Minority Business Development

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  • - Identification of best practices for MBE development - Identify critical components of MBE dev. initiatives

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  • 1. Minority Business Development in Cleveland Prepared for the Cleveland Foundation August 29, 2005 john a. powell Executive Director Kirwan Institute for the Study of Race & Ethnicity, Ohio State University http://www.kirwaninstitute.org Roger Clay Jr. President National Economic Development & Law Center http://www.nedlc.org
  • 2. Purpose of this Study
    • Identify strategies for The Cleveland Foundation to improve its minority business development approach
  • 3. Methodology
      • Analysis of national MBE trends
      • Identify best practices
      • Analysis of minority businesses in Cleveland & Cuyahoga County
      • Interviews with stakeholders
  • 4. Presentation Overview
    • MBE development matters
    • Economic and geographic analysis
    • What is and what isn’t working in Cleveland?
    • Community leader perceptions
    • Best Practices among Intermediaries
    • Emerging Opportunities
    • Conclusion
  • 5. Why Does MBE Development Matter?
    • MBEs will become an increasingly important factor in local, regional and national economies
    • Minority businesses tend to hire non-white employees at a higher rate than do majority businesses
  • 6. National MBE Trends
    • The number of minority owned businesses is growing faster than the rate for all U.S. firms
    • 17% of all companies in the U.S. were owned by minorities in 2002
  • 7. Yet, A Decline in National Market Share for MBE’s 92-02
  • 8. 1997-2002 – Sales up nationally for African-American- and Hispanic-owned businesses, but down in Ohio
  • 9. Description of Cleveland’s MBEs
    • Sales and receipts of African American-owned businesses grew by 284% from 1992-1997.
    • Larger MBE's are doing relatively well compared to other metropolitan regions
    • Most Hispanic or Latino MBEs are non-certified and disengaged from the regional economy
  • 10. Firm Expansion Rate Number of Years Number of Employees Average Credit Rating
  • 11. Industry Concentration
  • 12. Size by Industry
    • LARGE:
      • Wholesale Trade
      • Manufacturing
    • SMALL-to-MID-sized:
      • Retail Trade
      • Financial Services
      • Construction
    • Micro OR SMALL-to-MID-sized:
      • Professional Services
    • Growth: Financial Services were the only sector where the proportion of MBEs over $2.5 million in sales grew from 2000 to 2004
  • 13. Credit Rating by Industry
  • 14. Geographic Distribution
    • Our analysis looked at the geographic location of MBE’s and how they were located in respect to other regional trends
  • 15. Where are MBEs located?
  • 16. MBEs by Sales Volume
  • 17. MBEs by Change in Sales Volume 2001-2005
  • 18. What is Working in Cleveland?
    • Targeted technical assistance, business networking, mentoring, and supplier diversification efforts
    • Mainstream lending institutions compete for MBE lending
    • Cleveland has best practice community development financial institutions and community development venture capital funds
    • Good support from universities and colleges
  • 19. What is not working?
    • Exclusivity
    • Competition
    • Informal business networking
    • Need for more accountability and measurable outcomes
    • Need for programs to monitor and take advantage of public procurement programs
  • 20. Community Leader Perceptions
    • Structural challenges to MBE development
      • Limited social capital
      • Racism and weak political environment
      • Economics
      • Public education
    • Institutional based challenges
      • Difficulty in accessing capital
      • Need for more cooperation and specialization
    • Individual based challenges
      • Limited skill sets; talent; and strategic vision
      • Tendency toward life-style businesses
  • 21. Best Practice for foundations funding MBE development – a comprehensive approach
    • Targeted Business Development Assistance
    • Well-planned Business Networking
    • Research, Advocacy & Public Policy formulation
    • Community development financing
    • Promotion of regional climate to support MBEs
  • 22. Emerging Opportunities
    • Strategic partnerships
    • National trend toward supplier diversity
    • Strong and emerging sectors locally
    • New public sector affirmative procurement programs – especially Cuyahoga County
  • 23. More Emerging Opportunities
    • Ohio’s new Minority Business Venture Capital Tax Credit Program
    • Large land bank of the City of Cleveland
    • New workforce development strategies
    • Local market gaps for small-businesses
    • Retail and Services in the growing Latino community
  • 24. Recommendations
    • The Foundation should serve as a funder and convener of intermediaries working to promote and develop MBE
    • Support for MBE intermediaries serving various parts of Cuyahoga County, in addition to Cleveland
    • Provide multi-year grants
  • 25. Recommendations
    • Fund intermediaries that:
      • Articulate measurable goals and outcomes
      • Coordinate and cooperate with other intermediaries funded by the Foundation
      • Partner with diverse stakeholders to support minority businesses
    • Develop a tracking system to monitor the health of minority businesses
  • 26. Recommendation
    • Support the following:
      • A clearinghouse intermediary
      • Technical assistance and professional development grants to intermediaries
      • Research and evaluation to support the continued refinement of MBE services
      • Public policy formulation and advocacy
  • 27. Recommendations
    • Support for multi-organizational and regional strategies that target specific industry sectors
    • Support for micro-enterprise and small-business development strategies that target industries with the most potential to grow to the next level
  • 28. Conclusion
    • The Cleveland Foundation has a strategic opportunity to take its MBE promotion and development to the next level, with the combination of the intermediaries in place and many exciting, emerging opportunities.