This publication was developed by the U.S. Department of Housing and Urban Development to assist in the

planning and development of Neighborhood Networks centers.

The guides in this series offer “how to” information on starting up a center, creating programs and identifying

center partners; center and program profiles and a wealth of resources.

Neighborhood Networks is a community-based initiative established by the U.S. Department of Housing and

Urban Development (HUD) in 1995. Since then, hundreds of centers have opened throughout the United States.

These centers provide residents of HUD-assisted and/or -insured properties with programs, activities and

training promoting economic self-sufficiency. These guides contain examples of successful center initiatives and

how you can replicate them.

To receive copies of this publication or any others in the series, contact:

U.S. Department of Housing and Urban Development

Neighborhood Networks

9300 Lee Highway

Fairfax, VA 22031-1207

Neighborhood Networks Information Center

Toll-free (888) 312-2743

TTY: (703) 934-3230

All publications are available from the Neighborhood Networks website at:

www.neighborhoodnetworks.org
HOW NEIGHBORHOOD NETWORKS CENTERS

CAN SUPPORT MICROENTERPRISES

JUNE 1999
How Neighborhood Networks Centers Can Support Microenterprises Page i

June 1999

TABLE OF CONTENTS

Page

How Neighborhood Networks Centers Can Support Microenterprises ....................................................1

Introduction...................................................................................................................................................................1

Why Is Microenterprise Important? ..........................................................................................................................1

Guide to this Handbook ..............................................................................................................................................1

Chapter 1: Microenterprises and the Obstacles they Face ........................................................................2

What Is a Microenterprise? ........................................................................................................................................2

Challenges Faced by Microenterprises....................................................................................................................2

Market Information and Access .............................................................................................................................2

Financing Knowledge and Access........................................................................................................................3

Management ...........................................................................................................................................................4

Moral Support and Networking ..............................................................................................................................4

Chapter 2: Key Components of a Successful Microenterprise Support Program...................................5

Features of Effective Microenterprise Programs....................................................................................................5

Outreach into the Target Constituency..................................................................................................................5

Ongoing Feedback .................................................................................................................................................5

Intermediary Function.............................................................................................................................................5

Ongoing Support.....................................................................................................................................................6

Building Networks...................................................................................................................................................6

Pre-Screening Participants ....................................................................................................................................6

Asset Building .........................................................................................................................................................7

Chapter 3: Case Studies ...................................................................................................................................8

Accion U.S. Network....................................................................................................................................................8

Lending Methodology .............................................................................................................................................8

Other Assistance ....................................................................................................................................................8

Appalachian Center for Economic Networks (ACEnet).........................................................................................9

ACEnet’s Keys to Success.....................................................................................................................................9

Appalachian By Design (ABD).................................................................................................................................11

A Market-Driven Economic Development Strategy ............................................................................................11

Working Capital..........................................................................................................................................................12

Group Lending and Training ................................................................................................................................12
How Neighborhood Networks Centers Can Support Microenterprises Page ii

June 1999

Women’s Opportunity Resource Center (WORC).................................................................................................13

Pre-Selection of Participants................................................................................................................................13

Training and Business Support............................................................................................................................13

Capital ...................................................................................................................................................................14

Other Support Services........................................................................................................................................14

Chapter 4: An Action Plan for Neighborhood Networks Centers.............................................................15

How to Determine What Services to Offer.............................................................................................................15

The Capacities of Its Manager.............................................................................................................................15

Funding Sources...................................................................................................................................................15

The Needs of the Residents.................................................................................................................................15

Other Local Resources.........................................................................................................................................15

Optimal Microenterprise Services to Provide .......................................................................................................16

Access to Technology ..........................................................................................................................................16

Business Incubator...............................................................................................................................................18

Information Resources: Rolodexes .....................................................................................................................18

Broker....................................................................................................................................................................19

Ongoing Support and Encouragement................................................................................................................20

Cooperation with Other Microenterprise Programs.............................................................................................21

Taking the First Steps ...............................................................................................................................................21

Appendix A: Neighborhood Networks Information
How Neighborhood Networks Centers Can Support Microenterprises Page 1

June 1999

How Neighborhood Networks Centers

Can Support Microenterprises

Introduction

Microenterprises are an important potential source of

income for residents of HUD-assisted and/or -insured

housing. Already, much entrepreneurial activity is

taking place in these communities. Residents pay one

another to take care of children, cut each other’s hair

or repair television sets. Much of this activity is

informal, part-time and home-based. Many of these

entrepreneurs don’t even consider themselves to be

in business. With targeted support, Neighborhood

Networks centers can help these entrepreneurs

identify new market opportunities, use technology to

manage their businesses and increase their income.

All entrepreneurs face significant hurdles in starting

businesses. For low-income people, the barriers are

even greater. Not only must they contend with all the

standard obstacles, they must also overcome the

physical and social isolation of their surroundings.

Neighborhood Networks centers can help in two

ways: (1) by linking these entrepreneurs to markets

and services outside the housing complex and (2) by

providing a supportive environment where small

business owners can get advice and technical

assistance and network with one another.

Over the past decade, many microenterprise support

programs have sprung up across the country. Most

provide a combination of technical assistance and

loans and grants aimed at helping low-income

entrepreneurs start and grow their businesses. These

programs are a valuable resource for Neighborhood

Networks centers seeking to support microenterprise.

Why Is Microenterprise Important?

Supporting microenterprises has become a widely

recognized strategy for addressing poverty,

unemployment and community deterioration. More

than 200 microenterprise support programs are now

operating in 44 states. These programs have

collectively served more than 200,000 people, loaned

over $44 million and assisted over 54,000 businesses

in disadvantaged communities. Every month, new

programs start. The programs recognize that most

people have a fundamental ability to apply their

talents, creativity and hard work to better their lives.

By supporting microenterprise, we give people a hand

in building their own way out of poverty, rather than

handing them money and keeping them dependent

on support from others.

Guide to this Handbook

This handbook reviews the most effective approaches

and programs for assisting microenterprises. It also

identifies specific services that a Neighborhood

Networks center might provide. The report is

organized in four sections:

Chapter 1 defines microenterprises and reviews the

obstacles they typically face.

Chapter 2 describes the key components of a

successful microenterprise support program.

Chapter 3 offers six examples of successful

microenterprise programs:

q Accion: Washington, DC

q Appalachian Center for Economic Networks:

Athens, OH

q Appalachian by Design: Charlestown, WV

q Working Capital: Cambridge, MA

q Women’s Self-Employment Project: Chicago, IL

q Women’s Opportunity Resource Center:

Philadelphia, PA

Chapter 4 offers an action plan for center managers

in starting to work with microenterprises.
How Neighborhood Networks Centers Can Support Microenterprises Page 2

June 1999

Chapter 1

Microenterprises and the Obstacles They Face

What Is a Microenterprise?

By definition, microenterprises have five or fewer

employees, including the owner. They are generally a

sole proprietorship or family business and require less

than $25,000 to launch. Microenterprises tend to have

poor access to bank loans because of their small size

and lack collateral or experience. Most cannot afford

to pay for business advice or office space. Some

microenterprises grow into small businesses, but

many remain small or part-time. Microenterprises

divide into three categories:1

1. Cash or Seed Businesses. These

microenterprises augment another source of

household income. They generally have only a

very simple cash in/cash out accounting and are

often informal and not registered. The

entrepreneur frequently engages in several

different activities, with commonly seasonal or

sporadic activity. Many entrepreneurs in this

category do not even see themselves as small

business owners.

Example: A woman with two children who

collects welfare and earns additional income by

doing manicures and haircuts out of her

apartment.

2. Self-Employment. These individuals generate

all of their income from their business. The

product or service is generally more readily

defined than the cash or seed businesses, and

record keeping and accounting are more

formalized. Self-employed people may also not

be registered with any official bodies.

Example: A man who makes his living by

repairing electrical appliances.

3. Small Business. These businesses have

employees and may offer a variety of products

and services. They have formal accounting

systems in place, although these are not always

computerized and may be rather basic.

Example: A catering company that employs a

driver and waiters and waitresses.

While all three types of businesses above are found

in HUD-assisted and/or -insured housing, the majority

of enterprises there are home-based self-employment

offering specific services. The service sector is

attractive because it requires little start-up capital.

Many low-income microenterprises combine their

business with other activities, such as a job or child

care. In a study of 405 microenterprises, almost half

depended on other sources of income beyond their

businesses.2

Of this sample:

q 73% of the entrepreneurs were women

q 60% were from a minority ethnic or racial group

q 43% had household incomes below the poverty

level

Challenges Faced by Microenterprises

Microenterprises compete in a complex and

competitive marketplace. To succeed, they must

overcome challenges in four general categories:

q Market information and access

q Financing knowledge and access

q Management

q Moral support and networking

Market Information and Access

To grow, microenterprises need to identify market

opportunities outside of their immediate community.

This is especially important for enterprises in low-
How Neighborhood Networks Centers Can Support Microenterprises Page 3

June 1999

income housing because the local market, by

definition, has low spending power. These enterprises

need information about who prospective customers

might be and help in connecting with them.

Specific examples of the marketing needs of

microenterprises in HUD-subsidized housing include:

q Measuring demand for a new or existing

product. Microentrepreneurs need to know who

are their customers and competitors.

q Pricing of products/services. Inappropriate

pricing is one of the major reasons for business

failure. Microenterprises often price on a basic

cost plus formula without fully understanding all

their indirect costs and without a clear feel for the

price-sensitivity of their market. This can result

either in pricing too high and losing customers or,

more commonly, pricing too low and facing a

loss.

q Identifying customers and distribution

systems. Low-income entrepreneurs often lack

the personal and professional networks that

wealthier entrepreneurs rely on to develop

markets. This means that their businesses have

limited markets and fail to grow to their full

potential. Most very small businesses are also

less able to negotiate cheap transport or the best

wholesale prices because they are such smallscale producers.

q Negotiating contracts and structuring project

bids. Once microenterprises have identified

potential customers, they are not always sure of

the appropriate business language to use in

project bids.

q Preparing marketing fliers and brochures.

Microenterprises have difficulty getting the word

out about their services. They generally do not

have access to desk-top publishing and are often

not sure what marketing materials should look

like.

One Example of a Challenge: Residents of a

HUD-assisted property on the Navajo

Reservation in Arizona are producing a range

of Native American handicrafts and jewelry.

These products have a large potential market

but not in the immediate neighborhood of the

reservation. The Navajo need help in

discovering what price customers would be

willing to pay for their products. They also

need information on how to find customers

outside of the reservation.

Financing Knowledge and Access

Most microenterprises can’t access credit from the

formal financial system – banks, consumer credit and

credit cards – because they lack collateral or have a

poor or non-existent credit history. Many have

difficulty presenting their business idea to banks,

which typically require that borrowers show a history

of repayment of credit card debt, mortgages and other

types of loans to demonstrate that they are a reliable

risk. Many low-income people have never had access

to credit cards and never owned their own home.

Others have had trouble making credit card

payments. Quite a few have no banking relationship

at all and do all their operations in cash. Often, there

are little or no savings to fall back on in business

downswings or in the event of personal problems.

Microenterprises typically raise their capital from

family members or, when possible, on credit cards.

The use of credit cards to finance business

operations can often result in low-income

entrepreneurs getting into serious debt problems.

Entrepreneurs in subsidized housing may not even

have access to these informal means.

Community development financial institutions and

microenterprise loan funds have sprung up to finance

microentrepreneurs. One benefit of such initiatives is

that they also provide hands-on technical assistance.
How Neighborhood Networks Centers Can Support Microenterprises Page 4

June 1999

Many programs include the lowest income

entrepreneurs in their target client base.

Nevertheless, the geographic and social isolation of

many subsidized housing communities has made it

difficult for such programs to effectively reach

residents.

Management

New entrepreneurs often lack the basic skills and

control mechanisms to operate a successful

business. Among the most common limitations are:

q Creating a basic recordkeeping system. Many

new microentrepreneurs do not separate their

business costs from household costs. For a

business to grow, the owner must accurately

determine the costs of providing the service.

Otherwise he or she won’t price the service

correctly. Without a basic recordkeeping system,

the business activity will remain casual and

probably not earn enough to sustain the

entrepreneur.

Example: A woman who makes and sells baby

clothes does not keep any records of the money

she makes. When one of her children is sick, she

spends all her money on medication. As a result,

she has no funds to buy fabric for more baby

clothes and cannot fulfill her orders.

q Producing monthly or regular cash flow

forecasts and financial statements. Once

basic recordkeeping has been established, the

entrepreneur needs to consider financial

planning. Many microentrepreneurs take a shortterm approach, which can undermine the future

of their businesses. The woman making baby

clothes above could have avoided her problem

by planning future cash needs and setting aside

a reserve of savings to maintain her through

unexpected problems. To access credit financing

from one of the many microenterprise support

programs, microenterprises are required to show

financial statements.

q Legal and tax advice. Microentrepreneurs tend

to begin without legally registering their

businesses. Most are intimidated by the

complexity of registering and afraid of the related

costs. As their businesses grow, however, they

may actually benefit from registration because

they can make sales more openly or qualify for

business-support grants.

Moral Support and Networking

Self-employment can be a lonely enterprise. All

entrepreneurs need moral support and a friendly

sounding board at times. Some benefit greatly from

an informal advisory board or periodic consultation

with experienced business owners. For residents of

subsidized housing, common barriers include:

q Lack of awareness of and access to existing

resources because of distance, not being wellinformed or not having a peer group of similar

entrepreneurs.

q Fear of having informal business activity

discovered and lack of confidence about how to

approach local governments or potential

suppliers and markets outside the housing

project.

q Lack of experience in business language and

personal presentation – down to the most basic

level such as professional dress, how to

approach a negotiation about price or a

presentation in application for a loan.

q Daily challenges such as access to reliable child

care, transportation, or business services, work

space and time management.
How Neighborhood Networks Centers Can Support Microenterprises Page 5

June 1999

Chapter 2

Key Components of a Successful

Microenterprise Support Program

Microenterprise support programs are extremely

diverse. Some focus on a particular group of

entrepreneurs – such as immigrants, women or

welfare recipients. Some programs grew up locally,

while others are spread across the country. Most offer

some combination of business training and access to

capital. A growing number of programs have

experimented with ways to help microenterprises

access markets and build up savings and assets.

Features of Effective Microenterprise

Programs

The best microenterprise support programs routinely

feature most of the following elements:

q Outreach into the target constituency

q Ongoing feedback

q Intermediary functions

q Ongoing support

q Building networks

q Pre-screening participants

q Asset building

Outreach into the Target Constituency

To be successful, the microenterprise support

program must first reach its target constituency. This

straightforward principle is actually somewhat

complicated when the microenterprise is located in

subsidized housing because operators are sometimes

very reluctant to bring their businesses into the open.

As a result, the program must make a special effort to

create a nurturing atmosphere and encourage

residents to have the confidence to come in for

assistance.

For Neighborhood Networks centers interested in

helping microenterprises, offering a menu of support

services probably will not be sufficient. Many

entrepreneurs simply won’t avail themselves of such

support without proactive outreach. The center needs

to actively promote and market its microenterprise

support services and resources. Center managers

should survey the needs of resident entrepreneurs

before designing programs and undertake

conscientious outreach to explain why these services

are important.

Ongoing Feedback

As several case studies highlight, the best

microenterprise programs seek constant feedback

from their customers. To make sure they are offering

the optimal services for residents, Neighborhood

Networks centers should talk to people about what

they do, what services they need, and how they now

access those services, such as computers or fax or

copy machines. Residents should help conceptualize

and structure the services offered. Such a process

not only ensures the microenterprise services will be

relevant but it also breaks down the barrier of

unfamiliarity. One of the most effective ways to get

entrepreneurs to participate in a support program is to

have resident champions who encourage others to try

the service.

Intermediary Function

Good microenterprise programs often link

entrepreneurs to people and networks who can

provide additional services to complement the core

support program. For example, Accion New Mexico

has an agreement with a local law clinic and

accounting firm to offer free legal and accounting

expertise to its clients. A local grocery store gives free

training in management and merchandising. In Ohio,
How Neighborhood Networks Centers Can Support Microenterprises Page 6

June 1999

ACEnet partnered with Ohio University to run an

online community network where businesses can list

their services and access information from within and

outside their own community.

Neighborhood Networks centers should aggressively

seek such links. If a particular microenterprise service

is being offered by another nearby institution, it is

usually best to cooperate rather than replicate its

activities. This has the benefits of expanding the

horizons and contacts of the resident entrepreneurs

as well as freeing Neighborhood Networks center

resources to concentrate on providing services that

are not available elsewhere.

Ongoing Support

Microenterprise programs with the highest business

survival rates usually emphasize ongoing technical

assistance. Once a business is launched, the first

year can be turbulent and requires constant

reassessments and readjustment. Lower-income

entrepreneurs especially need help even after they

are already in business. A prime example is one of

the entrepreneurs assisted by the Women’s SelfEmployment Project (WSEP). This woman

entrepreneur had won the right to bid on a contract,

but didn’t know how best to structure or price the bid.

WSEP guided her though the process. Obtaining

appropriate advice and support at this stage can often

spell the difference between success and failure.

Neighborhood Networks centers that want to support

microenterprises should have someone at the center

familiar with business issues. This would ideally be

the center manager, but volunteers would also suffice

if they have well-established hours when they are

available to help.

Building Networks

Good microenterprise programs are continually

experimenting with ways to allow entrepreneurs to

learn from more experienced businesses and from

each other. Accion New Mexico, for example, has

established a successful mentoring program which

pairs established businesses with new Accion clients.

WSEP is implementing an apprenticeship program

that will place women on welfare in part-time jobs in

relevant small businesses for six months. The

business owner commits to meet with the WSEP

trainee for a few hours per week. WSEP supplements

this on-the-job learning with workshops and

customized training. “By far the most useful training is

not workshops but informal assistance that individuals

provide each other,” notes Jeff Ashe of Working

Capital. “The group brings the molecules close

enough that the bounce off each other and produce

reactions.”

“I didn’t call mine a business when I first started. I

didn’t keep books...it was just something to do. But

when I joined the group, I really took myself seriously

as a business... It’s just amazing I have this business

plan. I have a computer where I keep all of my books

and I sit down each month going over everything I

spend and everything I made.”

Respondent in the FINCA USA Outcome Evaluation

Preliminary Focus Group Report, September 1997

The Neighborhood Networks center could be a useful

place for such groups to meet. The center manager

could initiate foundation of these groups either based

on a common need such as a training course or a

savings group, or on a similar line of business (e.g.

child care, building maintenance or catering). The

center could then act as a point of contact for outside

organizations interested in reaching these groups –

such as potential suppliers, customers or training

organizations.

Pre-Screening Participants

Many microenterprise programs screen candidates or

set up processes, which encourage candidates to

self-select. For example, the Institute for Social and

Economic Development (ISED) in Iowa City, Iowa

structures the first three workshops of its

entrepreneurial training as an orientation. Participants

look at whether or not they have the characteristics of

an entrepreneur, focusing on their personal finances

and their strengths and weaknesses. ISED then

conducts a one-on-one session with each participant

to discuss his or her idea and personal

circumstances. At that point, 40 percent of the

participants drop out. Only after this stage does ISED
How Neighborhood Networks Centers Can Support Microenterprises Page 7

June 1999

start with the heavier technical information about

business planning.

Neighborhood Networks centers, too, need to

recognize in establishing a support program that not

every person is a potential entrepreneur. Many are

not willing or able to deal with the stress, the

loneliness and hard work involved. When offering

services for new entrepreneurs, centers should give

them a realistic idea in advance of the pros and cons

of running a business. At the same time, the center

needs to strike a balance so as not to overly

discourage residents who really do want to try their

own business.

Asset Building

Focusing business growth solely on credit can be

extremely risky. Many microenterprise programs

have developed savings programs to help customers

save on a regular basis and build a personal asset

base. For example, many programs offer Individual

Development Accounts (IDAs). With IDAs, savings

contributions are matched by private sector donations

and customers are allowed to withdraw only for

investments in education, a home or their own

business.

Neighborhood Networks centers can assume a key

role in informing residents about the dangers of taking

on unreasonable levels of debt and the tremendous

benefits of a systematic savings plan. They can also

introduce residents to banks to set up savings

accounts.
How Neighborhood Networks Centers Can Support Microenterprises Page 8

June 1999

Chapter 3

Case Studies

Accion U.S. Network

Accion is a nonprofit organization, which has run

microlending programs in Latin America for 35 years.

In 1991, Accion started their U.S. network with a

program in New York. It now has six nonprofit Accion

Associates across the U.S. These Accion affiliates

usually operate in urban areas (New York City,

Chicago, El Paso, San Diego, San Antonio and

Southern Texas, and Albuquerque) and target lower

income and minority entrepreneurs, mostly Latino.

The program emphasizes access to credit for existing

microbusinesses or informal business activities, and

offers training and technical assistance in the form of

workshops, individual advice and networking

programs.

Lending Methodology

Accion offers three products:

q Group loans, in which 4-6 borrowers provide

cross-guarantees for each others’ loans

q Small individual loans of less than $5,000

q Large individual loans of more than $5,000

Accion’s experience has been that capable, creditworthy entrepreneurs do exist in their target

communities, and they need Accion because they do

not have the credit histories, collateral or business

experience to access conventional bank loans or

other sources of credit. Accion requires that the

borrower has been “in business” for 6-12 months, so

these customers can immediately invest the loan

proceeds and generate cash flow from the business.

Although group lending is used widely throughout

Accion’s Latin America network, the U.S. experience

has been that some communities react positively to

group lending, while in others, the ties of trust

between people are not strong enough for

entrepreneurs to link their future business success to

someone else. The group loan product has been

most successful among the recent immigrant

population in New York City and among taxi drivers in

San Antonio.

Other Assistance

Accion borrowers benefit from one-to-one support

from Accion lenders, who often help with business

planning and accounting questions. However,

because the Accion Associates themselves are

working to become financially self-sufficient, they try

to minimize their costs of technical assistance to

microenterprises. This has led the Associates to

coordinate with other organizations and businesses in

the community to provide support and networking

services.

Services from Local Private Businesses. For

example, Accion New Mexico has agreements with a

local law clinic and accounting firm to provide free

access to legal and accounting expertise, and a local

grocery store gives free training in management and

merchandising to Accion New Mexico’s borrowers.

Peer Mentorship. Accion encourages borrowers to

form groups to offer each other information and

support. In El Paso, for example, a membership

association has been started with a reference library

and a newsletter.

Business Mentorship. Accion identifies successful

businesses in the community which are willing to

dedicate time to mentoring Accion clients. In New

Mexico, for example, a successful family-owned food

business has provided invaluable support to Accion

clients in the food sector. Key to success is that the

mentoring business commits a specified amount of

time per week for the relationship.

Ambassadors for Accion. Clients with a good track

record at Accion go next through formal leadership

training for a week and then become spokespersons
How Neighborhood Networks Centers Can Support Microenterprises Page 9

June 1999

for Accion in the community. This helps Accion raise

its profile. The ambassadors raise funds for Accion’s

activities and help attract new clients. Representing

Accion in the community gives the ambassadors

valuable experience in public speaking and access to

a much wider range of potential business contacts.

Useful Observations for Neighborhood Networks

centers

q Microbusiness activity can be very common in

populations with an entrepreneurial culture,

though often informal and part-time in nature and

therefore “invisible” to most observers.

q There are many opportunities to link local

microbusinesses with other resources in the

community, including local businesses, local

professional service firms (accountants,

lawyers), and each other.

q Language barriers can be significant, and a

Neighborhood Networks center might make a

significant impact on local businesses if center

staff can identify an accounting or law firm with

the necessary language skills that is willing to

hold office hours in the neighborhood (either on

pro bono or paid basis).

Accion New York

235 Havemeyer Street

Brooklyn, New York 11211

Terri Ludwig, President and CEO

Phone: 718-599-5170

Fax: 718-387-9686

Accion New Mexico

219 Central Avenue NW, Suite 620

Albuquerque, New Mexico 87102

Ann Yaskowitz, President and CEO

Phone: 505-243-8844

Fax: 505-243-1551

Appalachian Center for Economic

Networks (ACEnet)

Founded 11 years ago by community residents intent

on transforming the depressed economy of rural

Appalachian Ohio, ACEnet focuses on civic

networking. The group’s work has been enhanced in

recent years by computer technology. “The vision that

drives us is that civic networks can support the

transformation of our low-income community from a

preoccupation with problems to an opportunityseeking orientation,” says ACEnet Director Amy

Borgstrom.

ACEnet’s Keys to Success

1. An emphasis on networking and setting up

partnerships with other organizations rather than

on doing all training and support itself

2. A focus on higher-value businesses, such as

computers and specialty catering, that can

generate good earnings, rather than marginal

microenterprises that tend to still leave business

owners living at or near the poverty level

3. Use of technology to expand networks beyond

the local area

ACEnet currently works with over 150 farm families,

start-up entrepreneurs, and very small manufacturing

firms focusing on high-value specialty markets for

specialty food and wood products. Most are family

businesses or have fewer than five employees.

ACEnet’s experience shows that such businesses

critically need access to and training in new

technologies to compete successfully in high-value

markets.

Training

Business development. ACEnet has identified other

groups, which provide general business training, and

refers clients to a local network of business

assistance providers for general entrepreneurship

training. ACEnet concentrates on targeted programs.

Industry specific. ACEnet staff assists with the

development of sector-specific business plans,

costing, legal structures and regulations and financial

systems through workshops and one-on-one

technical assistance. ACEnet also runs a community

kitchen incubator with a licensed kitchen and retail

space for entrepreneurs in the food industry to

develop and test market new products. Special
How Neighborhood Networks Centers Can Support Microenterprises Page 10

June 1999

courses are held in this incubator for new

entrepreneurs in the food sector.

Networking

Online. ACEnet’s administers the Southeastern Ohio

Regional Freenet (SEORF), jointly with Ohio

University, to give local entrepreneurs a chance to

advertise their services and access contacts with

potential customers, suppliers or partners. ACEnet

has produced an online manual to help other

organizations design community networking

programs.

ACEnet is currently setting up an interactive

conferencing area on SEORF where businesses can

hold private conferences, make deals and work on

joint product lines. ACEnet is also organizing

specialized training forums, focusing on such topics

as equipment options and loan application processes

to purchase new technology.

ACEnet has made it possible for 26 Ohio

entrepreneurs to access new markets through the

Public WebMarket, an Internet commerce project

directed by the Center for Civic Networking

(http://civic.net/Webmarket). This project not only

enables small enterprises to reach distant markets. It

also provides an excellent profile of potential

customers for participating businesses.

Industry groups. ACEnet collects and distributes

information which firms can use to develop and sell

high-value products. The information includes data

about trends in various business sectors, which

ACEnet entrepreneurs can use to identify new

product possibilities. ACEnet surveys retail outlets to

identify new areas of product interest and can put its

entrepreneurs in touch with consultants who can help

with such tasks as label and image development.

In addition to helping new microenterprises, ACEnet

also works with established firms seeking to expand.

ACEnet encourages creative partnerships in the food,

furniture or computer services industries. For

example, local restaurants contract with start-up firms

for new specialty food items. Groups of companies

producing canned or bottled products buy supplies

together to get economies of scale. Other companies

engage in joint marketing.

Incubator. ACEnet’s small business incubator

provides entrepreneurs rental space while they start

up their enterprises, as well as affordable access to

computers, fax services and copiers. ACEnet’s

experience is that the incubators serve as networking

hubs, where entrepreneurs can get to know each

other. This provides peer support and possible

business contacts.

Networking outside the region. With the support of

the Ford and Charles Stewart Mott foundations,

ACEnet recently convened a pilot group of 10

organizations, all working with specialty foods firms,

to design an online and face-to-face network.

Participants came from microenterprise assistance

providers, training organizations and community

development corporations from nine states and the

District of Columbia. This group identified five

potential joint projects. Before the meeting had

ended, the group from Maine had begun developing a

supply relationship with participants from Washington

State, which needs Maine's surplus dogfish in cancerpreventative products. ACEnet will be sharing the

results of this national pilot with local firms and

service providers.

Useful Observations for Neighborhood Networks

centers:

q ACENet’s focus on a few sectors (clusters of

businesses in the same industry) has allowed it

to become an “expert” and share that collected

knowledge with each businesses. A

Neighborhood Networks center manager might

focus on particular types of businesses that are

in his/her community so he/she can add greater

value. For example, a focus on how to get child

care providers licensed and eligible for federal

and/or reimbursements and on projecting cash

flows and budgeting, could help create viable

child care alternatives in the community. The

use of technology to connect their clients with

national and other resources illustrates how

important that capacity is to help businesses

grow and transform into small businesses.
How Neighborhood Networks Centers Can Support Microenterprises Page 11

June 1999

q One of the most important functions that ACENet

provides its customers is feedback from the

marketplace. As mentioned earlier,

microentrepreneurs can be very isolated from

industry resources, trade publications and other

resources that provide invaluable information on

customers and competition. This can be very

local knowledge, or links to national trade groups.

The Appalachian Center for Economic Networks

(ACEnet)

94 N. Columbus Rd.

Athens, Ohio 45701-1312

June Holley, President (e-mail: jholley@tmn.com)

Amy Borgstrom, Executive Director (e-mail:

amyb@seorf.ohiou.edu)

Phone: 740-592-3854

Fax: 740-593-5451

Appalachian By Design (ABD)

ABD finds markets for rural women who produce

handloom knit goods. Founded as a project of the

Center for Economic Options in Charlestown, WV in

1991, ABD became an independent nonprofit in 1994.

The organization currently works with 69 knitters and

crocheters who are interested in becoming selfemployed, home-based producers of high quality

products. ABD offers skills training, researches the

market, secures contracts and helps the knitters form

teams to produce volume orders that none could

commit to on her own. A steering committee of

knitters helps govern the organization.

A Market-Driven Economic Development Strategy

ABD links Appalachian women to the handloom

apparel markets on the east and west coasts. Such

marketplace connections previously did not exist.

New customers come through marketing efforts at

wholesale shows, promotional articles sent to the

press and prospective customers, and referrals from

current customers.

The knitwear produced by ABD’s network is sold in

boutiques and specialty stores at retail prices ranging

from $75 to $300. ABD is developing a new market

for handloom goods in home furnishings. ABD

targeted the handloom knit goods industry because

that sector offers work that builds on the existing skills

of many rural women, pays above the minimum wage

with opportunities for increased earnings and can be

done at homes in remote locations.

ABD’s flexible business network organizes the

knitters into teams that pool their skills and production

capacities to satisfy contracts. Few of the women

currently in the network were originally production

knitters. Most have received a significant amount of

training from ABD.

ABD enhances the value of rural women’s skills by

offering a range of market-driven training

opportunities and by helping them earn a reputation

for quality.

Useful Observations for Neighborhood Networks

centers:

q ABD serves as the link between the producers

(the microentrepreneurs) and the marketplace,

and created a business in the process of filling

that missing role.

q ABD helps coordinate the women so that they

can work in teams to satisfy larger contracts and

maintain production levels. In this case, ABD

acts as the contractor but a Neighborhood

Networks center might help facilitate the role or a

link with another larger business that wanted to

engage the microentrepreneurs’ services.

q ABD educated the knitters about the quality

standards and business expectations from

customers, allowing them to provide products

that will be purchased and generate revenues for

the knitters. The focus on markets and

customers was critical to ensure that sales

volume developed and earned profits and cash

flow to the knitters.

Appalachian by Design

208 South Court Street

Lewisburg, West Virginia 24901

Karen Jacobson, Vice President

Phone: 304-647-3455

Fax: 304-647-3466

Website: www.abdinc.org
How Neighborhood Networks Centers Can Support Microenterprises Page 12

June 1999

Working Capital

Working Capital was established in 1990 to provide

loans, training and networking opportunities to lowincome entrepreneurs in northern Massachusetts and

southern New Hampshire. The organization now has

12 affiliates in Massachusetts, as well as programs in

eight other states across the U.S. Working Capital

has helped about 3,500 small business owners. The

heart of Working Capital's methodology is the

formation of groups of entrepreneurs who save

together, lend to each other, and provide peer support

and technical assistance. Working Capital also works

with existing community groups, providing them

instructions and training materials to become Working

Capital affiliates.

Group Lending and Training

Working Capital entrepreneurs run and manage their

own groups. Working Capital holds an initial

orientation session where entrepreneurs can meet

and learn about the program. Those who remain

interested then attend a training session where they

learn how to develop a cash flow analysis and how to

evaluate a business plan and loan application. After

this meeting, the entrepreneurs form groups, where

most of the rest of the training takes place. The

Working Capital training manual walks them through

the loan application and approval process, electing

officers to manage the group, and establishing the

group’s charter and rules. The groups work through

these at their own pace – writing their own charter,

meeting regularly to move through the training

modules, and accepting or denying each others’ loan

applications.

Each loan is guaranteed by the entire group so that if

one member does not repay, the rest of the group has

to make up the missing sum for the payment. This

structure relies on peer pressure and assistance to

help ensure repayment, rather than traditional

collateral. The lending process is strictly structured.

All borrowers must start with a loan of $500.

Subsequent loans can be for higher amounts – the

second loan may be $1,000, the third $1,200 and the

fourth $3,000, with further loans at still higher

amounts. The terms of the loans start short at four to

six months and get longer as the borrowers prove

their creditworthiness. During the early rounds,

borrowers learn about the borrowing process and also

build trust with each other.

Once loans are made, the group meets every month

to provide business support to each other, to

exchange ideas and contacts, and perhaps to

conduct additional Working Capital training modules.

The training modules are videotaped training

sessions prepared by Working Capital that address

specific skills and tools for better business planning

and management. According to Jeff Ashe, founder of

Working Capital, the peer networking and problemsolving is a critical element of the program’s success.

One survey showed that about 40percent of members

have conducted one or more business transactions

with another member of the network.

The groups have been so successful that Working

Capital is now developing regional network of all

participating group members. Entrepreneurs who are

not in lending groups can become associates,

enabling them to participate in the networking but not

giving access to capital. The network has already

been launched in Massachusetts and Delaware and

is working well and growing fast.

Useful Observations for Neighborhood Networks

centers:

q Members consistently cite the support and

business assistance from their peers in the

groups as one of the most valuable benefits to

belonging to Working Capital. Microbusiness

owners can be very effective leaders and

partners with each other, if they are motivated

and committed to their businesses and their own

success. In a group, the members need to

assess and be comfortable with each other

before trust can develop.

Working Capital

99 Bishop Allen Drive

Cambridge, MA 02139

Phone. 617-576-8620

Fax. 617-576-8623

E-mail: wcaploan@aol.com
How Neighborhood Networks Centers Can Support Microenterprises Page 13

June 1999

Women’s Opportunity Resource Center

(WORC)

WORC promotes self-sufficiency for low-income

women and their families, targeting female-headed

households, welfare recipients and dislocated

workers in Philadelphia and five surrounding counties.

WORC helps the women start their own business

enterprises or expand existing ones. The organization

serves 100-200 trainees per year. There are waiting

lists for all of WORC’s training programs. Many of the

training participants are funded by JOBS programs.

WORC’s activities grew out of a study conducted in

Philadelphia in 1985, in which 150 female business

were interviewed. The study revealed that:

q Women start smaller businesses than men

q Women encounter large gaps in access to

financial and other resources

q Women experience common barriers to entry into

the business world, including poor access to

credit, centralized information and referral

services

Pre-Selection of Participants

Recognizing that not every person is an entrepreneur,

WORC selects participants based on their product

knowledge, transferable skills and a clearly articulated

idea for a business that can be started for less than

$10,000. Applicants complete an application form and

are then interviewed first on the phone and then in

person.

Training and Business Support

WORC provides a combination of formal training

courses, one-on-one business support and advice

and other self-help and networking support.

WORC sponsors two formal training courses:

1. Self-Employment Training (SET). This

structured, intensive, 10- week course serves

18-22 participants. The training is divided into

two phases. In the first phase, participants

evaluate the feasibility of their business idea and

assess their personal readiness for business

ownership. This includes thinking about how

they will manage both their personal and family

responsibilities as well as the business. Training

in this phase covers such basic life skills as how

to approach a potential supplier or customer and

how to dress. WORC recognizes that many of its

clients are isolated from the business community

and need additional help to gain confidence in

their professional skills. Class discussion topics

include how to choose child care, how to put

client needs before your own, how do deal with

macho attitudes and how to be strong but polite.

WORC also offers advice on other organizations

that can help women with specific issues such as

women’s organizations that can help in cases of

discrimination.

After phase one, participants go through the

application and interview process. Those who

decide not to start businesses can access job

placement and referral services through WORC.

Those who do opt for entrepreneurship receive

training on writing a business plan and testing the

business idea. Trainees carry out five specific

assignments – a marketing plan, an operations

plan, financial projections, an oral presentation of

the business plan and a complete written

business plan.

All trainees are also required to save $10 per

week. They can save individually or in groups. If

they form a group, they choose leaders and a

goal for their group savings. These groups often

continue after the training and provide an

important source of peer-group support for the

new entrepreneurs. The capital they save can be

used to leverage credit, or the group can lend

money to each other.

About one-third of the SET participants are on

welfare and another third are dislocated workers.

The training is free.

2. Start Smart. This more streamlined course is for

women who are more advanced and confident. It

is typically offered as an evening class and

provides the key business planning concepts

without the additional handholding provided in
How Neighborhood Networks Centers Can Support Microenterprises Page 14

June 1999

Self Employment Training. The course costs $60;

its clients are often already in business.

Capital

WORC does not engage in direct lending. Instead, it

has established relationships with local banks and

government agencies. It runs a loan guarantee

program for graduates of its training programs in

which WORC helps the entrepreneur package her

loan request and refers her to a bank participating in

the guarantee program. The guarantee is for up to 30

percent of the loan. WORC is also an intermediary for

the U.S. Small Business Administration’s

“prequalifications” program for women-owned

businesses.

Other Support Services

In addition to formal training, WORC has

initiated various other services:

q Peer group networking program for program

graduates. WORC sees networking as a crucial

component of success for its entrepreneurs

because low-income women often lack the

contacts necessary to find suppliers and markets.

WORC is including in its new training courses a

class on how to network, how to make cold calls

and how to pursue contacts of potential

importance to a woman-owned business.

q Mentoring programs. WORC experimented

with these but found that most companies

expected to act as mentors could not find

sufficient time. WORC decided to move towards

peer-groups, where all members are willing to

commit because they see the benefits.

q Market access program. WORC helps its

entrepreneurs access contracts and tries to

bridge the gap between its trainees and the

larger marketplace.

WORC stresses the need for community outreach

and involvement in the design of its programs. For

example, WORC operates a computer center, but

recognizes that many of its target entrepreneurs may

not understand the relevance of computers to their

work. As a result, WORC makes sure its trainees

know what services the center offers and are walked

through how to use the center on their first visit. Many

of WORC’s clients are already engaged in informal

entrepreneurial activities and are afraid that their

relationship with WORC or any other official service

provider might result in tax implications they do not

understand. Only personal relationships with WORC

trainers can allay these fears. WORC regularly seeks

feedback on the content of the programs and other

services provided.

Useful Observations for Neighborhood Networks

centers:

q WORC is a good example of an organization

knowing its customers and developing products

or services that will meet their needs, rather than

starting with a product and then searching for

customers.

q Many training and support organizations like

WORC exist and Neighborhood Networks

centers should find out what organizations are in

their area, what services they might offer to the

Neighborhood Networks centers’ customers and

how to refer people to those organizations most

effectively.

q Women have some special needs in starting up

and running their own businesses. These should

be served either by the Neighborhood Networks

center directly or through putting women

entrepreneurs in touch with women’s groups in

the areas that can help them.

Women’s Opportunity Resource Center

1930 Chestnut Street, Suite 1600

Philadelphia, Pennsylvania 19103

Lynn Cutler, President

Phone: 215-564-5500

Fax: 215-564-0933

Website: www.worc-pa.erols.com
How Neighborhood Networks Centers Can Support Microenterprises Page 15

June 1999

Chapter 4

An Action Plan for Neighborhood Networks Centers

Each Neighborhood Networks center can carve out its

own distinct set of services to offer microenterprises.

Not all possible services will be appropriate for every

center, so it’s important to identify early on the

services most appropriate for the local market and

keep to a manageable number of initiatives.

Wherever possible, the center should bring in outside

expertise rather than provide services itself.

How to Determine What Services to

Offer

The package of microenterprise support services

offered depends on four factors:

q the capabilities of the Neighborhood Networks

center manager

q the funding sources that can be tapped

q the needs of the resident population

q the other local resources the center can access

The Capacities of Its Manager

If the manager has business skills, he or she can offer

microentrepreneurs personal counseling to

complement other more formal training. If the

manager is very computer proficient, he or she might

concentrate more on providing training for

microentrepreneurs in that sector. Wherever the

manager lacks experience, it might be necessary to

bring in outside help.

Funding Sources

There are three primary ways to finance

microenterprise support programs:

q Government grants. Funding for adult

education, welfare-to-work and employment

training are available from the U.S. Department

of Labor, the Department of Education and the

Department of Health and Human Services. In

addition, local housing authorities may have extra

welfare-to-work dollars to support

microenterprise programs. The Neighborhood

Networks website

(http://www.NeighborhoodNetworks.org) provides

links to these and other organizations that

provide financial support to microenterprises.

q Fees for services. Centers can charge fees for

microenterprise support services to individuals

who are not part of the Neighborhood Networks

community.

q Partnering. Centers can form partnerships with

nonprofit organizations that have already

accessed financing for microenterprise support

activities and need additional participants.

The Needs of the Residents

The types of services will depend on how many

entrepreneurs and would-be entrepreneurs live in the

Neighborhood Networks community. Determining this

will take research and outreach since many

entrepreneurs in low-income housing are secretive

about their activities.

Other Local Resources

The most effective programs introduce residents to

outside organizations and microenterprise supports,

including accountants, lawyers, computer technicians,

successful small businesses and other businessrelated parties. The services available in each locality

will vary, and the center may want to complement

those services with others not available elsewhere. If

a center is particularly successful at providing such

services, it may find it can sell the service to others

outside of its housing community.
How Neighborhood Networks Centers Can Support Microenterprises Page 16

June 1999

Optimal Microenterprise Services to

Provide

Under the best circumstances, Neighborhood

Networks centers would provide a combination of

some or all of the following types of support services

for microentrepreneurs:

q Access to technology

q Business Incubator

q Information Resources: Rolodexes

q Broker

q Ongoing support and encouragement

Access to Technology

Most microentrepreneurs would benefit from access

to computers and other office equipment.

Neighborhood Networks centers could establish a

business resource center that would ideally be

accessible beyond standard business hours. To

address security issues, one possibility being

explored in centers we interviewed was a codified

lock that would allow approved residents to enter at

all times. Some computer centers targeted to lowincome populations are practically unused. Based on

our research, the keys to achieving a high level of

center usage are:

q Long hours of operation

q Outreach to educate community residents about

computer applications of direct relevance to their

businesses

q Staff who can lead first-time users through the

systems

q Software specifically designed for entrepreneurs

– including accounting software, desktop

publishing to produce marketing materials and

word processing for preparing business plans

and proposals

q Standard computer systems so that new users

will not be confused by a new set-up or new

system at each sitting

q System for recording individual computer

users

q Equipment that works. Heavy usage of

computers leads to frequent occurrence of

problems that are relatively easy to solve. But if

users often find the equipment not working

properly, they will quickly become discouraged.

Cyberskills. One group that has succeeded in

overcoming low-income residents’ fear of

technology is Cyberskills Vermont. Established

with HUD Enterprise Community funds, this

nonprofit now receives funding from the

Kellogg Foundation and from its own earned

income. Cyberskills sponsors workshops that

offer job seekers, business owners, nonprofits

and groups an introduction to information

technology and a framework for planning for

their next steps. The initial awareness-raising

sessions build confidence. About 90 percent of

the participants in Cyberskills’ awareness

workshops return for more training. Cyberskills

indicated a strong interest in working with

Neighborhood Networks centers, and

suggested a first step might be to hold a

training workshop for center managers.

Contact: Lauren-Glenn Davitian, Executive

Director, Cyberskills. Email: davitian@cctv.org,

Phone: 802-862-1645 (ext. 12).

Use of Volunteers. Centers could attract volunteers

to teach computer, bookkeeping or desktop

publishing classes and provide individualized

assistance. Center managers should be sure to

check the skills and experience of volunteers and,

importantly, to ensure they able to commit for a

specified time – for example a specific time and day

each week for a pre-determined number of weeks or

months.

Surfing the Web. Centers should provide low - or nocost access to e-mail and to the World Wide Web.

The center could also set up a website to enable

outsiders to find out about the activities of the

community and set up a virtual post-board for those

needing and offering services. Multiple centers may

be able to share websites or commission other

centers to design them. One community computer
How Neighborhood Networks Centers Can Support Microenterprises Page 17

June 1999

center we interviewed ran successful clinics to

introduce small businesses to the web. This useful

service could be run by a computer-proficient center

manager or an outside trainer.

One organization that may be able to help

Neighborhood Networks centers become more

familiar with the web is CTCnet, a nonprofit network

of more than 300 community centers working with

youth, small business, housing and other communityrelated issues. CTCnet affiliates include about 20

Neighborhood Networks centers. The cost of

becoming an affiliate is $100. Services include free

software and an initial manual to help set up

computer networking, including use of the Internet.

Affiliates can contact other CTCnet members online

or attend in-person meetings. CTCnet distributes a

monthly newsletter and sponsors special interest

groups on issues of interest to its affiliates, including

youth issues and adult education. CTCnet plans to

start a group on microenterprise and small business.

Internet Marketing. Internet marketing offers

entrepreneurs a way to broaden the market for their

products and services. Most businesses that operate

on the Internet use a straightforward approach. The

business offers the products or services on a website

where customers can place orders. Internet marketing

may be another area where multiple Neighborhood

Networks centers can collaborate with each other or

with outside Internet marketing services.

One example of a potential Internet marketing partner

is Civicnet in Washington State. This virtual business

incubator offers a website for shoppers to connect

with small and medium-sized companies. Funded by

the U.S. Department of Agriculture and the Kellogg

Foundation, Civicnet currently lists over 60

companies nationwide. Service is free. The target

market is small businesses, which work with

community centers and offer business advisory

services. Civicnet’s director, Richard Civille, says his

group is interested in working with Neighborhood

Networks centers with a high level of computer

competence, although funding would need to be

arranged.

There is some risk that Neighborhood Networks

centers could be legally liable for the services

provided by companies accessing the Internet market

through the centers. Legal advice should be sought

and shared with the Neighborhood Networks program

so other centers can benefit. Disclaimers issued on

the web pages should state that any business

transaction is between the customer and the business

– not with the Neighborhood Networks center.

Another issue for centers is method of payment.

Internet customers typically pay with credit cards.

Unless a business has a merchant account, however,

credit card payments cannot be accepted. The

alternative is to request payment by check or for the

center to take on a merchant account for

microentrepreneurs to use by proxy. This latter

option should be explored only with caution since it is

likely to increase the center’s legal liability and has

accounting repercussions.

Examples of Successful Internet Marketing:

A Virginia coffin maker was selling about four handmade pine coffins per month. He decided to

advertise on the web. In the first week, he received

1,000 orders, partly because his coffins were far

cheaper than his competition and of good quality.

After an initial period of panic, he identified

subcontractors to help him complete the orders.

Better preliminary planning and market research

would have left him far better prepared for the

surge in production.

A North Carolina woman had a small home-based

craft business selling canvas-backed chairs for

children. She put her business on the Civicnet

system and got a request for a proposal from a

wholesaler for 7,000 items. With the help of her

local small business advisor, she put together a

winning bid using subcontractors to produce the

parts. Without the local advisor, she never would

have known how to prepare the bid or how to scale

up her production to such large volumes.

Internet marketing is generally successful only when

part of a larger marketing strategy. An enormous

response to an Internet ad alone (such as in the

example of the Virginia coffin maker) is extremely

unusual.
How Neighborhood Networks Centers Can Support Microenterprises Page 18

June 1999

Business Incubator

Neighborhood Networks centers might consider

offering business incubator services. The most

feasible is probably to partner with an organization

that specializes in running incubators and which

would be willing to manage one using the center’s

space and technology. Before deciding on this type of

service, centers should consider three crucial issues:

q Is there an adequate number of entrepreneurs or

potential entrepreneurs in their community to

make the service worthwhile?

q Is this the best use of the space and technology

given that a large portion of the center might

have to be dedicated to incubator use?

q Does the center intend to support start-up

businesses? If so, the level of support required

will exceed what incubators typically offer.

If a Neighborhood Networks center determines an

incubator is a good idea, two types of incubators are

worth considering:

General Incubators. This incubator offers shared

office space where multiple enterprises handle their

administrative needs. This is not where the

enterprises make their products or conduct their

services, which typically remains in their homes. The

general incubator provides a receptionist and

administrative support, computers, telephones, faxes,

meeting space and bookkeeping services.

Neighborhood Networks centers could supplement

these administrative services with training in business

planning, help with proposals and other business

advisory services. The business would be expected to

move out of the incubator after a predetermined

period. The National Business Incubator Association

has helpful information and advice that could help

Neighborhood Networks centers that decide to take

this route. Its website is: www.nbia.org Telephone:

740-593-4331.

Sector-Specific Business Incubators. If the

Neighborhood Networks community has a collection

of entrepreneurs in the same business sector, it might

be worth setting up a sector-specific incubator. An

example is the kitchen incubator operated by ACEnet,

which offers licensed cooking and retail space for

entrepreneurs in the food industry to develop and test

market new products. Special courses are also

conducted in this incubator for new entrepreneurs in

the food sector. Such an incubator can provide both

training and joint marketing and supplier relationships.

However, it requires a sector specialist to manage

start-up and operations and is clearly a large

additional expense. Nevertheless, sector-specific

incubators may be feasible for centers with

experience in supporting microenterprises and a

partner organization.

Information Resources: Rolodexes

Neighborhood Networks center’s have a potentially

new and important role in bringing information about

helpful services to their communities. The local

reference library would be a good source of support.

The information should contain not just a list of names

of organizations, but also a person the Neighborhood

Networks center manager has contacted and is willing

to act as a liaison. This requires a great deal more

preparatory work but greatly enhances the

functionality of the rolodex service.

Among the types of organizations to be included are:

q Local authorities — for business registration and

licenses

q Local Small Business Development Centers

q Community colleges which provide vocational

training

q The local chamber of commerce

q City business development offices

q Small business lenders

q Women’s support groups

q Training programs

q Microenterprise support and credit programs

q Accountants and lawyers willing to volunteer their

time or provide less expensive advice
How Neighborhood Networks Centers Can Support Microenterprises Page 19

June 1999

q Banks willing to open relatively inexpensive

accounts for microenterprises

Directory of Model Forms. Microentrepreneurs

would also benefit from easy access to models of

commonly used business documents, such as

business plans, marketing fliers, proposal letter

structures and pricing models. Many business plan

models are on the market. The Neighborhood

Networks center could display plans that are most

appropriate for small businesses like those in their

communities. Forms could be borrowed or modeled

from existing microenterprise programs.

Broker

A key role for the Neighborhood Networks center in

supporting microenterprise is to link these enterprises

with other organizations, such as:

q Financing sources. A center could invite

microenterprise programs that offer financing to

conduct their training, orientation, and client

interviews at the center.

q Training courses. A center could invite

microenterprise trainers to offer courses at the

center in business planning, bookkeeping or

marketing. Seminars could also be provided on

such issues as legal registration, tax questions

and pricing.

q Relations with local authorities. The

Neighborhood Networks center manager should

get to know people in local government with

responsibility for small businesses regulation and

programming and find out what benefits are

available to microentrepreneurs who register or

license their activities. The manager can then

facilitate relations between entrepreneurs in the

complex and the local authorities. As they grow,

many small businesses would benefit from

becoming more formal, which could help them

gain access to government grants, bank loans,

and, in some cases, a wider range of clients. But

entrepreneurs need to have the advantages of

such an approach clearly explained and to have

someone guide them through the process of

licensing, zoning, permits and Internal Revenue

Service requirements.

q Accessing Markets

• Access to housing authority contracts. The

Chicago Housing Authority allocates as

many of its contracts as possible to

residents. A loan fund helps resident

entrepreneurs fulfill the contracts.

Microenterprise support is offered through

WSEP. Access to reliable contracts from

HUD or the housing manager/owner is a

solid safe first step into business. Some

entrepreneurs will develop their businesses

from that point by finding additional clients

for the same service.

Neighborhood Networks centers can act as

go-betweens for residents and their property

managers – advising managers on the types

of services (construction, landscaping, car

wash and maintenance) that could be

procured from the community and letting

residents know what services property

managers are seeking. Such a list could be

posted at the center, which could help the

residents create proposals for these

contracts. Microenterprise programs might

be willing to cooperate in providing loan

funds.

• The center could identify sectors in the

community where clusters of

microentrepreneurs are operating and help

them come together as a group to sell their

product.

• The center could be used as the site for a

trade fair, where representatives of business

associations and wholesalers or other

potential clients from outside the community

are invited to view the products and services

offered by entrepreneurs in the housing

community.

• The center could collect and display

information on nearby companies that
How Neighborhood Networks Centers Can Support Microenterprises Page 20

June 1999

source the types of good and services being

made in the served community.

q Helping purchase supplies in bulk. For

example, through ACEnet, groups of companies

producing canned or bottled products buy

supplies together to get economies of scale.

q Helping target-specific sectors. Child care is

one example of an enterprise that frequently

operates informally in subsidized housing. Many

of these entrepreneurs may want to expand their

operations and become legal. In Philadelphia,

the Commerce Department sponsored a pilot

program to help people establish child care

businesses. Nonprofit groups took the child care

entrepreneurs under their wing and helped them

become legal businesses.

q Supporting peer networking. The

Neighborhood Networks center can offer its

services as a meeting room for groups of

microentrepreneurs.

q Helping microenterprises with savings

programs. The center might sponsor savings

programs directly, providing space for savings

groups to meet and arranging with a local bank to

administer the savings accounts. The center

manager would need to survey local banks to

determine which was receptive to a savings

program and which gave the lowest fees and

highest return. Alternatively, there might be

organizations operating close to the center which

already run savings programs and which might

be willing to operate a program at the

Neighborhood Networks center.

q Apprenticeship programs. Apprenticeship

programs have historically been the main training

ground for a wide range of enterprises. In the

developing world, microenterprise support

programs have reintroduced this idea with great

success. Apprenticeships provide low-cost

training in useful skills, with broad exposure to

business realities and an opportunity to cultivate

the social and economic networks needed to

overcome obstacles to self-employment.3 WSEP

(profiled in Chapter 3) has started a new

apprenticeship program, targeting women on

welfare, placing them in part-time jobs for six

months in small businesses. WSEP also offers

the women workshops and customized training.

Half of the participants’ wages are paid by WSEP

and half by the business owners. This type of

program has also been successful at the Good

Faith Fund in Arkansas.

Neighborhood Networks centers could offer

apprenticeships, identifying local companies

willing to take on unemployed residents for threeto-six month stints. The program might be best

carried out with a partner, such as a

microenterprise support program. In the best

apprenticeship programs, companies commit to

provide training and a predetermined period of

time per month that the business manager will

spend training the employee. The salary costs

might be slightly over welfare payments and

might be shared between the employer and the

center. In successful apprenticeship programs,

residents graduate with a job in the apprentice

sector or with the experience necessary to start

their own businesses. In operating

apprenticeship programs, a major issue is preselecting candidates carefully.

Ongoing Support and Encouragement

Whatever collection of microenterprise services the

Neighborhood Networks center offers, a key to

success is continuing individual support. Often, this

will need to be provided by the center manager.

Among the new entrepreneurs’ ongoing needs are:

q Advice on how to use the Neighborhood

Networks center resources. Provide

individuals with an orientation to the center,

explaining the services available, and how to get

started.

q Help dealing with specific questions. While

generalized training programs are very helpful to

microenterprise development, every participant

will still have his or her own unique questions.

Unless someone can provide the answers, the

fledgling entrepreneur may become discouraged.

For example, a business might win the right to
How Neighborhood Networks Centers Can Support Microenterprises Page 21

June 1999

bid on a contract with the property manager but

not know how to structure the proposal. Or a

young enterprise might find a new category of

customer for its service but not know how to price

that customer. In another example, a resident

might secure a loan from a partner microfinance

program but need help in fulfilling record-keeping

and reporting requirements.

Cooperation with Other

Microenterprise Programs

The number of microenterprise programs in the U.S.

is growing rapidly. In its Directory of Microenterprise

Programs, the Aspen Institute reported that 328

programs were operating nationwide in 1996, triple

the number of programs in place four years earlier.

The training, lending and savings elements of

microenterprise support require considerable

experience and capital. It is therefore preferable for

Neighborhood Network centers to cooperate or

partner with microenterprise programs rather than try

to set up all of these activities themselves. To identify

a good partner, the Neighborhood Networks center

manager should:

q Identify the microenterprise programs operating

in your region by checking the Aspen Institute

directory or the Association for Enterprise

Opportunity.

q Set up telephone interviews to pre-select

programs based on their initial interest in a

partnership.

q Visit selected microenterprise programs and

interview their directors. Subjects to cover

include:

• Target market of the program – how well

does the program’s focus match your

center’s community? Does the program deal

with start-up businesses or only those which

have been in operation for some time?

• Combination of training, financing and

savings. Is the training program credit-led or

training-led? If it provides credit, is it group

or individual lending?

• Loan size and terms. What size loans does

the program make and for what period? Or

does the program refer customers to banks

for financing? What types of businesses are

normally included? Can the program work

with start-up entrepreneurs?

• Repayment rate. What types of collateral

does it take for loans? Does this match the

capacities of potential borrowers in your

community?

• Technical assistance. Does the program

support its borrowers with technical

assistance once they have started their

businesses and taken a loan?

It might be very helpful for the center manager to take

on this site visit a couple of entrepreneurs from the

housing community to get their responses on how

useful the microenterprise program can be to them.

q Identify an individual at the microenterprise

program who wants to take a continuing interest

and be the contact for your Neighborhood

Networks center.

q Set up a first step for cooperation. The program

could run a training course or hold an initial

orientation at the center. The manager would

take responsibility for promoting the program

within the community and attracting

entrepreneurs to come to a first meeting.

Taking the First Steps

To determine the best package of services for your

center, the needs of the community and the available

resources should be clearly identified. First steps

would be:

q Check the property rules in the complex where

the center is located for any prohibition on

conducting business operations out of the

housing units. HUD supports microenterprise

programs and has no regulations against such

operations, but some building owners may. Also,
How Neighborhood Networks Centers Can Support Microenterprises Page 22

June 1999

check the local ordinances, which apply to the

property for similar rules or prohibitions. It is

important to be able to explain these rules – or

their absence– to residents who want to launch a

small business from their homes.

q Establish a group of volunteers willing to be

available on a regular basis at the center to

provide one-on-one help to entrepreneurs in

using computer programs.

q Hire a manager with at least basic business and

computing skills and a commitment to creating a

user-friendly environment for center clients.

q Search the HUD Neighborhood Networks

Resource Database

(www.hud.gov/nnw/nnwresdb.html) for good

sources of funding for microenterprise programs

or information about how to tap other

microenterprise supports.

q Establish focus groups of residents who run

their own businesses. Interview them about

their main needs. Get their opinions on

which services they would use and why.

This will have the double effect of spreading

information about the center’s upcoming

program and enabling the center to tailor

services to the needs of its own community.

q Interview other organizations in the region to

identify potential partners and other useful

support services for entrepreneurs. Identify a

contact person at each organization who is

willing to act as a liaison with the center. Compile

a database of these services, which can be

easily accessed by Neighborhood Networks

center entrepreneurs. The types of organizations

to feature include local microenterprise funds,

small business advisors, associations and

networking groups, women’s groups, the local

housing authority, computer training centers,

childcare programs and other social service

providers.

q Set up partnerships with microenterprise support

programs, which will be of benefit to

Neighborhood Networks, center customers. For

example, another local computer resource center

may be able to run a training program in

QuickBooks at the center. Microfinance

institutions may want to run training programs at

the center, hold orientation meetings for potential

borrowers or sponsor savings programs to help

microentrepreneurs build a capital base. Other

organizations may be willing to run mentoring or

apprenticeship programs for center

entrepreneurs or help them network to access

new markets.

A Neighborhood Networks center in Durango, CO is working to set up a network of entrepreneuriallyoriented centers. The Durango center has excellent Web access, thanks to an agreement with a local

cable company. The center plans to cooperate with another Neighborhood Networks center on a

Navajo Reservation where residents produce a range of Native American handicrafts. The Navajo

residents currently find their profit margins cut by selling through middlemen such as wholesalers and

stores. The Neighborhood Networks center on the reservation has no Internet access because of poor

area telephone systems. Durango residents could run an Internet marketing service to sell the Navajo

products at better terms than the middlemen – while also making some income for Durango. Durango

would pick up the orders; the Navajo center would supply the products. The housing manager in

Durango, Scott MacLennan, has also identified a Neighborhood Networks center in Greeley, Colorado

that is good at designing websites. Rather than hire someone locally, he plans to ask this center to

create a website to market the Navajo products.
How Neighborhood Networks Centers Can Support Microenterprises Page 23

June 1999

q Form a peer group if there are high

concentrations of people in a similar business.

q Run marketing fairs to display and sell the

products produced by local entrepreneurs. Invite

outside business associations, such as the local

Chamber of Commerce or the Rotary Club, to

sponsor or attend the fair.

q Contact the local housing authority to determine

what types of contracting needs it has and post

these at the center.

q Collect good examples of business plan outlines,

contracts, QuickBook files and marketing fliers to

give entrepreneurs models to follow in creating

their own documents and planning. These would

be useful both on paper and available on the

center’s computers.

q Go back into the community to ensure the

microenterprise services being provided are well

understood and will be used. The Neighborhood

Networks center manager will play a crucial role

in outreach and in providing moral support to the

entrepreneurs who use the center.
Appendix A

Neighborhood Networks Information

For more information about Neighborhood Networks, contact the Neighborhood Networks Information Center or the

Neighborhood Networks website (www.NeighborhoodNetworks.org) .The Neighborhood Networks Information Center

has a range of materials available for free, or at a minimal charge, to anyone with an interest in the initiative. Call the

Information Center toll-free at (888) 312-2743 or TTY at (703) 934-3230 to place an order. Order forms are available

for items that require payment. Resources include:

q Neighborhood Networks Resource Guide: The Resource Guide offers a step-by-step overview of the steps

involved in establishing and operating a Neighborhood Networks center.

q News Brief (current and past issues): A quarterly newsletter that highlights national achievements for a wide

audience including partners and the public.

q NNewsline (current and past issues): A bimonthly newsletter that highlights topics of interest to Neighborhood

Networks centers and coordinators.

q List of current Neighborhood Networks centers: The monthly list includes center names, cities and states.

q Fact Sheets: Fact sheets are one-page summaries of various topics relevant to the operations of Neighborhood

Networks centers. Fact sheets that are currently available include an overview of the initiative, telehealth

programs, health information, health partnerships, child care, transportation, seniors, and community

improvements at Neighborhood Networks centers.

q Success Stories: Brief descriptions of successful activities at Neighborhood Networks centers across the

country.

q Highlights Video: A useful presentation tool featuring footage of Neighborhood Networks activity in Boston,

New Orleans and Seattle. 17 minutes ($20)

q Media Montage Video: Highlights of broadcast coverage of Neighborhood Networks activity across the United

States. 6 minutes. ($20)

q Senior Connection Video: A great tool for marketing and outreach, this video helps demonstrate how older

adults benefit from Neighborhood Networks center activities. 17 minutes ($20)
Endnotes

 

1

 Association for Enterprise Opportunity/ Neighborhood Networks Conferences, “Microenterprises Build Communities”,

September, 1998.

2

Research conducted by the Self-Employment Learning Project (SELP). “The Practice of Microenterprise in the U.S.” The SelfEmployment Learning Project, Edcomb, Klein and Clark.

3

 “Where there is no Job”, John P. Grierson, Swiss Centre for Development Cooperation in Technology (SKAT) 1994. E-mail:

info@skat.ch.