Dear Fellow Taxpayer:

Florida officials continue to focus on policies to stimulate economic growth and development to diversify the state’s economy. This has been made more challenging with the recent reduction in funding to attract businesses and create new jobs. Florida has successfully promoted the state’s innovation economy by investing in entrepreneurial second-stage companies with great growth potential. Second-stage companies are those companies that have survived the start-up phase and are now focused on growth and expansion, and creating new jobs. Second-stage companies are now responsible for more than 30 percent of Florida jobs, and more than one-third of Florida’s sales.

One important state program, GrowFL, works with these second-stage companies to help them connect with resources that will allow them to make better strategic decisions and have a larger positive impact on our economy. A January 2015 study by Florida TaxWatch found that GrowFL would generate jobs and help to diversify Florida’s economy and the program has been recognized as the number one Economic Gardening® program in the nation.

Now, almost three years later, Florida TaxWatch has once again looked at the impacts of GrowFL on Florida’s economy. Florida TaxWatch is pleased to present policymakers and taxpayers with an independent analysis of one of Florida’s successful economic development programs.

Sincerely,
Dominic M. Calabro
President & CEO

Executive Summary

Launched in 2009 to help second-stage companies grow and create new jobs, GrowFL uses principles of Economic Gardening® to help growing companies throughout Florida overcome obstacles to mature and prosper. A January 2015 study by Florida TaxWatch forecast the economic impact of GrowFL and concluded that “Florida should continue this approach to economic development.” Since that report was published, three important things have happened: (1) the GrowFL program has continued to assist Florida’s second-stage companies; (2) the state has changed its strategy of investing in economic growth and development; and (3) a new academic analysis has estimated the job creation attributable to the GrowFL program since its inception in 2009. This study also found that the program has generated a net return on investment of more than 9-to-1.

These changes have prompted TaxWatch to revisit the 2015 analysis, using the REMI PI+ economic forecasting model, to calculate GrowFL’s economic impact over the next 10 years (2018-2027). The REMI analysis concluded that, over the next decade, GrowFL will:
• generate $4.72 billion in additional Gross Domestic Product (GDP);
• create 43,794 private sector, non-farm jobs statewide, with an average annual salary of $97,815;
• produce $4.61 billion in additional personal income for Floridians; and
• generate $345.14 million in additional state tax receipts.

This analysis shows that GrowFL plays an important part in the development of Florida’s entrepreneurial economy, producing tens of thousands of high-paying jobs across the state and helping to diversify the state’s economy. If lawmakers are committed to growing Florida’s economy from within, then a continued public investment in GrowFL would be a wise investment indeed.

Introduction

In 2016, there were 181,648 second-stage companies in Florida. These firms represented 11.7 percent of Florida businesses, 34.3 percent of the jobs, and 34.7 percent of total sales. Furthermore, Stage 1 firms, many of which are pre-Stage 2 employers, represented 76.7 percent of total Florida businesses and generated 90 percent of the net job growth in Florida from 2009–2016.

Looking only at companies headquartered in Florida, Stage 2 companies made up 9.3 percent of all companies, but accounted for 31.3 percent of all jobs.

In 2016, there were 127,076 Stage 2 resident Florida companies accounting for 2,630,928 jobs; there were 1,371,779 total resident Florida companies accounting for 8,417,988 jobs.

The net job growth from 2009 -2016 by Stage 1 and Stage 2 companies exceeded the total net job growth for Florida because these two types of companies offset the net job losses during that period attributed to companies over 100 employees.

Stage 1 and Stage 2 businesses are also generating the greatest net increases in sales ($686.7 billion net increase), and account for more than 90 percent of Florida’s net sales growth during the same period8 (see Appendix 1 for details).

Overall, business and job growth in Florida is occurring in small businesses, those with fewer than 100 employees (which includes second stage companies). This is also where the new jobs are being created. As many of the Stage 1 businesses survive their start-up and move successfully into the second stage, the need for resources like GrowFL to help them continue to grow becomes paramount.

About GrowFL

GrowFL uses principles of Economic Gardening® to help growing companies throughout Florida overcome obstacles to mature and prosper. Economic Gardening® is an entrepreneurial approach to economic development that seeks to grow the local economy from within. Its premise is that local entrepreneurs create the companies that bring new wealth and economic growth to a region in the form of jobs, increased revenues, and a vibrant local business sector. Economic Gardening® seeks to focus on growing and nurturing local businesses rather than hunting for “big game” outside the area.

Participating second-stage companies are selected through an online application process, during which the applicant must demonstrate that: • The company must be a for-profit enterprise; • The company must employ between 10 and 99 employees; • The company must have between $1 million and $50 million in annual revenue; and • The company should have the intellectual property and/or strategy to sell outside Florida.

Upon a company’s selection, GrowFL matches the second-stage company with a local and statewide team of professionals with specialized skills, which then analyzes the company’s overall business strategy. Team members routinely provide strategic market research in the form of reports, data, and recommendations for the company’s consideration. Team members also work on problems identified by the second-stage company and provide perspectives on potential issues and opportunities the company may have missed.

The intent is to “put the capabilities of a Fortune 500 company’s market research department in the hands of a second-stage business for the purpose of increasing top-line revenue.”

GrowFL trains the CEO and thier sales and marketing teams how to grow, which data are important to growth, where these data can be found, and how to use data to improve their strategic approach to growth.

Another valuable GrowFL tool is the CEO Roundtables, a peer learning process using a methodology designed specifically for leaders of second-stage companies. Meeting 10 times per year, the CEO Roundtables bring together participants from diverse, non-competing industries in a structured format with trained facilitators to share experiences and discuss new ideas.

In recognition of success, GrowFL identifies 50 “Florida Companies to Watch” each year. An awards ceremony is held each year, at which these Florida Companies to Watch are recognized and honored for their performance.

In its seventh year, GrowFL has recognized 350 companies nationally, as it is held in several other states in partnership with the Edward Lowe Foundation.

Quantifying the Economic Impact of GrowFL

These results buttressed the study’s conclusion that “public investments in this type of the program are a reasonable part of a state’s economic development strategy…” and that “Florida should continue this approach to economic development.”

Since that report was published, three important things have happened: 1) The GrowFL program has continued to assist Florida’s second-stage companies; 2) The state has changed its strategy of investing in economic growth and development; and 3) A new academic analysis has estimated the job creation attributable to the GrowFL program since its inception in 2009.

Based on these three factors, Florida TaxWatch has revisited the 2015 analysis of the economic impact of this program to provide the Legislature and the taxpayers of Florida with an updated analysis of the economic benefits of the GrowFL program.

This updated analysis uses the leading multi-period dynamic economic forecasting model to calculate the economic impact of the program over the next 10 years (2018 – 2027). The REMI PI+ model is an “input-output” model that forecasts the future of a regional economy and predicts the effects on that same economy (outputs) when the user implements a change (inputs). (See Appendix 5 for a detailed explanation of the REMI model.) The first forecast is called the “control forecast”; the second forecast, which incorporates the change (GrowFL), is called the “alternative forecast” or “simulation.” The difference between the two represents the effects of the change.

TaxWatch selected three GrowFL-related inputs for this analysis. The first input is regional sales related to GrowFL from 2009-2015, which is used to forecast economic growth as a result of GrowFL. The second input, the industry make-up of companies served by GrowFL, is used to forecast the number of jobs, wages, and sales by industry sector. The third input is the amount of investment into GrowFL, which varied widely over the 10-year period.

Based on the updated projections, over the next decade GrowFL will:
• Generate $4.72 billion in additional Gross Domestic Product (GDP);
• Create 43,794 private sector, non-farm jobs statewide, with an average annual salary of $97,815, which is more than double the current average salary of $45,116 in Florida.19
• Produce $4.61 billion in additional personal income for Floridians; and,
• Generate $345.14 million in additional state tax receipts.

The detailed outputs of the REMI PI+ multi-period dynamic economic forecasting model analysis are provided in Appendix 2.

The projections from the 2017 analysis are consistent with the results from the 2015 analysis, but show that the program is even more valuable as an economic development program. As in 2015, almost one-quarter of the new jobs will come from the Professional, Scientific, and Technical Services sector, which helps to explain the high average salary of nearly $98,000 for these new jobs. When other traditionally high-paying industry sectors (Manufacturing; Information; Finance and Insurance; and Health Care and Social Assistance) are included, the high-paying industry sectors are projected to provide nearly half of these new jobs. See Appendix 3 for the detail of Jobs Created by Industry Sector.

Overall, these projections show that Economic Gardening ® generates jobs, and that is important in a rapidly-growing state like Florida. Since 2010, Florida’s population has grown from 18.80 million residents to 20.48 million residents, an average increase of about 1.3 percent each year. During that same period, Florida businesses have created more than 1.44 million jobs, and Florida’s unemployment rate has dropped 7.1 percentage points to 3.6 percent, the lowest unemployment rate in more than a decade. Over the five years ending in 2016, the Florida economy grew in real terms by 12.69% at a compound annual growth rate of 2.42% per year. Real Florida Gross Domestic Product (GDP), at $815.07 billion in 2016, is at the highest level recorded to date and is indicative of a robust economy. Florida’s business- friendly climate, evidenced by impressive job growth, low unemployment, and a robust economy, continues to be a major attractor of new residents to Florida.

Job creation in Florida is accomplished by either enticing new businesses to relocate to Florida or by expanding existing Florida businesses. Historically, Florida has used economic development incentives targeted to specific industries and investments to attract qualifying businesses to bring high-wage jobs to the state and to diversify the state’s economy. Although these important incentives have been shown to generate positive returns, funding for many of these incentives has recently been greatly reduced or eliminated. This has placed Florida at a competitive disadvantage compared to other states when it comes to enticing new businesses to relocate to Florida. This makes the role of Economic Gardening® programs like GrowFL, in the absence of other economic development incentives, even more critical in sustaining Florida’s economic and population growth.

Businesses helped by GrowFL are not only creating tens of thousands of new jobs statewide, but these new jobs are high-wage jobs spread across a number of industry sectors. With average salaries approaching $100,000, the average salary of GrowFL-created jobs is more than twice the average salary ($45,116)25 for all Florida jobs. The diversification of these jobs across 20 different industry sectors is reflected in Appendix 3.

Furthermore, the recent analysis of the economic and fiscal impact of the program since its inception in 2009 shows that the program has generated a net return on investment of $9.10 for every $1 of public investment.

Conclusions

GrowFL has a demonstrated track record of developing second-stage businesses and giving them the skills and competencies they need to grow and expand. GrowFL has plays an important part in the development of Florida’s entrepreneurial economy, producing tens of thousands of high-paying jobs across the state and helping to diversify the state’s economy. If lawmakers are committed to growing Florida’s economy from within, then a continued public investment in GrowFL would be a wise investment indeed.