|Fred McKinney, president and CEO of the Greater New England Minority Supplier Development Council (GNEMSDC).
The current state of minority business development in New England is critical. Its importance to the social and political health of our democracy here in New England cannot be minimized. Business development affects employment, and thus the income of workers. Through employment, families are capable of supporting themselves and contributing to their communities as consumers and taxpayers.
Business development, and in particular small business development, is an indicator of the health of a community. With vibrant stores to enable residents to shop and browse and interact with one another, a community is strong. Where there are only store front churches or boarded up buildings, a community is in despair. In black and brown communities all over this country, minority business development is critical in the struggle for the survival. These communities are suffering by almost every socio-economic standard. Hispanic and black families have less than one-fifth the net worth of white families. Blacks and Hispanics continue to drop out of school at alarming rates at a time when education is so necessary for employment. The recent census reports that for African Americans and Hispanics, the rate of poverty is 25.8 percent and 25.3 percent, respectively. Minority entrepreneurship was once considered to be a tool in the anti-poverty toolbox. It is clear from these numbers that this tool needs to be sharpened.
Minority businesses are often the starting point for minority workers to enter the labor force. Nationally, minority businesses employ almost 5 million workers. Minority businesses are often the primary supporters of the social needs of communities when governments and families fall short. There are countless examples of minority entrepreneurs stepping in to fill the unmet needs of the families of their workers in difficult times like today. And minority business leaders play an important political role in the fabric of American democracy. Thomas Jefferson believed that without small farmers and property owners, democracy would fail. John Adams believed that without well informed citizens, democracy would collapse into aristocracy. Minority business owners are often the most well informed and politically active citizens in our communities. They are the ones who push the agenda for greater opportunities for all Americans.
Minority businesses in New England are significantly underrepresented, undercapitalized and underperforming. It is time for the political and business leaders of this region to pay close attention to this problem. The consequences of failure go far beyond the lines that separate our segregated communities.
GNEMSDC certified MBEs larger than US average
More than 61 percent of certified Minority Bussness Enterprises (MBEs) in the GNEMSDC have annual sales over $1,000,000. These MBEs have enlightened leaders at their helm and have been able to build their sales, even while building a strong team of workers and managers. As a group, these businesses employ hundreds of workers. Our records show that two thirds of their work force are minorities. Minority firms with sales of more than $10 million per year are the clear exceptions. According to the Minority Business Development Agency of the Department of Commerce, minority firms on average have sales of less than $200,000 per year. So a minority firm with $10 million in sales is 50 times greater than the “typical” company. Surprisingly, more than 30 percent of GNEMSDC certified MBEs fall into this group. Most of these large minority firms will survive the current recession. They will likely continue to grow in size and scale, through organic growth and acquisition.
Despite the success of these large minority firms they continue to require nurturing and support from corporate and public sector consumers. In the economic scheme of things, a firm with $10 million in annual sales in most industries is a very small player. Everything is relative. These large minority businesses are still small fish in a big pond filled with ruthless, rapacious carnivores. Without the support of corporations to continue to provide opportunities to these businesses, they may also fall victim to global competition that will wipe out the strongest source of indigenous economic support to a community.
It is ironic that these large MBEs face the greatest challenge when it comes to government support. All state, local and federal programs that are “designed” to assist minority businesses are designed to assist only “small” minority businesses. This narrow, government focus on small size misses the opportunity to help the minority businesses that are in the best position to assist in the goal of community economic development.
For this reason I have often stated that the public sector does not have a minority business development program; they have a small business development program that occasionally helps some small minority businesses.
Within the GNEMSDC, 39 percent of certified companies have sales of less than $1 million. Our MBEs are significantly larger than all MBEs nationwide. These small MBEs are most vulnerable to not making the transition from an early stage enterprise to a sustainable and growing employer. The market for most goods and services that corporate America purchases has now become global. We are all familiar with the impact that big box stores have had on small retailers unfortunate enough to be in the same market. There has been a similar development in the Business to Business world where most of GNEMSDC MBEs compete. Corporations not only are sourcing globally, they are consolidating the number of suppliers that they are buying from in an attempt to lower their administrative costs. They are looking for suppliers to have the “bandwidth” to supply all of their far flung global needs. Unfortunately, small MBEs are not in a position to defend their turf under these conditions. Courageous corporate leadership is needed to state in unequivocal terms: “yes we will source globally; yes we will reduce our vendor base, but we will not do this at the expense of small minority businesses that are high quality, price competitive suppliers.” Without this commitment, small MBEs are in danger of losing more ground after this recession is over.
MBE success still fragile
MBEs in New England, regardless of size, are facing difficult economic and business conditions. While economists debate whether the current recession is over, there is little doubt that for certified MBEs the recovery has yet to take hold. There will be some business that will never come back to the region as the pace of globalism shows no sign of abating. But like all recessions, the survivors are in a great position to pick up the pieces that are left by those who did not survive. It is our goal as an organization, and it should be our goal as society, to keep as many minority firms in business and growing as we are able. It should be the goal of corporate leaders to continue to support MBE development by expanding their commitment to purchase from high quality MBEs and to support their continued growth and expansion. This requires more than lip service to goals of diversity. This requires that corporations put real resources into minority business development and make minority business development an important strategic goal.
We need strong MBEs. We need growing MBEs. And we need these not simply to create a class of wealthy entrepreneurs, but to create communities that can thrive and participate fully in the American dream. This is the responsibility of corporate leaders, political leaders, minority business owners and consumers in general. If we fail at this, the fears of Jefferson and Adams will become a reality.