Black Business Owners Face Uphill Battle Trying to Build Their Businesses...Why?
Local minority-owned businesses finding success but facing long road ahead
Three decades of working for a Fortune 500 corporation paved the way for her new enterprise as a franchisee.
“I got some of the best training in how to lead a business from the people who were there,” Kelly-Green said. “The things I learned about how you deal with people, how you provide service and how you manage profits – those things work whether it’s a large billion-dollar company or a much smaller organization.”
Kelly-Green’s locale at Memphis International Airport is Lenny’s top-performing store, and along with Jim Neely’s Interstate BBQ – another black-owned business – it’s the top-performing concession at the airport.
Richard White, vice president of properties and business development for the Memphis-Shelby County Airport Authority, said Neely opened his airport store – a 180-square-foot kiosk – about a decade ago. White said Neely made about $1 million in revenue in the first year, earning enough in the first three-months to finance the build-out of his current larger space.
Although there are many notable success stories like Kelly-Green’s and Neely’s, black business revenues still comprise just 1 percent of business revenue in Shelby County, despite Memphis being a minority-majority city. And while there are many more black-owned than majority-owned businesses in the county, their revenues are significantly smaller. According to U.S. Census data, the average business in Shelby County in 2007 generated slightly more than $871,000; the average black-owned business generated about $20,000.
“African-American businesses are doing woefully poor in terms of revenue,” said Roby Williams, president of the Black Business Association of Memphis, a 37-year-old nonprofit dedicated to entrepreneurship and growth opportunities for minority and women-owned business. There are some successes, but they’re too few and far between.”
Memphis Mayor A C Wharton Jr. is an attorney who taught employment discrimination at the University of Mississippi for 25 years. He said he believes the “vestiges of past discrimination” continue to play a role, albeit largely unintentional.
“There was a phrase that the courts often used in determining whether some practice that was neutral on its face nonetheless had a discriminatory impact,” Wharton said. “And one of the phrases the court would use in making that determination was that this is a ‘vestige of past discrimination.’ And that’s primarily what we have here, in which credit opportunities that were readily open to the majority race at that time, were simply not available.”
Black business owners, like women, historically had trouble securing business loans because of a lack of personal credit history. Wharton saw this first-hand many years ago when his own father could not secure a commercial loan to expand his small grocery to include a gas station.
“He was very enterprising, so he struck up a deal with an oil distributor who said, ‘I’ll let you have money to build your store if you agree to pump my gasoline for five,’” Wharton said. “So my daddy had to turn to alternative means.”
Wharton said the economic downturn has helped create “the perfect storm” by coupling those historic headwinds with current credit tightening, placing entrepreneurship and growth out of reach for individuals without existing capital.
He also said older black businesses in Memphis are service-oriented, and he would like to see more black entrepreneurs involved in more sustainable, value-added endeavors, such as technology startups and manufacturing, with raw materials being turned into a product.
The Black Business Association – which claims to be the largest trade association of its type in the Mid-South – helps minority business owners through investment, counseling and training.
Williams said to improve the state of local black business, it’s imperative to develops a solid infrastructure that nurtures black startup companies and taps the city’s existing entrepreneurial incubators, such as LaunchMemphis and EmergeMemphis. In addition to his leadership role at BBA, Williams serves on the city’s Minority Business Development Oversight Committee, created last spring to oversee diversity in the city’s business practices.
“We see what they have coming down the pipe and help them develop relationships with the African-American businesspersons who can do the business,” Williams said. “This is a very worthwhile committee. Since we got started in April, we’ve helped African-American and women-owned businesses secure an additional $8 million in revenues from city government. We’re busting our tails on that one.”
Williams said that although Memphis has come a long way in terms of black business, there’s still a long road ahead.
Fred Spikner is owner of Spikner Printing. Although there are many notable success stories like Spikner’s, black business revenues still comprise just 1 percent of business revenue in Shelby County even though the county boasts many more minority-owned businesses than majority-owned businesses. (Photo: Lance Murphey)
“I’d like to see us make some quantum leaps in revenues for our minority business owners,” he said. “I’d like to see more minority business owners do more business with majority companies, with city, county and state government, and contracts with all of those entities. What our business people need is business.”
While BBA prepares businesses for success, Memphis Minority Business Council (MMBC) plays matchmaker between minority businesses and major corporations and public sector institutions in need of services and goods provided by smaller companies.
“Last year, that matchmaker process produced almost $200 million in contract awards,” said Luke Yancy, president and CEO of MMBC, whose membership includes about 110 major corporations. “That number is up from 2010, when it was $127 million. So that in and of itself shows that there’s an improvement.”
The MMBC Continuum is a 40-year-old economic development agency dedicated to promoting a climate of inclusion that allows minority and women-owned businesses to prosper through business-to-business relationships and entrepreneurial development.
Local black-owned businesses are typically first-generation businesses, and having to compete in price, quality and delivery with many majority-owned businesses that have had generations to make improvements can be daunting. The uncertainty that has penetrated the national economy over the past several years has resulted in what’s being called “the new normal,” which, according to Yancy, is defined largely by rampant competition.
Large corporations have scaled back, making them more formidable competitors to smaller black-owned business. As a result, black-owned businesses have had to work even harder to become more efficient and competitive. Compliance has also posed a challenge, as the federal government has implemented a number of new requirements, ranging from transparency to environmental protection, for corporations. Suppliers must also meet those regulations.
There is, however, a positive side to the new normal for black businesses. As large corporations scale back, smaller minority-owned companies are more likely to have the capacity to meet those corporations’ needs. According to Census data, 97 percent of black businesses in Shelby County have no employees. But when they do hire, black businesses are more likely to hire black workers, and Yancy sees MMBC’s work as a vital part of the solution to the city’s black unemployment rate, which he says is close to twice that of whites.
“It has a direct impact on unemployment in these inner-city communities,” he said. “We’re creating jobs in the community by basically putting our minority businesses in touch with a portal that exposes them to opportunities with major corporations. Producing a product or service creates jobs, and unemployed people gain employment. Then they use restaurants and cleaners, they buy cars – all of those things that spur consumer spending, which is a driver for our economy.”
At City Hall, Wharton has been pushing to increase the number of minority and women-owned businesses that do business with the city. He said just as a corporation should reflect the values of its shareholders, so should a municipality.
“Those things that the city of Memphis controls have had excellent minority participation,” Wharton said. “The fairgrounds were 54 percent minority; The Pyramid is 47 percent; Mitsubishi’s $9 million sewer realignment is 100 percent minority. So we’re doing it in the city. But what we’ve got to do now is go out and, for those who are excluded on contracts that we don’t control, push those prime contractors to sit down, dissect those bids, and find out where minorities and women are being excluded. Then we the city come in and show these bidders in future bids how they can avoid what caused them to be rejected.”
Wharton said pulling together a bid package for a contract can be very costly for a small business, and many business owners will not submit bids unless there’s “some assurance that they have a realistic chance of getting the contract,” Wharton said.
The mayor is preparing in February to launch his Office of Resource and Entrepreneurship, a full-service office that will assist business owners with developing bid preparations for contracts.
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