Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 13, 1994 TAG: 9403110052
SECTION: BUSINESS PAGE: D-1 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Long
The disparity is obvious. The reasons - and the solutions - are not.
Ask three - or four or a dozen - experts why minority communities produce few entrepreneurs and you'll get three - or four or a dozen - explanations.
They talk about socialization, about discrimination, about setting aside portions of contracts for minority companies, and voluntary goals. The program that one person calls a boon to minority entrepreneurs is termed by someone else as a double-edged sword, helping some only at the expense of others.
And at least one academic thinks some affirmative-action government programs, intended to provide opportunities for minority companies, actually may be preventing those firms from venturing into better opportunities.
For all their differences, observers of minority entrepreneurship from academia and business agree on one thing: the importance of entrepreneurial role models in minority communities.
Lowell Reeves, owner of Lowell's Restaurant and Supper Club in Roanoke, has an insider's view of the plight of minority business owners: He is one minority businessman who beat the odds and has used his success to boost the morale of others in his community.
"I think I inspired a lot of people to go into business after me," said Reeves, who opened his Melrose Avenue restaurant in 1986 and expanded it in 1991 to include a supper club. "If you see somebody else doing it, you think, `If he can do it, I can.' They just need to see someone else make it."
"All minority groups have a motivation to go into self-employment," said Robert Boyd, an assistant professor of sociology at the State University of New York at Buffalo who has studied black and Asian entrepreneurship.
Minority groups typically face the greatest hardship in the mainstream work force, he said: Asians because many are recent immigrants who face both language and cultural barriers, blacks because of discrimination based on skin color.
But just because motivation exists doesn't mean action follows. According to Boyd, less than 3 percent of all black workers are self-employed, compared with up to 20 percent among Asians. For the U.S. work force as a whole, self-employment is 7 percent.
At least some of that disparity is because of the presence of role models in Asian communities and their absence in many black neighborhoods, Boyd said.
It perpetuates a cycle: Young people watch neighborhood businesses flourish and so see entrepreneurship as a viable option. When they are ready to start their own businesses, they get seed money from friends and family who are already established business owners. The new entrepreneurs then become role models for the next generation.
George Shen, owner of Roanoke's PC City Computers, is a minority businessman who was able to take advantage of this cycle. A native of China, Shen managed to avoid the hassle of securing a bank loan by borrowing from family members when he left his salaried job in Connecticut to open his own business in Virginia.
Although Khang Dao Allen, the Roanoke businesswoman who started the Asian-French Cafe, doesn't fit the mold completely - she fled Vietnam with nothing and had no family here to help her - she does play a part in continuing the cycle because she now counsels other minorities about going into business.
The story is different in the black community. Here, too, there is a cycle, but it is based on a history of enslavement and defeat that has convinced blacks they lack the ability to start successful businesses, said Robert Adams, publisher of "Minority Business Enterprise," a New York-based magazine that caters to minority business owners.
"Headset has a great deal to do with it," Adams said. "If you're white and male, it's understood you can start out. Culture affects what you think you're capable of doing."
Because there aren't enough people like Lowell Reeves to go around, young blacks have few role models to emulate. And even if a young black entrepreneur does decide to go into business, the small number of existing businesses means limited sources of seed money.
"If the capital doesn't exist in the community, then it's hard to break out of that cycle and get money from family and friends," said Ray Smith, associate dean of the MBA program at the University of Virginia's Darden School of Business Administration.
Because banks are often unwilling to back new businesses, entrepreneurs like Shen who have access to other sources of funding are at a distinct advantage, Boyd said.
Many potential entrepreneurs in black communities, on the other hand, must rely on money they have accumulated themselves or try to obtain loans from banks.
Although Reeves said it has been getting easier for blacks to obtain loans, he added that banks are still wary of lending money to anyone - black or white - without established track records.
Willie Smith, owner of Willie's Car Clinic in Roanoke, faced this problem when he set out on his own in 1991. With little money to spend, he started small, renting a garage for his business until he built up a solid clientele and a reliable financial track record. He then was able to secure a loan that allowed him to buy the garage.
Thanks to several government programs, minority status is becoming less of a liability - and sometimes even an advantage - for many minorities who want to start their own businesses.
Virginia, for example, in 1984 set a policy to foster minority participation in state government projects. The policy set up a goals program to encourage state agencies to contract with minority-owned businesses.
Although the program is voluntary - unlike the minority set-asides mandated for large federally funded projects - it has been "very effective," according to the Virginia Department of Minority Business Enterprise. Department figures show minority business procurement increased from 2.4 percent of total expenditures in 1983-84 to 4.5 percent in 1992-93, for a final level of $71.2 million.
In 1991, the Wilder administration announced another policy aimed at helping minority businesses. Also voluntary, this policy encourages large contractors hired for state-funded projects to subcontract with small and minority-owned businesses.
Petra Barrera, owner of the Roanoke-based electronics distributor Mexitronics, owes much of her company's success to set-aside programs. Barrera, in fact, plays up the fact that she is a double minority - a Hispanic female - to attract contracts from buyers like NASA that are required to subcontract with minority-owned businesses.
For all their accomplishments, there may be a down side to programs like federal set-aside plans and affirmative-action systems, Boyd believes. These policies may may be so successful in the public sector that they are drawing black entrepreneurs away from starting their own small companies, Barrera said.
"The attraction of public-sector jobs is a disincentive to go into business," he said. This, too, can help perpetuate the cycle in the black community: For every potential entrepreneur drawn away from a neighborhood business, the community has one less role model.
Adams agreed that some programs involve larger contracts than most minority-owned businesses can handle. But programs like the Small Business Administration's 8(a) plan have returned the focus to small businesses, he said, by setting them up with small federal and commercial contracts and guiding them until they're able to bid on their own.
Whatever the reasons for the dearth of minority entrepreneurs, something needs to be done to relieve it, Adams said.
"This is a capitalist society," Adams said. "This country is built on entrepreneurship. To have large portions of the population not oriented toward it is terrible."
by CNB