Minority Business Development


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

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