Wall St. and Business Wednesdays: E-Letter To Regan Morris and The New York Times Re: "To Get Ahead, Own The Store"
Your interesting article,"To Get Ahead Own The Store” highlighting the dramatic spike in small business ownership among female Latino and “minority” entrepreneurs picks up right where you left off last year with Daniel Altman’s, “Young Blacks Try Entrepreneurship”.
It is a subject that we have followed with great interest at BlackElectorate.com over the years.
This portion of your article basically sums up the phenomenon:
Between 1997 and 2004, the number of firms owned by Hispanic women increased by nearly 64 percent, to 553,600, and their combined revenue climbed by more than 62 percent, to $44.4 billion, according to a study by the Center for Women's Business Research that was released Tuesday.
The number of privately held firms that are 51 percent or more owned by minority women rose by 54.6 percent, compared with a 9 percent increase in the number of all privately held firms in the United States, the study said. The number of firms run by African-American women rose by 33 percent, to 414,472, the center said.
Over all, an estimated 1.4 million companies are owned by minority women in the United States, generating nearly $147 billion in sales. Hispanics accounted for 39 percent of the companies, while African-Americans accounted for 29 percent. Asian-Americans and Pacific Islanders, who were grouped together, also accounted for 29 percent. Native Americans and Native Alaskans made up about 6 percent, the study said. (The numbers add up to more than 100 percent because some business owners were classified in more than one category.)
These numbers are staggering when their disproportionate nature is revealed by census data. There is something revolutionary going on among non-Whites in the American economy. And what lies beneath this paradigm shift is beyond the ability of traditional economic and political science theories to explain.
Having said that, while excited about this emergence, I have grown concerned about the pace at which the Black, Latino and Native American communities are moving to solve their problem(s) in obtaining capital to fuel and sustain their entrepreneurial visions. That access to capital crisis is also typified by these excerpts from your article:
Ms. Cordova started her business from her home and asked clients to pay half the cost of the projects up front, allowing her to buy materials and pay the two carpenters she had hired. In its first year, Queston's revenue was about $55,000. Last year, it was $2.5 million, down from a high of $3 million in 2002, though Ms. Cordova projects it will bounce back to $3 million next year because of the booming construction market in New Mexico. The company is profitable, but keeping it that way has been a struggle.
Initially, the biggest challenge was getting financing. Now, it is coping with the soaring costs of materials, fuel, insurance and supplies. "I think instead of having an estimator in our bid room, we really should have a psychic, because we really don't know what the cost of materials will be from one month to the next," Ms. Cordova said.
To cope, she said that she and Russ Steward, who is her companion as well as her business partner, pinch pennies in their business and private lives and stay out of debt. She said they had put off building their planned retirement home.
The article continues later:
...To learn the ropes, Ms. Cordova worked as a laborer on construction sites with Mr. Steward and her two carpenters, at first lugging wood and tools but eventually becoming one of the first women in New Mexico to earn a contractor's license.
Another major challenge was raising money. She did not know any bankers and was repeatedly turned down for loans. She could not even get a $5,000 loan for a used truck, and instead bought an older one with $1,200 from her savings.
The decision to buy a small roofing company turned their venture around. Ms. Cordova started selling new roofs along with the remodeling jobs, and the added profit enabled her to employ Mr. Steward full time and to buy a property, an office trailer and work space.
Even then, to her great frustration, the bankers would not loosen their purse strings. "We were quite successful,'' she said. "We certainly had the money in the bank to collateralize a loan, to say nothing of the fact that the property was worth much more than we were asking to borrow."
The rejections Ms. Cordova experienced did not surprise Sharon Hadary, executive director of the Center for Women's Business Research, who said that women and minority business owners operate at a distinct disadvantage in competing against white men, even today. "They aren't connected into the boy's network," she said.
In all three communities – Black, Latino, and Native American – the problem of access to capital has been presented by their establishment leaders to be one that is primarily political in nature. The solution to the politically-oriented problem of access to capital is characterized by an emphasis on government and the enforcement of economic justice as the source of business and investment through procurement and loans. This limited approach has been increasingly confronted and complimented by a market and indigenous approach that champions financial markets and community-oriented financial intermediation – with ethnically owned banks and development schemes as favored sources of capital for small business owners and first-time entrepreneurs.
In the next few years the challenge will be for all three communities to synthesize these three different approaches through a healthy dialogue in civil society; sophisticated voting and lobbying informed by a self-enlightened interest; and increased cultural unity. One could get a hint of how this synthesis might evolve in the Black community by the example recently set by Minister Louis Farrakhan and Reverend Jesse Jackson’s two-hour public conversation recently moderated by WVON Radio's Cliff Kelley. The portion of their conversation dealing with economics should interest you greatly.
As a final suggestion as you continue to pursue this topic, you should consider interviewing Cynthia McKinney, soon to be returning to Congress, representing the Fourth Congressional District of Georgia. She has her finger on the pulse of this phenomenon. Although most headlines surrounding her revolve around foreign policy and issues of war and peace, her message of economic development and growth centering around small business owners and entrepreneurs resonated “everywhere” she campaigned. Even, the Atlanta Journal-Constitution, which had been very critical of Ms. McKinney, acknowledged in a post-Democratic Primary editorial, the impact that her economic message had on voters as she campaigned door-to-door in minority neighborhoods.
In keeping with the subject of your article it should be no surprise to find yet another minority female entrepreneur, only she of the political variety.
Keep up the good work.
Wednesday, November 24, 2004