[Posted Dec. 19, 2007]

Landscape Changing For America’s Black-Owned Businesses

By Rosaland Tyler
Associate Editor
New Journal and Guide

      
     Gerry McCants could focus on how he started Black Pages USA 17 years ago; however, he prefers to observe how he has seen the landscape change for black-owned businesses.
     True, McCants could relax to savor being a first. He started Black Pages USA, which currently publishes 12 regional business directories in five states: South Carolina, North Carolina, Georgia, Virginia and Florida. But he says black businesses are changing too fast. Whether it’s the sale of Black Entertainment Television to Viacom in 2000 for $3 billion, or Essence magazine’s recent sale to Time Inc. for an undisclosed sum, the day of 100 percent-owned anything is changing, according to McCants and other experts.
      “The whole marketplace presents challenges for black-owned companies,” McCants said. “The bottom line is if you want to glamorize black businesses you can do that; but if you want to talk about the facts we’re still challenged,” McCants said, during a recent interview from his Greensboro office.
The challenging facts for black businesses add up rather quickly. For example, many new black businesses do not even have buildings. They are only web sites. But online sales totaled about $84.5 billion in 2005, according to US Department of Commerce records. So this explains why there are new black search engines such as www.blackrefer.com.
     Here’s another fact. There has been a 2.6 percent increase in Virginia’s Asian-American population (93,000 statewide). Has it created more Tidewater companies—especially in black neighborhoods—where numerous companies are competing for the black dollar?
     The fact of the matter is that the total buying power for African Americans nationwide amounted to about $860 billion, according to the National Black Trade Association. In Virginia, that figure equals about $36 billion. While the overall population increased in the Hampton Roads area by about 40,000, according to census data, “about one in three U. S. residents is a minority,” Census Director Louis Kincannon said, in a May 17 news release.
     In other words, many companies are trying to attract the growing African-American population, nationwide, and in Hampton Roads.
    “But, it’s not a reciprocal thing,” said New Journal & Guide newspaper publisher Brenda H. Andrews, who became the 107-year-old paper’s owner in 1991. “We patronize the Asians, Hispanics, and others but how many do you see going into a black business?” asked Andrews who has worked in the community and at the African American newspaper for over two decades.

    And, one more fact. More blacks are opening businesses as they either retire, or begin their career. “New entrepreneurs are willing to take risks that 10 years ago, 20 years ago, African Americans were not willing to take,” said Barbara B. Lang, the chief executive of the District of Columbia Chamber of Commerce. “It’s an absolute change in attitude, and not having to feel that the corporate structure is the only way—or the  safe way.”
     The bad news is that “the marketplace is competitive and even more so now,” McCants said. But, advertise. Put your product out there. Seek new training.
While the number of black-owned companies rose by 26 percent from 1997-1992, businesses overall grew by only 7 percent.
Further, minority-focused firms are slightly outperforming others in the venture capital industry as a whole, said Timothy Bathes, a Wayne State University economics professor who has studied black entrepreneurship for more than three decades.

     In other words, the challenge is for the black-owned business to find its place in the shifting landscape, McCants said. “You may want to go out on your own. But the difference between a successful and unsuccessful business is having access to government contracts,” he said pointing to a study he once read.
    A business that can access government contracts increases its chance of succeeding, McCants explained.

    This is happening as more black-owned businesses become increasingly diverse, according to a recent Kauffman Foundation study which examined why some black-owned businesses succeed and others fail. The link seems to be profitability and education. The more education business owners have, according to the study, the more likely they are to gain access to capital, long an obstacle to black businesses.
So population growth explains the increased number of minority venture capital firms these days. But, black-owned firms are still more likely to be denied a loan than white firms, according to a 1993-98 study by the National Surveys of Small Business Finances. Moreover, black businesses are often charged higher interest rates for those loans that are approved.
      The confusing piece of the puzzle is what’s called the race-wealth gap. This means the average black family has only a dime of wealth for every dollar of wealth the average white family has.
     But more blacks hold jobs that could be called middle class. That figure rose from about 750,000 in the mid 1960s, to 7.5 million, according to census data.
     “That’s a ten-fold increase,” said sociologists Dr. Thomas Shapiro, the author of “The Hidden Cost of Being African American.”
     “That increase takes part through education, through hard-earned degrees, through advancement on the job, and through talents and skills,” he said.
      Translated, the fact of the matter is that while most black families have only a dime of wealth, compared to a dollar of wealth for most white families—companies are going after these dimes.
For example, travel through an African American neighborhood. Whether it’s the Asian-owned hair-care store, and gas station or convenience store which are often operated by people from overseas—or even well-known chains-—the bottom line is that many different stores do business in black neighborhoods.
     “I think the marketplace is shifting,” McCants said. “What we have to do is be a smart consumer and decide who we are going to buy from and who will benefit from our purchase,” he said. “We have to become better consumers. We have to become better educated.”
      Becoming politically connected is also a good idea, Andrews added. “That’s how Atlanta became a mecca. People were responsive to the need to have more business development there,” she said.
“But just electing people into positions of power does not always translate into higher economic development,” Andrews said. “It’s not enough. Too often blacks get in a position of power but do not lead because their allegiance is to be equal and fair to the whole community.”
      If the color line was the greatest problem in the 20th century, as William E. B. Du Bois noted, then shifting demographics are the new problem. There is more competition.
     “There will always be black businesses in America, as in the past,” said Dr. Juliet E. K. Walker, the founder and director of the Center for the Study of Black Business, History, Entrepreneurship and Technology, at the University of Texas at Austin.
     “But black businesses do not operate in a vacuum, separate and apart from other economic, political and societal institutions and policies that distinguish American life and thought.
     “Blacks can successfully challenge future changes and trends,” Walker said. “It is not just access to venture capital for black business development that is needed, but also equitable access to education, adequate health care and adequate housing.”
      To learn more about how to buy a franchise go to Black Enterprise’s website (be.franchisesolutions.com). Franchise prices are as low as $1800 for a company called The Back Rubber, to $250,000 for an Ace Hardware Corp. franchise.
  

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