The country’s economic growth and competitiveness in the global market will increasingly depend on the growth and expansion of minority-owned businesses, according to a new report by the U.S. Department of Commerce’s Minority Business Development Agency. The report, “Characteristics of Minority Businesses and Entrepreneurs: An Analysis of the 2002 Survey of Business Owners,” which was made public in April, analyzes minority businesses to identify trends that may have impacted their performance in 2002.
The 2002 Survey of Business Owners is part of the Economic Census and includes results from a questionnaire conducted by the U.S. Census Bureau. The survey was distributed by mail to a random sample of 2.3 million businesses selected from a list of all U.S. firms operating during 2002 with receipts of $1,000 or more. About 81 percent of the 2.3 million firms responded to the survey.
While the number of minority firms increased at a fast rate between 1997 and 2002 and currently stands at a record 4 million, the growth rate of their gross receipts lags behind their growth in number. Minorities also have yet to achieve entrepreneurial parity in relation to their proportional share of the U.S. population.
Accelerated growth of the minority population, which is expected to reach 50 percent of the U.S. population by 2050, is a key factor in helping to position minority firms as increasingly important players in America’s business sector. As Washington presses for increased U.S. exports to curb a trade deficit now in celestial orbit, for example, the report indicates that minority-owned firms are twice as likely to export (2.5 percent of firms) as non-minority-owned firms (1.2 percent of firms). “U.S. minority firms are a great American asset and the time is right for them to seize the opportunity to expand and export their goods internationally,” says Ronald N. Langston, the agency’s national director. “Doing so will not only grow their business but strengthen the national economy and create jobs in minority communities.”
More than 70 percent of the world’s purchasing power and 95 percent of its population is beyond U.S. borders. “We need to do everything we can to encourage more minority firms to engage in exporting and global expansion. They are vital to America’s economic success,” Langston says.
The report notes that minority firms have a competitive export advantage over all firms due in part to language capabilities, ancestral ties, cultural compatibility and potentially great agility and nimbleness because of their size. To fully realize their growth potential, however, minority businesses must overcome such challenges as inadequate capital to start and expand the business. Minority-owned firms were more likely to use high-interest credit cards and less likely to use bank loans to start or acquire their businesses. MBDA tries to address this challenge by facilitating traditional commercial loans, government guaranteed loans and, in some instances, private equity for minority firms. In fiscal year 2006, MBDA produced $407 million in financial transactions and nearly $1.2 billion in procurement opportunities for its minority business clients.
The MBDA report outlines additional opportunities for minorities to grow their businesses. Minority firms that have a diverse customer portfolio — other businesses and organizations, the federal government and international customers — are at an advantage to increase their bottom line. Large minority firms with receipts of $500,000 or more are already capitalizing on this market of opportunity. The report finds the larger the company in terms of receipts, the more likely it is that it sells goods and services to businesses or organizations, the federal government and global customers.