‘We will see faster growth for strong companies’
XMI’s Jim Phillips assesses the state of Nashville’s business climate
AUTHORS Staff Reports
Jim Phillips is chief executive officer of Nashville-based XMI, a provider of business process management services.
In September, Phillips received from Lipscomb University the Leader with Purpose Award, which recognizes individuals for their strong leadership in corporate governance, their ethics and their commitment to community service.
The Post recently caught up with Phillips to ask him a few questions.
How does Nashville’s start-up environment compare to those of other U.S. cities? Pros/cons?
Nashville has a healthy economy and a business-friendly regulatory environment. Mayor [Megan] Barry and her predecessors have consistently promoted an open business environment. Incubators like the Nashville Entrepreneur Center and Launch Tennessee, as well as the Nashville Capital Network and TNInvestCo, have fueled additional momentum to make Nashville a desirable place for start-ups and growing companies. Nashville’s location works in investors’ favor as it gets grouped with Southeast deals for venture capital, which tends to be more investor friendly compared to the West Coast or New England.
Nashville needs to overcome a lack of confidence that we can compete with other thriving locations for start-ups, like Silicon Valley. In the past, we were told that we weren’t competitive, and that incorrect perception has lingered. However, Nashville is a great place for growing businesses, we can compete with other cities, and our stable regulatory environment is a valuable asset.
What resources exist that make the area a quality environment for entrepreneurs? What resources are lacking?
No state income tax is the greatest resource for start-ups. In addition to Nashville’s stable regulatory environment, the fact that we do not have a state income tax drives business development in our area. The Angel Tax Credit is another beneficial resource. When an entrepreneur is looking to place a startup in Nashville, these economic development policies send a clear signal that the regulatory bodies in our city and state play the role of a business partner to entrepreneurs and investors looking at Nashville as a place to grow their business.
Nashville has fantastic resources for entrepreneurs, and the only thing we lack is beyond our control — a beach. Some cities have geographical resources that attract qualified employees, making them desirable locations for establishing businesses. I am not sure that Old Hickory or the Smokies can make up for that.
What changes have you seen in financing for businesses in the region? What is the direction ahead for financing?
We are starting to see the pendulum swing in favor of management teams and founders versus investors. Early investors, in many cases, are flush with cash and are interested in reinvesting in other businesses as their previous start-ups have grown. With a sophisticated angel network and more investors, start-up owners have less pressure coming from a specific investor and can acquire capital on more favorable terms. This is another part of making Nashville entrepreneur friendly, which could inspire more business development and growth in the region.
What is the main avoidable mistake growing businesses make?
Managing too many vendor relationships at once can be a downfall for growing businesses. When companies develop and grow, founders often realize they need the support of external vendors to support operations. While getting external support is beneficial, it can be difficult to coordinate among vendors, resulting in a lack of accountability and take time away from focusing on growing a business’ products/services, revenue and staff, which can lower overall business performance.
Growing businesses must also never underestimate competitive threats. Entrepreneurs must be engaged in their industries and markets and be aware of potential threats, so that they can be proactive rather than reactive. This also allows a business to stay close to its customers and learn about its competitors.
How can business growth be sustained?
Timing is everything. The most important factor for sustaining business growth is adding the right people to the team at the right time. As I mentioned before, as businesses grow, the needs of the company change and the infrastructure needs to change with it. Knowing when to strengthen infrastructure — from adding a product development person or someone to directly oversee customer relations — will help businesses experience sustained growth.
How do you think the rate of growth for start-ups in Nashville will change over the next five years?
I expect that we will see faster growth for strong companies, those with CEOs who stay focused on the most important aspects of running a business and are well capitalized. We will also see more companies that do not make it. Stronger companies will grow faster, but there will also be a higher failure rate.
What industries potentially are “hot” for growth in Nashville?
The emerging area of business growth is international business, and this is already moving forward. The airport’s planned expansion and international flights, and the Chamber’s interest in these businesses, add to the existing factors and resources that already make Middle Tennessee a great place for growing businesses. The city is well positioned to help international businesses thrive.
What is the most significant contributor to success for start-ups and small businesses in Nashville?
Nashville has an entrepreneurial culture. Risk-takers in this town are admired. Now that there is a sophisticated capital infrastructure to support those risk-takers and great mentorship — Clint Smith, Michael Burcham and Mike Shmerling, just to name a few — from those who have already succeeded, I don’t see anything slowing us down now.