Minority Businesses Optimistic During Downturn
MICHEL MARTIN, host:
Political leaders of both major parties often feel they can score political points by touting their support for small businesses. And most Americans probably have at least some understanding of the role small businesses play in creating jobs and keeping the economy humming. But what has often been overlooked is the role played by women and people of color in the most recent economic boom.
The Census Bureau recently released a report that found that minority-owned businesses in the U.S. grew by 46 percent between 2002 and 2007. During that time, the number of women-owned businesses increased more than 20 percent. Overall, U.S. businesses grew 18 percent. So a key question in any recovery is how well these businesses are surviving the downturn and whether, despite the recession, members of these groups are still willing and able to start small businesses.
We wanted to know more about this, so we called Danny Boston of Georgia Tech. He's a professor of economics and advises government agencies on matters of small business. And also with us here in our Washington, D.C. studio is Emogene Mitchell, proprietor of Mitchell's Meetings and Events. That's a business she co-owns with her husband. It's in the Washington, D.C. area. Thank you both so much for joining us.
Ms. EMOGENE MITCHELL (Co-Owner, Mitchell's Meetings and Events): Thank you for having me.
Professor DANNY BOSTON (Economics, Georgia Tech): My pleasure.
MARTIN: Danny, let's start with you. The Census Bureau examined the period from 2002 to 2007, which is of course prior to when the recession officially started. So I wanted to ask, why was there so much growth by women and minority-owned businesses during that period? And I want to ask, secondly, how have these businesses been affected by the recession that started subsequent to that?
Mr. BOSTON: You know, actually, it's a continuation of the growth that occurred the five years actually prior to that. And so we are seeing a continued growth in the formation of minority and women-owned businesses. Very, very rapidly over the last decade one of every two businesses that were formed were formed by minority individuals. And today, those businesses are represented, roughly about 20 percent of all businesses. They will still be growing much more rapidly than all businesses.
However, that rate would have slowed down because of problems in terms of access to credit and also a slowdown in government expenditures. And a large percentage of minority-owned businesses are clients to government agencies.
MARTIN: Emogene, this is a good time to bring you into the conversation. First of all, just tell us how you decided to get into business for yourself to begin with?
Ms. MITCHELL: Thank you. We started the business as a way to address some financial needs that we had. And the way that I was brought up was that if you needed, if you had a need, then you worked hard for it. And so that was really the impetus for us to start our business.
The business is doing meetings and events. And I've been in this industry for 20 years. So it was something that people would come to me and say, Emogene, you're great, you have great contacts, you do such a good job. You are a very, very hard worker, you should be working for yourself.
MARTIN: So you started before the recession took hold.
Ms. MITCHELL: Yes.
MARTIN: What was your kind of vision at the time? Was it that - did you think that there might be a downturn coming and this was a way for you to kind of hedge against that possibility? You wanted more freedom?
Ms. MITCHELL: Sure. When the economy started going down and my boss went to all of the department heads the way we were working, and I was in a senior level position there, and asked all of us to look at - are there ways that we can more efficiently run our departments? And so I said, well, yes, you can move this out of house and it'll save you a lot of money. And I can run it for you. And there you have it.
And this was actually last year, last July that I actually made that proposition and stepped out there. So I actually did that move right in the middle of all of the craziness.
MARTIN: And so I have to ask about that. Wasn't that scary? I mean, it's a ridiculous question, but wasn't that frightening?
Ms. MITCHELL: It was extremely scary, but there was something about it. We talk about blessings in disguise. I saw this as a blessing right in my face, wherein I could take advantage of something and make it good for the company because they really are benefitting tremendously. And at the same time, creating opportunities to hire other people. And I think that that's very, very critical and very important when thinking about your business. It's not just about me out there hustling every day.
MARTIN: We need to take a short break, but we will return with more on how women and minority-owned businesses are faring in this economy. Please stay with us.
This is TELL ME MORE from NPR News. I'm Michel Martin.
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MARTIN: I'm Michel Martin, and this is TELL ME MORE from NPR News.
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But first, we want to continue our conversation about women and minority-owned businesses in this country. It turns out that these groups were starting businesses at a faster rate than other groups before the recession took hold. We're asking whether that trend is continuing despite the recession. Back with us are Georgia Tech economics professor Danny Boston and Washington businesswoman Emogene Mitchell.
Danny Boston, can you tell us if Emogene's story of how she got started, she happens to be both a woman and African-American and how she got started, is that typical of small business owners with her background? And how are women owned and minority-owned businesses fairing in this recession relative to other small businesses?
Mr. BOSTON: Emogene's profile is so typical of particularly successful minority-owned businesses. I've done national surveys of African-American business owners and it turns out that the three most important reasons why they decided to go into entrepreneurship are to, first, determine their own future. Second, because they've identified an opportunity; and, third, to take advantage of their experience. In so far as how they are faring and the contributions they make, it's getting increasingly significant.
The last survey, the one we're talking about now, indicated that roughly about 5.1 percent of the total workforce is employed in minority-owned businesses. While that's small, the rate of growth over the last five years was 26 percent. In other words, if you go back five years ago, only 4.3 percent were employed and that's up to 5.1 percent. So that rate is growing very, very rapidly. So, a very, very important component of the health of the economy.
MARTIN: Now, we talked about the fact that the rate of growth of these businesses was faster than of other businesses during the boom years. Hard to remember those at the moment. But now that the recession has taken hold for some months now and we see that the indicators overall are not that great. I mean, there are a number of people who are long-term unemployed who have been unemployed for over a year now, and we hear that there is a continual issue with access to credit, for example.
And Americans are still burdened by high debt loads and they're not spending as they had been in the past, are these businesses, Danny Boston, disproportionately affected by those factors? Or do you think that when we come out at the other end of this, do you think that they will have maintained their position in the economy?
Mr. BOSTON: Right. They are disproportionately affected because they are in the most vulnerable position. First of all, and you're correct, Michel, small businesses really are the engine of job growth. During the depths of the last recession, about 85 percent of the new employment that was being added was added by small businesses. So that's the engine.
And those businesses are struggling and part of the reason why we're not seeing a greater dent in the employment rate is because the small business sector is struggling.
And when you filter that down to minority businesses, they're struggling even more because you've had a tightening of credit regulations. And then it has a disproportionate effect on minority businesses because while many of those have healthy business profiles, you also have, as an economy as a whole, the disproportionate segment of minority entrepreneurs and individuals that don't have the highest credit ratings. And so if you tighten up on the credit requirements, then you're making it much more difficult for those businesses.
MARTIN: Emogene, why don't you tell us what some of the major challenge is for you at this point? Not to put the emphasis on the negative, because as I understand that as an entrepreneur you have that kind of can-do spirit.
Ms. MITCHELL: Sure.
MARTIN: But I would like to ask, what are your major challenges in growing the business right now?
Ms. MITCHELL: Sure, absolutely. It's hard to compete with small businesses the way that a lot of small businesses are defined when they're talking about staff of under 50 people, or revenues up to $50 million or $5 million, whatever those pieces are.
A lot of these new businesses are a lot smaller. So it's very difficult to compete even from the - when looking at federal business and just some of those other businesses where historically small businesses, especially minority businesses had thought, well, this is the way I can get in the door is through some of the federal and the government piece of it.
But it's hard to compete with the other businesses that are also defined as small. So I think that we have to look at these new businesses very differently because we're - the playing field is not even.
MARTIN: Is there anything, do you think, distinctive about your role as a female and as a minority entrepreneur that lends a certain character to your business? Do you think there's any specific challenge you face in part because you're a minority and a woman? Or are there any particular opportunities that you take advantage of because you're a woman and a minority?
Ms. MITCHELL: Sure. I think that there's a responsibility that comes with that. Someone asked me once what advice would I give people who were starting their businesses, especially women and minorities who were starting their businesses. And I said that you have to recognize that your goal is not how much money or how financially successful my business is going to be.
I think that in this environment we have to think past that and we have to think about what impact is my business going to have on others coming up behind us? For me it's about that. It's about how to help others. And with that, my business will grow.
MARTIN: Well, we wish you every success.
Professor Boston, a final thought from you if we could, what is critical to this particular group of entrepreneurs that we're talking about in allowing them to continue to thrive and contribute to the economy. Are there some key things you think that policymakers, for example, could be thinking about?
Mr. BOSTON: Right. We have to put in place policies that help build the capacity of these new businesses because the globalization of the economy means that corporations that use small businesses now are demanding that they have a larger capacity of reducing the number that they use and therefore every one business that they use now has to have a larger capacity.
Governments are bundling contracts and therefore you have to have a larger capacity to compete. So the government has to be sensitive to these changing dynamics and understand that minority business owners represent really the - an important part of the future of the country and put in place the kinds of policies and programs that would give them assistance to growing capacity and opportunity to build their business and be successful.
MARTIN: Danny Boston is a professor of economics at Georgia Tech. He joined us from Georgia Public Broadcasting in Atlanta. Emogene Mitchell is owner of, co-owner of Mitchell's Meetings and Events and she was kind enough to join us here in our Washington, D.C. studio. I thank you both so much.
Ms. MITCHELL: Thank you.
Mr. BOSTON: My pleasure.