to do. And as a startup business, I know I personally don't want to spend the limited funds that I have fixing up somebody's building because they neglected it."

Jenkins adds that she is also aware of the difficulty of being a building owner in Detroit if you want to properly operate and rent out space to businesses.

"A lot of the licensing that the city requires can be quite challenging, as well. And from what I understand, a lot of the processes that the city has in place were established back in the '70s," she says. "Frankly, it's a lot of work to start a business. You've got to learn how to navigate through different things. I think that you have to be a pretty persistent person if you are going to be an entrepreneur. There are a lot of challenges, and you just have to find a way to overcome them. It's not easy, but it's what I've chosen to do."

Diallo Smith, owner of the Drive Table Tennis Social Club in downtown Detroit, says every entrepreneur should go into business for one of three reasons: "To stay in business, to expand your business or to sell your business."

Founded in 2012, Drive Table Tennis Social Club invites guests to socialize over pingpong. Without an incubator, Smith says he had to put aside savings for many years before opening the club.

"Financing is always one of the biggest challenges for any entrepreneur," Smith says, but the bigger challenge? The hidden expenses in Detroit.

"You have to play the course and be very consistent. It will take time," says Smith. "But building a business in Detroit is possible."

Paul Riser Jr., managing director of technology-based entrepreneurship at TechTown Detroit, explains, "In order for entrepreneurship to thrive, you need that diversity of ideas, you need that diversity of programs being offered, and you need to be in buildings that represent the mosaic of our city and region."

Founded in 2000, TechTown provides entrepreneurial support to seven local neighborhoods by helping sole proprietors and existing businesses gain access to capital and incubation programs-strengthening neighborhoods in the process.

Riser says neighborhood-based services and diversity are key to TechTown, particularly as some minorities find it challenging to pursue entrepreneurship in Detroit.

But even with the added help of incubators, minority business owners still fall behind in access to funding. Recently, a report titled Race and Revitalization in Detroit, based on research conducted by independent researcher Alex B. Hill, revealed that several incubators graduate a majority of White entrepreneurs, while minority entrepreneurs passed through such programs in significantly smaller numbers. The study, which did not include TechTown, showed that nearly 70 percent of fellows, executives and other revitalization agents were White, compared to the city's 83 percent Black makeup.

Here is where incubators and city reforms in business licensing can work in tandem to close the gap between minority and non-minority entrepreneurs, says Riser. "Diversity, inclusion and openness-it's crucial for Detroit's future," he says.

Reforming the red tape in Detroit 

Detroit could be an international business gold mine with access to a growing immigrant community and close proximity to Canada. But its hidden gems are often overlooked because of all of the municipal red tape.

"My feeling is that most of the issues (in the city of Detroit) are in process and procedure," says Brian Ellison, former director of business and development services under Mayor Mike Duggan and business advocate under past Mayor Dave Bing. Seemingly minor issues tend to have greater ongoing problems, he explains, telling the story of how Method Home wanted to open a soap factory in Detroit-but was hampered by residential zoning laws and stalled permissions at the county and state levels. The factory never came.

"Around these kind of core process changes, we're starting to make systemic change in business licensing and development permitting. That's how you re-invigorate neighborhood commerce," says Ellis.

Making the city more business-friendly means putting an end to obsolete processes for issuing business permits while repairing a fractured relationship with business owners. Among the city's goals is to boost its near-nonexistent online system for business paperwork and that would otherwise require an office visit, says Ellison, and reduce the animosity and contempt some business owners have toward the city from past dealings.

"There are people with good experiences and there are people with bad experiences," says Ellison. He explains that the city is also working with existing business owners to help bring them up to speed on new code enforcements, with the end goal of making the business environment welcoming for everyone. "For the people who have been discriminated against in the past, they've had difficulty-and the only way to rebuild that trust is to be consistent, be competent and communicate."

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