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Minority entrepreneurs savor business successes.

Seizing the American dream of being your own boss, a growing number of minorities are gaining toeholds in Alaska business.

Alaskans typically think of themselves as tolerant and generous people. They can point with pride to any number of progressive public policies enacted over the years to address injustice or inequality.

But interviews with minority-owned business operators and with spokespersons for the agencies that are charged with helping to level the economic playing field indicate that many minority entrepreneurs are still playing a vicious game of catch-up with the business mainstream. These spokespeople say that in some business categories, public agencies in Alaska are still locking out minority contractors. Usually, the racial bias is unintended or very subtle; in some cases, it is cleverly cloaked, making enforcement difficult.

Johnny Gibbons, an African-American attorney practicing in Anchorage, says overt racism is a thing of the past. "When you do encounter racism, it's very subtle. People learn to operate within the system; they learn new tricks to meet old ends."

He notes that the state's economic downturn in the latter half of the 1980s increased the pressure on minority firms. "The crash tended to make people more sensitive to racism, overt and subtle. There was not as much free-flowing money, so there had to be some re-allocation of resources. Those inside the network would have first access to those resources," Gibbons explains.

Getting into business is a strenuous process for anyone, and for minority entrepreneurs, it can be formidable, says Mary Spellens, project manager for the Minority Business Development Center of Alaska in Anchorage. Operated by the Community Enterprise Development Corp., the center is funded by the U.S. Department of Commerce's Minority Business Development Agency in Washington, D.C.

Spellens adds, "I think that the barriers to minority entrepreneurship are high, and killing. I've seen some bad stuff go down since I've been here. There's not an atmosphere of out-and-out bigotry, but people that are minorities have to be better than everybody else to compensate for those kinds of barriers, and we don't give them a whole lot of help."

Ample and reliable anecdotal evidence exists to support such statements. But policy-making and enforcement are hampered by a lack of statistical information about how minority firms are faring, both in Alaska and in the Lower 48. Accounts related by minority entrepreneurs suggest that discrimination occurs regularly in both the public and private sectors.

Bearing Witness. Mayfield Evans asked his longtime bank for a loan to expand his successful E & S Diversified Services Inc. But the bank turned him down. Though impossible to prove, Evans is certain that his business was stereotyped as a high-risk minority-owned enterprise.

"With the cash flow I had, there was no reason why I shouldn't have gotten a line of credit. I'm still here because of something I've done right," says Evans of his 12-year-old company. E & S Diversified, based in Anchorage, has 200 employees and contracts throughout Alaska and the Lower 48 for janitorial, warehousing and food-preparation services.

Raj Bhargava's firm has designed large and complex projects all over the state for nearly 20 years and has prospered despite economic doldrums. Yet the Indian-born engineer still encounters resistance from a publicworks bureaucracy unfriendly to minority-owned enterprises.

Bhargava says the high cost of bidding and low award rate he sometimes faces would cause serious problems for less-experienced or less-well-managed firms. "Others have not reached the same level of opportunity. They need encouragement, because of cultural handicaps, not necessarily because of professional handicaps," explains Bhargava.

Dominic Lee, Korean owner of an Anchorage construction company, is president of the Alaska Society of Minority Professionals, an organization formed to combat discrimination. He and others say the Alaska Department of Transportation and Public Facilities is a particular and long-standing offender in minority contracting.

"They never gave us much work for the last 10 years, they just pay us lip service. The only thing we can do is file a lawsuit, but I don't have the money to file a lawsuit," says Lee.

Charting the Course. Statistic-keepers estimate that roughly 1 million minority-owned businesses are operating in the United States and that the number is growing. No comparable estimate is available for Alaska.

According to the U.S. Bureau of Census, between 1982 and 1987, minority entrepreneurs started businesses at twice the rate of white men. The number of minority-owned businesses grew by 64 percent.

Largely as a result of immigration, business start-ups among certain groups jumped dramatically, particularly Asian (89 percent increase) and Hispanic (80 percent increase) minorities. By contrast, the number of enterprises launched by African-Americans rose 38 percent, while Native-owned business starts leaped 58 percent.

Observers warn that a proliferation of new businesses should not be mistaken for widespread prosperity. Data show that businesses owned and operated by white males are generating substantially more revenues than are firms owned by women or ethnic minorities.

Small businesses owned by white men averaged $189,000 in receipts in 1987, more than double the revenues for most minority-owned businesses. Average annual receipts range from $47,000 for male-owned American Indian firms to $107,000 for Asian/Pacific Islander-owned businesses. For women-owned companies, average annual receipts range from $32,000 for American Indian firms to $70,000 for enterprises owned by white women.

The variance in revenues is attributable, in part, to the dominance of white male business owners in manufacturing and wholesale sectors. Receipts for those fields tend to be higher than in the service and retail sectors, in which minority-owned enterprises are more prevalent. Because white, male-owned firms enjoy greater access to financing, they can more easily enter capital-intensive ventures. Recent research indicates that minority-owned firms are venturing more often into the areas of manufacturing, wholesale, construction and finance.

Louis Overstreet, an African-American engineer who has served for the last six years as director of facilities for the Anchorage School District, points out that no agency in Alaska is charged with tracking minority business trends. He adds that figures compiled on minority business trends in Alaska are heavily distorted by the number and disproportionate strength of Native corporations, which effectively obscure the statistical picture of African-American, Hispanic and Asian firms.
Ownership Men Women
White $189,000 $70,000
Asian/Pacific Islander $107,000 $64,000
Hispanic $66,000 $38,000
African-American $50,000 $41,000
American Indian/Alaska Native $47,000 $32,000
Source: U.S. Bureau of the Census

49th State Accounts. According to Overstreet, minority-owned firms in Alaska have traditionally concentrated in "dirt work," such as excavating and paving, janitorial services and painting. He says the opportunities afforded by substantial state and federal contract work have been offset by the inability of minority firms to muster the resources to bid on large projects and by the failure of state agencies to set or follow minority contracting goals.

The Minority Business Development Center's Spellens agrees that the high profile of Native corporations tends to distort the picture of minority enterprise overall, but notes that many of the center's Native clients are individual- or family-owned businesses making important contributions to village economies. She adds that entrepreneurship in Alaska's Hispanic and Asian communities appears to be increasing.

The growth of Asian businesses reflects immigration and cultural traditions that value business ownership, Spellens says. "A lot of Asians are coming here. They're able to help each other. It's a critical mass sort of thing. If I get one of them as a client, I'll get several others.

"It's my feeling, too, that Asians feel pretty confident that they can do well here. They see a lot of role models here. They see business as their way."

For many minority firms in Alaska, success may depend in part on the choice of business. Contractor Lee says three consecutive state administrations in Alaska have been reluctant to even consider minority contracting goals for public projects.

"We're not asking for a set-aside, we're just asking for a goal. Even 1 percent is better than zero. The way it's set up, it's 0 percent," Lee charges.

The construction company owner blames state contracting practices for the closure of many minority firms. In recent years, membership in the Alaska Society of Minority Professionals has dropped from about 40 firms to less than 10, because many companies "don't have work -- a lot of them have left the state," he says.

E & S Diversified's Evans agrees: "As a whole, I don't think they're doing very well here. A lot of them are going by the wayside, the staying power is not there."

Lee credits the Anchorage School District and U.S. Army Corps of Engineers with at least trying to respond to minority contracting concerns. But while the school district has established minority contracting goals, an internal analysis conducted last year showed the district consistently fails to meet those goals.

Bhargava concurs that minority firms are not doing well in Alaska. He says that record contrasts with experiences of other states, where larger minority populations exert more political pressure to set minority contracting goals and enforce anti-discrimination rules.

Overcoming Obstructions. Not all of the barriers to economic progress for Alaskan minority business enterprises arise directly from racial prejudice, although discrimination tends to exacerbate other problems. For example, franchises provide an important opportunity for minority enterprise in the Lower 48, but Alaska markets are too small to support many franchise operations.

Often minority entrepreneurs experience language difficulties or other challenges, which in some instances are a legacy of discrimination in education or other areas. Such hindrances can make writing a business plan or applying for a loan difficult.

Spellens says she has seen many instances of bureaucrats and regulators tying minority businesses in knots in ways that non-minority firms would never tolerate. "Public-sector bigotry can be bad, say, in regulatory interpretation," she explains. "A minority client will not fight that kind of a thing, perhaps until it's too late. Bureaucrats will kill you; they're prejudiced against less-able people, regardless of race. They don't care if a business fails or not, they care about keeping the file tidy."

Perhaps the most crucial and sensitive area of discrimination is finances. Because of past discrimination in America, minority entrepreneurs have tended to have less capital of their own with which to start a business. They've also been treated less than equally when seeking funds for new businesses or expansions.

Another challenge to minority-owned firms has been language and cultural miscommunication. Spellens recalls an instance in which several customers of one of her clients chronically failed to pay their bills. "We're talking about four to six months to collect, nobody can afford that. Any white Alaskan could have gotten that paid, but she had some language barriers," Spellens says.

Finally, minority-owned enterprises often feel pressed to overcompensate to succeed. They seek to generate business and to muscle into profitability by striving to achieve higher performance standards or by becoming politically aggressive.

Building Business. Experts say it's a misconception that being awarded bid points strictly for being a minority-owned enterprise means a free ride for minority contractors. Rather, awarding points for minority ownership is a device intended to level the playing field in an effort to undo longstanding discriminatory contracting practices.

Bhargava says he has never been awarded a contract in which minority points made the competitive difference. "In practice it just isn't enough. That little advantage is just not enough to get a job. You have to do well in other categories or you'll be at the bottom of the barrel."

Another tool for combating contracting bias, the federal Section 8(a) program operated by the U.S. Small Business Administration, provides federal contracts and other assistance to small companies owned by socially and economically disadvantaged persons. In effect, the program allows SBA to act as a prime contractor to other federal agencies and to negotiate subcontracts with minority firms.

While the contracts are awarded on a non-competitive basis, SBA uses stringent criteria for program eligibility. Participants enter the program for five years and are expected during and after that period to generate additional, non-8(a) work.

"Most of our clients have been in business a long time, usually more than two years. So they've survived, but have had trouble growing," says SBA contract specialist Karen Forsland. Many feel they've experienced discrimination, she adds.

Rudy Sandoval, owner of Arctic Commercial Laundry, says his first couple of years in the business of servicing equipment for dry cleaning and for commercial and industrial laundry were hard because of the regulatory paperwork and other details. He knows machines inside and out, but running a business was new. He believes that with technical assistance from SBA, his business is set to grow dramatically this year.

Sandoval feels his experience has taught him a valuable lesson that might help other minority entrepreneurs. "We've had some that have done real good. But the ones that have done well have started small," he says.

"It seems like the ones that start with a lot of money tend not to last very long. A lot of them don't want to go out and hustle the work. There seems to be an expectation that because they're a minority enterprise that they're entitled to these things. It'll help a little, but it isn't going to get everything done for you."

In addition to traditional forms of government assistance, some minority entrepreneurs are taking matters more aggressively into their own hands. Evans sits on the board of the African American Business Council, a statewide group newly formed to provide an effective network for minority businesses.

"There's a lot of need out there for struggling businesses. Coming together, we can give them advice and be a source of information," says Evans. "We want to give back to the community and to the young people of the state."

Looking Ahead. Those who monitor minority-owned enterprises in Alaska acknowledge it's difficult to discuss the issue from strictly a business perspective. Nor is there any way to avoid dealing with the uncomfortable, elusive issue of racism. "It goes back to deep prejudices that are out there," says SBA's Forsland.

Overstreet agrees and criticizes those who accuse minority firms of draining public coffers, while relying heavily on public construction spending for their own success. Overstreet says the hypocrisy is compounded when large prime contractors bid on government jobs, negotiate favorable deals with hungry minority subcontractors and pocket the savings.

"If they say minority, they mean unqualified. But they're making astronomical markups on the performance of minority firms," Overstreet charges. He adds that the contractors realize a bonus payment for hiring minority-owned firms.

"We just haven't done a very effective job of showing the economic benefits of minority-enterprise-assistance programs. People who are opposed have done a much better job of showing them as a social giveaway," says Overstreet.

The economic contributions of minority-owned enterprises are substantial. Hard work and motivation are cited as factors in the high productivity and savvy management of scarce resources that typify the successful or surviving firms. Increasingly, minority-owned firms are seen as important links in expanding trade with Asian and Latin American countries.

Minority-owned firms (not including those owned by white women) employ more than a half million people, and their successes represent net gains for the economy as a whole. Their failures, like those of non-minority firms, drain the country's economic vitality.

Attorney Gibbons agrees that economic health is of practical concern to the country, but argues it is equally important not to lose sight of justice and equality when the subject of racial discrimination in business is examined. "It truly is a difficult, difficult situation, intellectually and practically," he says. "But one thing we must do is keep trying."

David & Juil Kim Kim's General Maintenance Contractors

When he first immigrated from Korea, Juil Kim worked as a maintenance man for an Anchorage apartment complex. But he came to this country with a more ambitious vision, and two years later, in 1983, established Kim's General Maintenance Contractors Inc. The company specializes in commercial and residential renovations and repairs, landscaping, sheetrocking, painting, plumbing, interior/exterior remodeling and installing gates and fencing.

For several years Kim operated his own company in Korea, but found entrepreneurial options for contractors in the small nation severely limited. America offers many more opportunities, he says.

Despite the larger market for Kim's skills, turning opportunities into a livelihood has taken a lot of hard work, says his son David Kim. The younger Kim is a recent graduate of the University of Wisconsin in Madison and now serves as general manager of Kim's General Maintenance. He's in charge of marketing and bid preparation.

Kim says of his father, "He literally had to sacrifice his body to put bread on the table." The first hurdle the entrepreneur had to jump was learning about American tools, measurements, materials and other technical details. Despite the challenges, those early days had positive aspects, too. For one, capital was easier to obtain then.

"My company is a small company, not much money. But getting a loan from a bank, that's the big problem. Seven years ago, it was easy to get a loan. Now it's real hard," says the elder Kim.

Later, during Alaska's 1980s recession, Kim's General Maintenance fared well contracting for repairs, renovations and winterizations for repossessed properties. Over the last five years, the company has won a number of contracts at local military bases.

"I've done a lot for real estate agents, banks and mortgage companies. It's really slowed down this year," adds Juil Kim.

David Kim says diminished capital and work have made Kim's General Maintenance's markets more competitive, and the company now faces a number of new challenges. He notes there's much less room for error in all aspects of the company's operations.

"Sometimes I can't sleep at night because I worry if I made a mistake on a bid," David Kim says. He adds that along with the increased competition has come the feeling that some work has been lost because the company has been stereotyped as an Asian-owned firm.

Kim suspects the tendency to overlook the firm's credentials and work history is linked to the economic malaise throughout the country. "At times like this, when foreigners play such an important role in our economy, there's hostility because people are afraid," he says.

Juil Kim notes that another challenge comes from a growing trend for government agencies to seek administrative efficiencies by consolidating several projects into larger bids. "Small companies can't bid that kind of job," he says.

David Kim notes his experience in the family enterprise has taught him the value of marketing, and he's thinking of pursuing a master's degree in the subject. "I always thought if you did good, people would call you up. But it doesn't work that way. You have to let yourself be known," he adds.

A dreamer like his father, Kim sees a bright future for Kim's General Maintenance: "There are a lot of opportunities. I want this to be one of the biggest contractors in town. I hope to diversify this business."
COPYRIGHT 1992 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article on Kim's General Maintenance Contractors Inc.
Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Date:Jun 1, 1992
Previous Article:Heed new rules for hazardous materials shipping.
Next Article:Mayfield Evans: E & S Diversified Services.

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