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'2 Minnesota Magazine August/September 1987 by Charles Schaffer Minnesota is verb, rich in the number and kind of public' and private orga~:izations that offer assistance to businesses. A measure of their quality and commitment is their willingness to offer increasingly sophisticated assistance at little or no cost. Here are some examples: The Minnesota Chamber of Commerce and Industry has begun a program of export assistance; the Small Business Development Center network offers assistance with government contracting; Minnesota Project Innovation assists with securing federal research and development grants; and the Minnesota Small Business Assistance Office offers a series of workshops on second-order business topics such as pricing, product development, taxation and the business growth'decision. The result is an increasingly large menu of ways to remove the information cost barrier to business growth and development. A major factor in the success of these efforts has been the willingness of the various service providers to share resources -- mones; time, talent and expertise -- in coordinated and cooperative planning and delivery. Over the next year, those cooperative efforts will be ~uned more and more to thinking of ways to assist businesses with complex permutations of basic business issues in three areas: mone55 markets and management. Money The availability and accessibility of capital as debt or equity remains the No. 1 factor in business success. Capital markets, already dramatically changed over the last 10 years, will see further changes. There has been increased interest in Congress on proposed repeal of federal laws separating comm.~¢cial and investment banking and prohibiting commercial corporations from owning banks. A number of major banks have secured permission from the Federal Reserve to begin underwriting new financiM securities. The President's signLng, in August, of the Competition in Ban~dng Equality Act has muted but not eliminated this interest. The kinds of changes proposed by advocates of an increasingly dereg~.z!ated financial market would affect the amounts of capital available, the actors in loan decisions and even the na[ure of debt itself. Banks might, for example, behave more like vent ,~e capitalists seeking repayment not in cash, or cash onl.% but in stock or stock warrants. Oneof the traditional bases of the credit decision, collateralizabiEty of assets, could be replaced -- as it is in the venture capital decision with an emphasis on cash flow a~d quick growth. Markets In many industries, markets have become more contestable. That is, bm'tiers to entry have been eased by factors such as deregulation, technology transfer, new manufacturing systems and increased use of subcontractors for intermediate product assembly. But a contestable market is not necessarily a competitive one. Some firms may possess enough market power -- in terms of production capacity or proprietary products to drive out new entrants to the market. For businesses and for those who assist them, this trend requires a clear return to the concept of "value" in identifying markets and making marketing efforts. A good product is no longer enough. (The patent office is full of great ideas which will never see production.} In addition to a good product, a renewed and strong ' emphasis must be placed on creating valuei meeting the needs of the buyer in such a way that he will part with his mbney for your product, rather than a competitor's. Management Management skill follows access to capital as a major factor in business success. As products, technolog3~ and markets become more complicated and competitive, the need for management skill and management foresight increases. For example, if there is one problem which bedevils business managers, especially those in small businesses, it's the problem of unintended consequences. · A surgical equipment firm installs an expensive gas sterilizer to reduce variable costs o/production. It succeeds; but an5, savings are eaten up by increasing liability insurance premiums because the gas used is deadly in large doses and carcinogenic in small ones/ · A small manufacturing firm bids on a government contract only to discover it must bear an immediate and substantial cost to redo its accounting system to federal credit standards. For those who counsel and assist small businesses, these issues are a call both to action and to caution: action to aid businesses in the increas'2ng comp!e~:ity of business activity, caution to remember that ali that activity must be based on sound business judgment. Charles Schaffer is director o/the Sm~l Business Assistance Office of the Business Promotion and .~£arketing Division of the .z~finnesota De.nartment of Trade and .~cono,mic De:.,elopment.