Traditional Industries Sharpening Entrepreneurial Edge
Posted September 15, 1998
RALEIGH — Several months ago, I researched what I considered an anomaly: an entrepreneurial textile company. We often think of textiles as an "old industry" -- or, to put it more politically correctly, a "traditional industry."
But Mount Airy-based Pluma Inc. (PLU/NYSE) was started in the mid-1980's out of whole cloth, as it were. A group of executives who had cut their teeth at Bassett-Walker decided they wanted to try their hand at building their own company. Thus, they founded Pluma -- a company whose products are as basic as they come: sweatshirts and T-shirts.
I wondered just how extensive entrepreneurism is in North Carolina's traditional industries and in the state's rural areas. Now, a year-long study conducted by the Regional Development Institute at East Carolina University provides some answers.
The North Carolina Entrepreneurial Rural Growth Study (NCERGS) focused on the state's 85 rural counties, where it identified 3,058 entrepreneurial companies that have been grown to maturity over the past 20 years.
The study points out that these are not "mom and pop" operations. On the contrary, these firms averaged revenues of $6.8 million and 55 employees in 1995.
Though they represent only 4 percent of the total companies in rural counties, these entrepreneurial companies have created 14 percent of rural private jobs in the state. And they're moving fast. Over the past 5 years, these companies produced 36 percent of rural North Carolina's net new jobs and 77 percent of its new manufacturing jobs.
As for my question about traditional industries, the report states these companies are "innovative homegrown rural companies, built upon the strengths of the state's traditional industries. Rather than small businesses, (these) companies have achieved annual revenues that place them among the largest 2 percent of the state's companies."
The state has recognized the potential of entrepreneurism in our rural areas, and on October 1 will open a new five-person division in the Commerce Department aimed at nurturing it.
The new Commerce Department division aims to increase state and private investment in manufacturing capacity; persuade fast-growing small companies to relocate to rural North Carolina; and help the state's small businesses tap into electronic commerce.
The study found that entrepreneurial growth is strongest among some of the most traditional of traditional North Carolina industries: textiles, apparel, wood and paper, furniture and food products.
"Rural entrepreneurs are tapping the historic strengths of these businesses to develop new high-value-added products and services for national and global markets," concluded the report.
And, unlike much of the new industry in North Carolina's metro regions, rural entrepreneurial growth is being spearheaded by natives of the state. More than 68 percent of the entrepreneurs identified in rural areas are natives, and 88 percent are native to the area in which their company is located.
The findings are consistent with a 1995 study conducted by Cambridge, Massachusetts-based Cognetics Inc., which ranked North Carolina eighth among the 50 states in entrepreneurial activity.
And Cognetics agreed with NCERGS that entrepreneurism is not a word reserved for Charlotte, the Triad or the Triangle. That respected research firm found that all of rural North Carolina's regions ranked in the top 25 percent of 89 U.S. rural regions.
I found two other conclusions outstanding, and very encouraging, for areas of our state that generally are perceived as "disadvantaged":
- First, those who conducted the study disabused their own preconceived notion that a rural location is a disadvantage. Conversely, they found that "rural entrepreneurs succeed because of -- rather than in spite of -- their locations."
- The second point should perk up the ears of investors in search of good ideas. These companies need cash, and two factors are working against them. Bank consolidations have removed many "local" banks from our rural areas. And venture capitalists focus so heavily on the metro regions that they're overlooking these companies.
Many of my readers live in one of the 85 counties included in this study. Could there be an opportunity to invest in one of these companies, or perhaps to invest in a new "local" bank? Look around you. The next golden egg could be laying in a nest near you.
Have a prosperous week. Dale Gibson is a Raleigh-based journalist who publishes The Gibson Report, a weekly electronic newsletter focused on North Carolina business. Questions or comments may be directed to him by e-mail firstname.lastname@example.org by phone at 919-834-1033.