Against All Odds.

Three entrepreneurs overcome the hurdles of ownership

SMALL BUSINESS OWNERS ARE CHALLENGED EVERY DAY. They're challenged to compete with the big boys of their industries; to secure the capital that can take their companies to great heights; to find employees who can embrace their vision and help them grow their operations to the next level.

For the black small business owner, the obstacles can be even greater. Still, that's no reason to count yourself out. The number of black entrepreneurs continues to rise each day and not because of government handouts or a stroke of good luck. These African American business owners have the drive, passion, creative genius, and stick-to-itiveness to pursue and achieve the American Dream.

Nearly 900,000 black-owned firms are scattered throughout the country. These companies have produced $59.3 billion in revenues and employ 580,000 workers (according to the latest available reports).

This book tells the stories of 10 individuals who yearned to be counted in these growing statistics. Three of the 10 entrepreneurs described here threw caution to the wind, followed their hearts, and overcame great odds to transform hobbies, lifelong interests, and other novel ideas into unique and highly profitable enterprises.

Dubbing themselves "tomorrow's titans," these movers and shakers realize that they are the future of black business. In fact, each business owner profiled in the book has set a goal to make BLACK ENTERPRISE magazine's annual listing of the largest black-owned companies in the nation. Their ambition and self-confidence make it clear that they are here to stay.

SYLVIA AND HERBERT WOODS SYLVIA'S RESTAURANT

While shopping one day on 126th Street, Sylvia Woods walked right into her future. It was waiting for her at Johnson's Luncheonette. Johnson, a young black Southern entrepreneur who had overextended himself financially in trying to build a resort for blacks in upstate New York, made her a business proposition to help raise money for his project. "He said to me, `Sylvia, you want to buy a restaurant?' I laughed because I thought it was a joke. I knew that I had saved a lot of money, but I didn't have that kind of money socked away to buy Johnson's Luncheonette." Woods asked her mother to mortgage the family farm to help raise the $20,000 down payment. She did, and on August 1, 1962, Woods started operating what would become one of the most respected and historic sites in New York City.

The Sylvia's name is far reaching, and the menu is the main draw. But the food is not the only thing that keeps people coming back for more. The feelings of family, togetherness, love, and comfort are also important. Where else could you find Secretary of State Madeline Albright and her Secret Service guardians dining just tables away from a working-class family of four?

If she's not checking on the chef or going over menus and other day-to-day tasks, she's greeting and talking with her customers. Never too far from her side is her husband of 56 years, Herbert. A soft-spoken man with a round, gentle face and piercing eyes, Herbert helped turn the once small mom-and-pop outfit into a palace of Southern dining located just around the corner from the legendary Apollo Theater.

Both come from a community of great cooks, which explains their passion and penchant for getting behind the grill. But it took a lot more than culinary genius to make Sylvia's a success.

They weathered turbulent economies, devastating riots, and competition. They maintained and grew their restaurant, which today generates around $3.5 million in annual revenue and feeds millions of people around the globe every year.

"For years, we had been asked to open restaurants in Brooklyn, Baltimore, Chicago, Detroit, Los Angeles, Philadelphia, Washington, D.C., and various other cities," remembers Woods.

At the suggestion of a group of developers, Woods chose downtown Atlanta, across from City Hall and minutes from the Underground Entertainment Complex as her proving ground for the restaurant's first clone. To finance the $1.6 million expansion, she teamed up with investors from the J.P. Morgan Community Development Corp., and the plan was put into action in the latter part of 1995.

They had planned to open in June 1996, in time for the Summer Olympics, which were held in Atlanta that year. But another six months passed before the ribbon would be cut. On January 31, 1997, the grand opening of the 200-seat clone, with its high ceilings and Art Deco mezzanine, was held. The festivities were grand and the turnout was huge. But the food was awful. The Atlanta staff then closed the restaurant for the weekend to regroup, work out the kinks.

Over the next couple of years, the Woods family dealt with difficult management and production issues at the Atlanta site. They hired and fired several chefs, as well as other employees who could not perform well enough to uphold Sylvia's standards. They experienced problems with getting the managers to use the same meats, brand of ingredients, and equipment that were used at the Harlem location, all of which make a difference in taste. And although the menu at Sylvia's Atlanta started off being identical to that at Sylvia's Harlem, over time, Kenneth, Sylvia's son and director of operations, who travels to the restaurant every other month, found that it had to be changed slightly to cater more to the preferences of the Atlanta customers.

Admittedly, the family continues to experience some growing pains in operating the baby branch. But things are beginning to gel, and it shows in the revenue: $2.3 million in 1999. As for the plan to open other Sylvia's satellites: "We do want to put other restaurants in other areas. In fact, we would love to have one in Brooklyn and the other New York boroughs. But right now we want to focus on making sure that Atlanta stands strong so that we can continue to successfully move forward."

FRANK MERCADO-VALDES AFRICAN HERITAGE NETWORK

Frank Mercado-Valdes struck a deal with Universal Domestic Television (now Studios USA) to purchase the weekend syndication rights to its popular police drama, New York Undercover. It was the first time in the history of broadcasting that a minority-owned business had bought an off-network series for syndication.

The price was $8.5 million, a pretty hefty sum for a company barely five years old to fork over. But it was worth every penny. Mercado-Valdes is hoping to generate over $20 million in revenue as a result of the acquisition.

Not bad for the Bronx-born CEO who spent his early days of ownership with more lint than money in his pockets. But Mercado-Valdes, 38, has never been one to let circumstances, especially those involving a shortage of cash, stand in the way of his goals. When he decided to start African Heritage Network in 1993, he had little more than a $350-a-month rent-controlled apartment in Harlem. But he had an idea born from a lifelong passion.

It's a classic rags-to-riches tale. Perhaps one of the best you've never heard.

It's about a skinny black kid with Coke-bottle eyeglasses and straight hair like the late Nat King Cole's. The kid grows up in the 1960s. He plays stickball outside his South Bronx stoop while his mother sits gossiping with friends about old Cuba and old Puerto Rico. His father, a Puerto Rican, is absent, but his maternal grandparents, both Cuban, help to rear him.

Valdes had dreamed of becoming a lawyer, but a business idea tugs at his brain. He wants to put on a beauty pageant, so he pursues the idea and even persuades a well-known entrepreneur to help him see it through. But after just three years in operation, the business begins to fatter. He becomes homeless and is sleeping in a cardboard box in front of a New York City church. With death starting to look better than failure, the idea of committing suicide crosses his mind. But he quickly remembers his passion for entrepreneurship and soon regains his focus. "As a business owner, I believe that if you simply transform that which you really have a lot of passion about and like into a workable plan for business and capitalism, you can do well."

A movie enthusiast since childhood, Mercado-Valdes liked old black pictures. He had grown up with films like Carmen Jones and Porgy 'n Bess. As an adult, he realized how difficult it had become to find these and other black classics. He could not locate them in video stores or on television.

Mercado-Valdes perceived a great way to revive these types of movies: create a company that would license the films, package them in a movie-of-the-month format, and offer them to television stations across the country. He named his newest venture African Heritage Network and began doing his homework.

Getting access to studios was the toughest challenge. "Many studios didn't want to give up their product to an unknown company. In fact, many of them have a general policy that says that they don't give up their projects to subdistributors who compete with them. So the first challenge for me was to convince them that I was not competing with them. The second challenge was convincing them that I had the ability to pay for the rifles. I had to convince them to go ahead and let me license the movie and that I would pay them when the time came, before the movie aired." He developed a strategy for getting solid pictures: He chose classic titles that were 20 years old or older. Most likely, these films wouldn't be the first picks of his competitors because they weren't recent works.

Mercado-Valdes searched the client rosters of UniWorld and Burrell Communications Group Inc. for companies willing to buy or barter time during his movie package. He came up with a few pretty sizable accounts, including Procter & Gamble and Pro-Line Corp. By the end of the first year, AHN had reached 80 markets covering about 75% of the country and 88% of all black households that had television sets. The company generated $1 million in revenue, a nice sum for a business still finding its way. "I am constantly thinking of the next idea. If I have any skill or gift as an entrepreneur, it's that I never actually enjoy what's happening now. I'm always thinking about what could happen in the future. You never know when the idea which has been feeding you is still going to feed you three or four years down the road."

Mercado-Valdes estimates that company revenues will grow to $40 million in 2000.

ALBERT AND ODETTA MURRAY HILLSIDE INN

The Murrays experienced the challenges that are familiar to nearly every new entrepreneur: securing start-up capital, finding good employees, and attracting and retaining customers. But their difficulties in overcoming these obstacles were exacerbated by the times. The year was 1955. Nearly 100 years had passed since the Thirteenth Amendment to the U.S. Constitution abolished slavery, but segregation was still the operative law of the land.

Schoolrooms were segregated. In some states, blacks could ride only in the rear area of buses, had to sip water from "Colored Only" water fountains, and use separate public lavatories. Times were rough for the new entrepreneurs, and some local residents tried their best to discourage them. Still, the Murrays were determined to take their rightful place in the growing and very competitive hospitality industry.

Hillside Inn, the first and only black-owned resort in [Pennsylvania's] Poconos, is what the owners, Albert, an ex-judge, and Odetta Murray, known as Mama simply call their house by the side of the road. When the couple opened the hotel 45 years ago, it was just that. Back then, Hillside House had wooden floors, a screened-in porch, and hanging lights. There was no heat, air conditioning, or insulation, no individual bathrooms for guests to use, and no diversions, except a pond six miles away. But it was a start. Today, Hillside Inn, quietly tucked beneath a canopy of trees, is located off the main road running through the heart of the Blue Mountains. It is a beautifully landscaped 36-room hotel situated on 15 acres of a 109-acre estate. From their humble beginnings, the Murrays managed to build a solid business that today attracts 1,000 vacationers, conference attendees, church groups, and other guests each year, and grosses $900,000 in revenue annually.

"I had no problem competing because blacks couldn't go to the white-owned resorts at that time. It wasn't a question of competing with them, because if [blacks] showed up at one of the white lodges, they would call us, and before Mama could put the receiver on the hook, they would be in the door with them."

However, starting Hillside Inn was no easy task. The rejection and animosity the Murrays faced when trying to secure a $10,000 mortgage for the hotel are easy to describe. The answer was simply "No." And the response they received had far less to do with their being new and precarious entrepreneurs than it did with the color of their skin. They knew that, but they persevered. They had not come through years of plowing fields, walking nine miles to school every day, and serving in a World War to throw in the towel.

A few challenges still continue. Customer retention is at the top of the list.

The travel industry has topped $400 billion. African Americans spend more than $20 billion a year on their travel plans. Still, Hillside Inn's customers, of whom more than half are black, are dropping off. Ask where they are going and Albert, in an unapologetic tenor, will say, "To the white man's place.

"We have a lot of black people coming up here year-round, but there are still many of us who won't stay at Hillside. I felt very strongly that if 100 of us would come to the Poconos to vacation, 70 of those people would go to the white place even if my place was better.

"Once the white places opened up to blacks, minorities barely supported us anymore."

As a result of the civil rights movement, de jure segregation began to diminish in the late 1960s. Albert says that while blacks experienced greater gains than ever before, black businesses, including his own, also suffered some losses.

Albert decided to close the inn's doors in 1982.

By 1988, two years after retiring, the Murrays decided to regroup and rebuild. Albert began looking for funding to rebuild from the ground up. But even years after segregation became illegal, getting working capital proved to be tough.

"Four banks turned me down. They said, `We don't think you're going to make it.'"

Always the optimist, Albert was determined to prove them wrong. Hillside Inn was no gift. The Murrays have earned every shingle, every floor tile, every table, and every chair.

From Black Enterprise Against All Odds by Wendy Harris. Copyright [C] 2001 Wendy Harris. Published by arrangement with John Wilely & Sons Publishers. All rights reserved.