Creating a new business agenda.
All the while, Michael Clark, president and CEO of Atlantic-Pacific Inc., an engineering and manufacturing firm in Fremont, Calif., just leaned against a wall and stared passively. After the rally, Clark chatted with cohorts, then lobbied his case to several clusters of black entrepreneurs. "Our businesses are to small," Clark said. "We need to focus on getting ahead by reclassifying the `small' category and creating a `micro' category that caters to the needs of very small businesses."
The Small Business Administration generally defines a small business as having less than 500 employees or less than $5 million in sales. But in many industries, such as retail, firms can qualify as "small" with $21 million in sales. According to the latest U.S. Census Bureau figures of some 424,165 black-owned businesses, only 189 gave more than 100 employees. Just 328 have more than 50 employees. Total revenues for black firms is $19.8 billion or, on average, $46,592 annually. Clearly, most black-owned firms fall short of the SBA's definition of small.
Just how the SBA defines small has become a sore spot with many entrepreneurs, regardless of race. Proponents of the micro business movement say that very small firms could be better targeted and therefore more precisely serviced by the SBA. Such a distinct category would help provide fairer competition among other very small firms in the areas of loans, financial and technical assistance programs, innovative research assistance programs and government procurement contracts. The SBA's fundamental purpose is to promote fair competition among small firms.
But not every small business owner supports the micro movement. "We have to get off our feet and stop begging for equal opportunity," says Roosevelt Roby, president of the Santa Monica, Calif.-based Reese Network, a 66,000-member association of home-based businesses." We just need to lick our wounds, move on and stop asking for special treatment."
Bennie Thayer, president and CEO of the National Association for the Self-Employed (NASE), a 320,000-member association in Washington, also disagrees with the micro movement. "Congress talks a big game, but [African Americans] are the last ones on the totem pole," says Thayer. "A micro category would just further separate us and allow Congress to look further beyond our needs."
LEVELING THE PLAYING FIELD
Whatever the opinions of black business leaders on the micro movement, they all agree that the black business community is walking on broken glass. In general, white male business owners are irked by affirmative action and assistance programs targeted at minorities, and they're marshaling their voting blocs, pushing for an end to 8(a) set-asides.
Now on the chopping block are Specialized Small Business Investment Companies, which are being scrutinized for allegedly granting loans to minority entities that were destined to fail. (See "Under Fire," Enterprise, November 1995.)
Moreover, the Minority Business Development Agency remains under constant threat of being wiped out with a mere presidential signature. The agency, which came into existence under President Nixon's executive order, helps to develop minority firms.
Clark and other business owners have been trying to persuade SBA Director Philip Lader to take the Regulatory Flexibility Act and reclassify the "small" definition, adding a "micro" category, which would encompass firms with less than $10 million in revenues and 50 employees. This way, a two-employee firm with $100,000 in sales wouldn't be forced to compete for procurement contracts with a 200-employee firm reporting $20 million in sales.
Lamenting about a routine $20,000 procurement contract for plastic examination gloves, Trent Harbin, president of Assured Medical Supply in Detroit, is lobbying for the micro category. It seems that many hospitals hand over small contracts to major medical supply companies, because smaller businesses can't beat the bulk-buying capabilities of the multimillion dollar firms. "[The larger companies] have more buying power. They should not even be on the same screen," says the 43-year-old entrepreneur.
After 20 years of selling medical supplies for three major manufacturers, Harbin opened his company in 1993. He recorded a respectable $200,000 in sales his first year in business. "I had to hustle against competitors [twice my size] to get clients," says Harbin, who knows all the major players personally. "A micro status would have helped reduce unfair competition." Harbin predicts $1.7 million in sales for this year.
Needless to say, minority entrepreneurs who support the micro movement aren't merely bellyaching about the paltry 5% to 10% set-asides pecked over by African American, Latino, Asian, Native American and white women business owners.
Atlantic-Pacific's Michael Clark is on various councils that work closely with SBA directors, congressional representatives and President Clinton himself. Clark's legion represents several hundred thousand business owners. The group is not formally named since the 2,000 regional delegates who attended the White House Conference on Small Business were representing their respective states, and in turn, their constituents.
Reclassification of what constitutes a small business finished 80th among the 200 major recommendations presented by the delegation. Taxes, burdensome regulatory paperwork, international trade and health care issues snagged the majority of the top slots.
BE CAREFUL WHAT YOU ASK FOR
Although NASE's Bennie Thayer isn't backing the micro status, he contends that 99% of all businesses in America are categorized as "small." Unwittingly, NASE, whose membership is made up of mostly micro business owners, posts a strong case for the micro business status. Thayer, however, contends that "if affirmative action is dismantled, none of us will be able to compete. So it won't matter what we're called."
Over the last few months, there's been a lot of talk--and even more whispering--but entrepreneurs are still not sure how to hedge their bets. Everyone knows that something must be done to create a balance and ensure that African Americans continue to compete in the ever-evolving marketplace. But there's no widespread agreement on how this should be done.
Perhaps Babette Peyton best represents the opposing side in the black business community, the side that's tired of begging or battling for its just due. "Of course we need more government attention. Obviously, we need access to loans, but I don't want another stigma to get it," says the president and CEO of Peyton Elevator Co., a $500,000 elevator and escalator design, build and repair firm based in Chicago.
Although her firm's sales don't even top $1 million, Peyton still shies away from the micro status concept. She's quick to note that there are companies serving as minority fronts that steal contracts from "real, legitimate [black-owned] small businesses."
Despite citing case upon case of white males boasting their "ownership" of minority companies and getting free rides, Peyton still can't support a micro business standpoint. Regardless of how many categories are created to aid minorities, she says, "The good ole boys will seduce some minority front companies and keep getting over."
The jury is still out on whether the SBA or the Clinton administration will even consider the idea of redefining small businesses. At least when it comes to lending, the SBA's micro loan programs (loans for less than $50,000) do recognize very small enterprises.
Stumped for the right solution. Peyton reflects back upon her wallflower days when she leaned against the Hilton's hallowed walls as a delegate at the 1985 White House Conference on Small Business.
The first inklings of forming a smaller business category were discussed then as a preventive measure for African Americans to be less dependent on race-conscious business aid.
"The idea is always popular, at first," says Peyton. "However, when it comes right down to it, other minority businesses may think like I do: I know I'm a micro business--I just don't want to be called one."
RELATED ARTICLE: MINORITY CAUCUS MANDATES
At the White House Conference on Small Business, the Minority Delegates' Caucus fought to have 16 recommendations included within the final 60 Recommendations that were submitted to Congress in September. Here's a quick scan of what they want Congress to do.
* Increase the SBA loan guarantee programs from their current level of $750,000 to $1,000,000.
* Increase the number of non-bank lenders eligible to process SBA loans.
* Continue and enhance the SBA micro loan program.
* Enforce the Community Reinvestment Act with special efforts placed on eliminating redlining.
* Implement "one-stop shopping" access to all government information and resources.
* Create a pilot program that leverages private-sector resources to assist small business members with international trade.
* Create a Small Business Relief Fund to economically assist small businesses that are displaced by the establishment of a big business in their localities. The big business must contribute an annual fee for the fund.
* Design a national certification organization to establish a database of certified small business, small disadvantaged business, and small women-owned business. Initially funded by Congress, it will serve as a one-stop clearinghouse for all federal agencies by disseminating information in conjunction with each agency's outreach efforts.
* Support the Minority Small Business Capital Ownership and Development Program, SBA 8(a), and enact legislation to require federal agencies to reach their 8(a) goals.
* Establish procedures for immediate relief for small businesses in the event of catastrophic circumstances, including, but not limited to, the total dissolving of government agencies.
* Require that at least 35% of all government procurement monies (35% of prime and 35% of subcontracts) be awarded to small firms so that at least 10% of prime and 10% of subcontract monies be awarded to minority businesses.
* For more information or a copy of the White House Conference on Small Business Recommendations, write to the Small Business Administration, Office of Information, Advocacy Department, Room 7800, Washington, DC 20416.