Fabrication sewing specialist Maria Sanchez assembles a night compression garment at the West Allis manufacturing center of Solaris Inc., which started in 1998. The company’s compression garments are for people with swelling caused by lymphatic problems. Credit: Kristyna Wentz-Graff

SHARE Click to enlarge

By of the

It's the warm and fuzzy side of our frigid start-up climate.

In steady-as-she-goes Wisconsin, new businesses are notoriously few. That's the bad news. But the ones that do get launched tend to stay launched — more so than in all but a handful of states.

Recently released state profiles from the U.S. Small Business Administration show the pattern.

Of business establishments opened in Wisconsin in 2002, the SBA reported, 41% were still open 10 years later. That was the highest rate in the Midwest. It was also 6.5 percentage points above the U.S. average, and 10 or more points above such states as New Mexico, New Jersey and Florida.

That characteristic, both economists and businesspeople agreed, reflects the same cautious approach to risk-taking that makes Wisconsin a start-up laggard.

"It's definitely a good thing that our businesses survive, said Dale Knapp, research director at the Wisconsin Taxpayers Alliance and a longtime observer of the state's economy. "But I think the negative to that, and it's not in the survival rate, it's in the business formation aspect of it. We don't start up enough businesses."

Randy Roeder has some geographic perspective on that. Working as an environmental engineer in Los Angeles, he saw lots of businesses launched.

"That's ... a much more entrepreneurial environment, where everybody's got ideas about doing stuff, and they're probably more willing to take risks," he said.

But Roeder also believes that Wisconsin, where in 2001 he formed Material Recovery Inc., a plastics recycler that since has grown to employ 32 people and is shooting for $3.5 million in sales this year, has its advantages.

"When people decide to start a business around here," he said, "I think it's probably more well thought out."

Risk avoidance

Adam Murphy started Big Bang LLC in 2003. The firm sells software worldwide that lets organizations with a hundred or more computers update versions of the Windows operating system.

With 11 employees and more than $2 million in annual sales, Big Bang has done well enough, but the company's name belies its slow growth — a path Murphy has deliberately chosen and which he believes is characteristic of Wisconsin's businesspeople and lenders.

"We're a bit more conservative," he said. "I don't take incredible risks; my banker doesn't encourage me to take incredible risks."

Russell Kashian, an economics professor at the University of Wisconsin-Whitewater and an economic development specialist, said the state's relatively high business survival rate could reflect a more cautious approach to launching businesses in the first place.

"We probably are culturally more conservative, in an economic sense," he said. "We had fewer bank failures during the savings and loan crisis, we had fewer bank failures during the recent financial crisis, and our foreclosure rates were actually less than the nation's, because we just have a conservative population that aren't risk takers."

Knapp said much the same thing.

"Maybe it's just that we're going to do safer businesses, and so we don't start many, but the ones that we start tend to be safer and so they do last longer," he said. "The other thing that could be playing into this — and we've heard ... from businesspeople about this — they view the banks here and the lenders as very conservative, in fact they would say overly conservative."

The absence of a roll-the-dice, risk-taking mentality hurts Wisconsin when it comes to tech start-ups, Kashian said.

Plus, we're homebodies. About 72% of Wisconsinites are natives, one of the highest rates in the country, Census Bureau data show. That doesn't engender entrepreneurship.

"There's a certain risk-taking behavior of the guy who basically gets in his Ford Focus and drives to Colorado," Kashian said. "And if what we do basically is everyone says I want to have chicken and rice at mom's house on Sunday, you can tell that cohort is probably not going to start their own business."

The same SBA state profiles that show Wisconsin's relatively high business-survival rate also show the number of business establishments opened in 2002, 2007 and 2010.

And measured by population, Wisconsin's rate of business-establishment openings ranks near the bottom in all three years.

An "establishment" is typically a single location of a company, and some companies have many establishments. A fast-food franchisee, for example, may operate several restaurants.

Most firms, though, have only one location, and there is substantial overlap between the opening of new business establishments and start-ups generally.

Strong support system

Solaris Inc., a growing manufacturer of medical compression garments, is a one-establishment firm, and its experience offers yet another perspective on Wisconsin's business-survival pattern.

The state — or its southeastern corner, at least — offers extensive support to companies as they take their early steps, Solaris President Kyle Weatherly said.

Solaris was formed in 2000 by Weatherly's mother, Kathy, an occupational therapist who treated people with lymphedema — swelling caused by blockage in the lymphatic system — and wasn't happy with the compression products available. She started making her own, and found a market.

The company now has 65 employees, and in February expects to move from West Allis to a new plant it is building in Milwaukee's Menomonee Valley Industrial Center. The 68,000-square-foot facility will be more than four times bigger than Solaris' current quarters, which Weatherly said the firm has "completely outgrown."

He believes Solaris has thrived in part because of a receptive business environment in which entities from the Metropolitan Milwaukee Association of Commerce to the Wisconsin Economic Development Corp. have been eager to help.

The company's international sales, which now account for 16% of revenue, have boomed in the last three years, and Weatherly credits WEDC with a major assist on that score.

"For all the bad press they get — and this is coming from a Democrat — they've done an unbelievable job of supporting us with international expansion," he said.

MMAC, meanwhile, helped Weatherly move from someone who knew no one in the local business world to a well-connected networker.

"It's a very approachable small-business support system, ecosystem, however you want to describe it, that was very helpful to us in the early days," he said.