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Minority business looks to Clinton: can the new administration create a policy to meet the myriad needs of the black business community?

New presidents provide optimism, and many business owners hope that the Clinton Administration will soon establish more effective minority business development policies. But the diversity of this minority business community may ensure that one policy will not fit all.

Developing a comprehensive prescription is complicated by how you define a "small" or "disadvantaged" business. The usual definition of small business--a company with fewer than 500 employees--is too broad to cover black entrepreneurs' myriad needs. But defining groups by such measures as personal income or education excludes entrepreneurs who can make a difference in the communnity.

At one end of the minority business spectrum are the BLACK ENTERPRISE INDUSTRIAL/SERVICE companies. The 1992 list (see BE, June 1993) highlighted the growing sophistication of these companies as they identified such new markets as health care and computer systems service, where consumer and business demand are strong, and exploited them to reach a new plateau of profitability.

At the scale's other end are small, mostly service-oriented firms as represented in the 1987 U.S. Census Bureau Survey of Minority-Owned Business Enterprises, a statistical portrait of minority-owned companies compiled every five years. Unfortunately, policies leading to the creation of more firms like those in the census profile are also unlikely to launch these entrepreneurs onto the BE 100s' ranks. In fact, one observer, economics professor Timothy Bates of New York City's New School for Social Research, argues that the federal government's policies frequently show entrepreneurs the worst of both worlds. First, they don't assist viable minority firms deemed "too big" and "too successful." And secondly, they often focus on firms with steady revenues but little growth potential. This paradox means that both the company's personnel roster and employment and tax contributions remain low.

Is there a solution? In his book, Banking on Black Enterprise: The Potential of Emerging Firms for Revitalizing Urban Economics, Bates suggests the government assist the most viable firms by providing markets and access to financing. Keep in mind, of course, that any state or local government procurement program aiding minority business doing public business must be able to clear hurdles raised by the Supreme Court's Croson set-aside ruling.

All that understood, an ambitious entrepreneur's major problem is still inadequate capital. While minority firms have always been undercapitalized, the problem is more serious for those operating in high-tech or manufacturing industries. Substantial evidence supports the contention that minority entrepreneurs are still discriminated against when they seek capital. Consquently, vigorous enforcement of existing laws and the development of alternative financing ideas must be part of our policy agenda.

Two basic types of business policies are needed to reach small and large businesses. One set should be geared toward the well-educated, experienced individual, while the other should focus on smaller, less-experienced companies. Dual public initiativers, which do more than make millionaires of a few African-Americans, should be created. One important goal, according to Bates, is to boost minority employment. His book shows that minority firms are much more likely to hire minority workers than are nonminority firms (see chart). Such sound business development policies could help to revive moribund inner-city economies and produce more income for poor communities.
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Author:Simms, Margaret C.
Publication:Black Enterprise
Date:Sep 1, 1993
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