mbe development presentation to tcf

8/8/2019 MBE Development Presentation to TCF

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Minority BusinessMinority BusinessDevelopmentDevelopmentin Clevelandin Cleveland

Prepared for the Cleveland FoundationPrepared for the Cleveland Foundation August 29, 2005 August 29, 2005

john a. powellExecutive DirectorKirwan Institute for the Study of Race & Ethnicity, Ohio StateUniversityhttp://www.kirwaninstitute.org

Roger Clay Jr.PresidentNational Economic Development& Law Centerhttp://www.nedlc.org
http://www.kirwaninstitute.org/http://www.nedlc.org/http://www.nedlc.org/http://www.kirwaninstitute.org/


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Purpose of this StudyPurpose of this Study

Identify strategies for The ClevelandIdentify strategies for The ClevelandFoundation to improve its minorityFoundation to improve its minoritybusiness development approachbusiness development approach


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MethodologyMethodology

Analysis of national MBE trendsAnalysis of national MBE trends Identify best practicesIdentify best practices

Analysis of minority businesses inAnalysis of minority businesses inCleveland & Cuyahoga CountyCleveland & Cuyahoga County

Interviews with stakeholdersInterviews with stakeholders


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Presentation OverviewPresentation Overview

MBE development mattersMBE development mattersEconomic and geographic analysisEconomic and geographic analysisWhatWhat isis and whatand what isnt isnt working inworking inCleveland?Cleveland?Community leader perceptionsCommunity leader perceptionsBest Practices among IntermediariesBest Practices among Intermediaries

Emerging OpportunitiesEmerging OpportunitiesConclusionConclusion


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Why Does MBEWhy Does MBEDevelopment Matter?Development Matter?

MBEs will become an increasinglyMBEs will become an increasinglyimportant factor in local, regionalimportant factor in local, regionaland national economiesand national economiesMinority businesses tend to hire non-Minority businesses tend to hire non-white employees at a higher ratewhite employees at a higher ratethan do majority businessesthan do majority businesses


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National MBE TrendsNational MBE Trends The number of minority owned businesses is growing The number of minority owned businesses is growing

faster than the rate for all U.S. firmsfaster than the rate for all U.S. firms

Growth in Number of Firms

0

10

20

30

40

50

1992 to 1997 1997 to 2002

P e r c e n

t a g e

I n

MBEs

All Firms

17% of all companies in the U.S. were17% of all companies in the U.S. wereowned by minorities in 2002owned by minorities in 2002


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Yet, A Decline in National Yet, A Decline in NationalMarket Share for MBEs 92-02Market Share for MBEs 92-02

0%

1%

2%

3%

4%

5%

6%

7%

1992 1997 2002

MBE: % of National MarketShare


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1997-2002 Sales up nationally for1997-2002 Sales up nationally forAfrican-American- and Hispanic-African-American- and Hispanic-owned businesses, but down inowned businesses, but down in

OhioOhio

22%

30%

22%

13%-8%

-8%

-10%

0%

10%

20%

30%

40%

Nation Ohio

All BusinessesAfrican American Owned Bus.Hispanic Owned Bus.


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Description of ClevelandsDescription of ClevelandsMBEsMBEs

Sales and receipts of AfricanSales and receipts of AfricanAmerican-owned businesses grew byAmerican-owned businesses grew by284% from 1992-1997.284% from 1992-1997.

Larger MBE's are doing relatively wellLarger MBE's are doing relatively wellcompared to other metropolitancompared to other metropolitanregionsregions

Most Hispanic or Latino MBEs are non-Most Hispanic or Latino MBEs are non-certified and disengaged from thecertified and disengaged from theregional economyregional economy


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1010

0

10

20

30

40

50

60

70

80

90

100

0 2 4 6 8 10 12 14

Poly. (All Firms)

Poly. (MBEs)

FirmFirmExpansioExpansio

n Raten Rate

Number of YearsNumber of Years

Numberof

Numberof

Employees

Employees

70

75

80

85

90

95

100

5 to 9 10 to 19 20 to 49 50 to 99 100 & Over

Number of Employees

All Firms

MBEs

AverageAverageCreditCreditRatingRating


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Industry ConcentrationIndustry ConcentrationIndustry Strength of Cleveland's African-American-owned

Compared to Nation

0

0.5

1

1.5

2

2.5

3

3.5

Construction Wholesale Trade Financial Services Manufacturing M a r k e t S h a r e R a t i o o f I n d u s t r y

C o m p a r e d

t o O v

e r a l l M a r k e t S h a r e

Cleveland PMSU.S.


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Size by IndustrySize by IndustryLARGE:LARGE: Wholesale TradeWholesale Trade ManufacturingManufacturing

SMALL-to-MID-sized:SMALL-to-MID-sized: Retail TradeRetail Trade

Financial ServicesFinancial Services ConstructionConstruction

Micro OR SMALL-to-MID-sized:Micro OR SMALL-to-MID-sized: Professional ServicesProfessional Services

Growth: Financial Services were the onlyGrowth: Financial Services were the onlysector where the proportion of MBEs over $2.5sector where the proportion of MBEs over $2.5million in sales grew from 2000 to 2004million in sales grew from 2000 to 2004


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Credit Rating by IndustryCredit Rating by IndustryIn d u s t ry b y C re d i t R a t in g , P e rc e n t o f M B E

R a tin g O v e r 8 0

4 0

5 0

6 0

7 0

8 0

9 0

M a n u f a c t u

r i n g

W h o l e s a l e

T r a d e

P r o f e s

s i o n a l S e r v

i c e s

F i n a n c i a l S e r

v i c e s

A d m i n / S

u p p o r t

S e r v i c e s

R e t a i l T r

a d e

C o n s t r u c

t i o n

A l l M

B E s


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Geographic DistributionGeographic Distribution

Our analysis looked at theOur analysis looked at thegeographic location of MBEs andgeographic location of MBEs andhow they were located in respect tohow they were located in respect toother regional trendsother regional trends


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WhereWhereareare

MBEsMBEslocatedlocated

??


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MBEs by Sales VolumeMBEs by Sales Volume


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s y ange n a es o umes y ange n a es o ume2001-20052001-2005


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What is Working inWhat is Working inCleveland?Cleveland?

Targeted technical assistance, business Targeted technical assistance, businessnetworking, mentoring, and suppliernetworking, mentoring, and supplierdiversification effortsdiversification effortsMainstream lending institutions compete forMainstream lending institutions compete forMBE lendingMBE lendingCleveland has best practice communityCleveland has best practice communitydevelopment financial institutions anddevelopment financial institutions andcommunity development venture capital fundscommunity development venture capital fundsGood support from universities and collegesGood support from universities and colleges


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What is not working?What is not working?

ExclusivityExclusivityCompetitionCompetition

Informal business networkingInformal business networkingNeed for more accountability andNeed for more accountability andmeasurable outcomesmeasurable outcomes

Need for programs to monitor andNeed for programs to monitor andtake advantage of publictake advantage of publicprocurement programsprocurement programs


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Community LeaderCommunity LeaderPerceptionsPerceptions

Structural challenges to MBE developmentStructural challenges to MBE development Limited social capitalLimited social capital Racism and weak political environmentRacism and weak political environment EconomicsEconomics Public educationPublic education

Institutional based challengesInstitutional based challenges Difficulty in accessing capitalDifficulty in accessing capital Need for more cooperation and specializationNeed for more cooperation and specialization

Individual based challengesIndividual based challenges Limited skill sets; talent; and strategic visionLimited skill sets; talent; and strategic vision Tendency toward life-style businesses Tendency toward life-style businesses


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Best Practice for foundations fundingBest Practice for foundations fundingMBE development aMBE development a

comprehensive approachcomprehensive approach

Targeted Business Development Assistance Targeted Business Development AssistanceWell-planned Business NetworkingWell-planned Business NetworkingResearch, Advocacy & Public PolicyResearch, Advocacy & Public PolicyformulationformulationCommunity development financingCommunity development financing

Promotion of regional climate to supportPromotion of regional climate to supportMBEsMBEs


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Emerging OpportunitiesEmerging Opportunities

1.1. Strategic partnershipsStrategic partnerships2.2. National trend toward supplierNational trend toward supplier

diversitydiversity3.3. Strong and emerging sectors locallyStrong and emerging sectors locally4.4. New public sector affirmativeNew public sector affirmative

procurement programs especiallyprocurement programs especiallyCuyahoga CountyCuyahoga County


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More EmergingMore EmergingOpportunitiesOpportunities

5.5. Ohios new Minority Business Venture CapitalOhios new Minority Business Venture Capital Tax Credit Program Tax Credit Program

6.6. Large land bank of the City of ClevelandLarge land bank of the City of Cleveland

7.7.

New workforce development strategiesNew workforce development strategies8.8. Local market gaps for small-businessesLocal market gaps for small-businesses9.9. Retail and Services in the growing LatinoRetail and Services in the growing Latino

communitycommunity


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RecommendationsRecommendations

The Foundation should serve as a The Foundation should serve as afunder and convener of funder and convener of intermediaries working to promoteintermediaries working to promoteand develop MBEand develop MBESupport for MBE intermediariesSupport for MBE intermediariesserving various parts of Cuyahogaserving various parts of CuyahogaCounty, in addition to ClevelandCounty, in addition to ClevelandProvide multi-year grantsProvide multi-year grants


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RecommendationsRecommendations

Fund intermediaries that:Fund intermediaries that: Articulate measurable goals and outcomesArticulate measurable goals and outcomes Coordinate and cooperate with otherCoordinate and cooperate with other

intermediaries funded by the Foundationintermediaries funded by the Foundation Partner with diverse stakeholders to supportPartner with diverse stakeholders to support

minority businessesminority businesses

Develop a tracking system to monitor theDevelop a tracking system to monitor thehealth of minority businesseshealth of minority businesses


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RecommendationRecommendation

Support the following:Support the following: A clearinghouse intermediaryA clearinghouse intermediary Technical assistance and professional Technical assistance and professional

development grants to intermediariesdevelopment grants to intermediaries Research and evaluation to support theResearch and evaluation to support the

continued refinement of MBE servicescontinued refinement of MBE services

Public policy formulation and advocacyPublic policy formulation and advocacy


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ConclusionConclusion

The Cleveland Foundation has a The Cleveland Foundation has astrategic opportunity to take itsstrategic opportunity to take itsMBE promotion and developmentMBE promotion and developmentto the next level, with theto the next level, with thecombination of the intermediariescombination of the intermediariesin place and many exciting,in place and many exciting,emerging opportunities.emerging opportunities.

mbe development presentation to tcf

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