Designing Educational Programs for Minority Entrepreneurs

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Title

Designing Educational Programs for Minority Entrepreneurs

Subject

Entrepreneurship

Description

Abstract
The study analyzed why minority contractors were not bidding on federally-funded jobs. The objectives were to find out why, what were their needs and to design an educational program. Data included a survey completed by 22 minority contractors. Literature was reviewed and local resource persons were interviewed. Conclusions were that minority contractors faced racial discrimination, lacked successful role models and a networking system, had little training in business skills, and lacked knowledge concerning banking. They lacked capital, equipment, workers, insurance and bonding. Recommendations were for professionals to receive diversity training and host a reception to meet minority contractors. Contractors should attend educational workshops to enhance their business and management skills. Formation of a coalition for minority contractors was also recommended.

Full text:


Michelle L. Pride
Educator, Community Leadership and Volunteerism
Cooperative Extension Service,
University of Illinois
Champaign-Urbana, Illinois
Internet Address: pridem@idea.ag.uius.edu

Bruce Stoffel
Community Development Manager
City of Urbana, Illinois

J.C. van Es
Laboratory for Community and Economic Development,
University of Illinois Champaign-Urbana, Illinois

The Problem
The Community Development Department of the City of Urbana has not been successful in recruiting minority general contractors or subcontractors to bid on federally-funded housing rehabilitation programs. In order to retain federal funding, the city needed to increase participation of minority contractors. They approached the Cooperative Extension Service (CES) to aid them in finding out why minority contractors were not bidding on these projects.

Purpose of the Program

The purpose of the program was to determine the reasons minority contractors were not bidding on the housing projects and to develop an Extension program which would enable them to do so in the future.

According to the U.S. Census Bureau, 12 percent of the U.S. population is African-American (Boyd, 1990). Smith (1993) found that 3.1 percent of businesses in America are owned by African- Americans. His study also showed that only "one percent of revenue generated by U.S. businesses came from black-owned businesses. Forty-nine percent of all black-owned businesses were concentrated in lower pay service industries and the service sector accounts for nearly one-third of all black-owned business revenues"(Smith, 1993: D12). Mescon (1987:62) reports that "service industries and retail trade businesses comprised 68 percent of black firms and 59 percent of their gross receipts, with more minority firms concentrated in these industries than was true for firms overall". Although minority interest in business ownership is increasing, minority businesses continue to fail at a higher rate than businesses owned by whites.

History

Reviewing the history of African-Americans, one begins to note some reasons for the large discrepancy between the levels at which African-Americans are self-employed compared to members of other races. African-Americans have been hindered in business because of conditions they have endured that are inimical to successful business enterprise.

Although there have been situations where a black business class developed (Drake-Clayton, 1963), white-owned businesses ultimately dominated the trade in profitable consumer goods because of prejudicial restrictions for African-Americans in acquiring bank loans, developing sound business management, securing favorable business locations, and even insufficient patronage by fellow African-Americans (Boyd, 1990).

During the Nixon Administration, in 1969, the Minority Business Development Agency was established providing would-be minority entrepreneurs with technical and managerial assistance, direct loans and loan guarantees, financial grants, and set-aside procurement from federal agencies (Task Force on Education and Training for Minority Business Enterprise, 1974).

Under the Reagan administration, public policy became less interventionist (Black Enterprise, 1992:210-1). The Small Business Administration shifted away from the predominant use of affirmative action as a tool to equalize economic opportunities for African-Americans and other minorities on grounds of reverse discrimination. As a result, programs awarded to African- Americans dropped significantly (Frazier & Gupta, 1993:R1). Under the current debate on affirmative action, further decline in governmental incentives can be anticipated.

Because government agencies use general hiring standards, such as civil service exams, "blacks have gravitated to public service" (Boyd, 1990:263). Socialization literature indicates that as African-Americans hold more government jobs, the chances that there will be more African-American entrepreneurs diminish. A scarcity of African-American businesses within their own communities reduces the possibility of "power and status necessary to reduce prejudice and break down barriers to black economic progress" (Boyd, 1990:269). Yet, the long-term health of the African-American community will be significantly strengthened by the development of an African-American community (Mescon, 1987; Mann, 1990).

Educational Programs for Minority Entrepreneurs

On the basis of reviewing other educational programs that had been successfully designed for African-Americans in business, it was decided that developing a face-to-face workshop for this audience was a viable format. The next step was to identify the specific educational content needed for this audience.

Data Collection

Data were acquired through a survey of minority general contractors and subcontractors in the Urbana-Champaign area. A questionnaire was developed by CES in close consultation with key informants including two minority contractors. Local governments, the University of Illinois, and referrals were used to acquire the list of minority construction businesses. A few names on the list were women. Interviews were conducted by an African-American female hired by the City of Urbana. Questions on business management background, insurance, licensing, general contracting, subcontracting, financial management, and educational seminars were asked to ascertain the objectives for the educational programs.

During the months of August and September 1991, 22 interviews were successfully completed from the list of 35 contractors. While a few refused to be interviewed, the majority of those businesses not interviewed were no longer in existence.

Survey Results

The survey revealed that painting was the most common business among the respondents (See Table 1). Only two of the respondents identified themselves as currently being or having ever been a general contractor.

Table 1
Reported Participant Construction Trades
Painting 6 Construction (general)5
Hauling and General Maintenance 5 Masonry and Carpentry 5
Electrical 3 Plumbing 3
Concrete 2 Roofing 1
Landscaping 1 General Maintenance 1
Excavating and Demolition 2
Total 35*

*The total number of businesses exceeds the number of respondents (N=22), because some respondents listed multiple business areas.

The most common job performed in dollar amounts was between $1,001 to $5,000, which was also the most common category for the largest job performed. However, there was one job reported at $3,200,000.

Among the contractors, 15 worked alone and only seven hired one to three people per job. Yet, as many as 15 of the construction contractors indicated they would like to hire one or more employees. Lack of money was the main obstacle to expansion. Lack of business leads and work were mentioned by about one-third of the respondents.

While 77 percent of the minority contractors indicated that they were interested in participating in the federal housing renovation programs, Table 2 indicates that they had trouble meeting the requirements (59%) and learning about specific opportunities (45%).

Table 2
Reported Reasons For Non-involvement in Champaign-Urbana Federal Housing Projects
Reasons Frequency Percent
Can't Meet Requirement 13 59
Don't Get Information 10 45
Too Busy 4 18
Don't Work With Contractor 3 14
Too Much Paperwork 2 9
* The total number of businesses exceeds the number of respondents (N=22), because some respondents listed multiple reasons.

The contractors reported that only 7 (23%) carried any liability insurance; only 2 contractors carried at least one million dollars worth of liability insurance.

The respondents did not indicate that they had trouble obtaining insurance, although two contractors indicated that they could not afford insurance and five of the contractors indicated that they had not tried to obtain insurance. Since carrying insurance is a requirement for participation in city contracts, the majority will need to obtain insurance to participate in federally-sponsored projects.

Over half of those interviewed do not use banks for any of their business operations. Reasons cited for not doing so included: "bank staff possesses prejudice or racist attitudes", and "extreme credit checks are done on Minority Business Entrepreneurs (MBE) so as to discourage returning." However, the bank employees attitudes may at least be partly attributed to the fact that the respondents did not maintain good up-to-date records (see Table 3).

Table 3
Frequency of Updating Business Books
Frequency Percent
Weekly 13 14
Monthly 10 23
Quarterly 2 9
Don't Keep Books 11 50
* The total number of businesses exceeds the number of respondents (N=22), because some respondents listed multiple reasons.

Respondents were asked to indicate their interest in attending seminars concerning business management and expansion. Table 4 indicates the level of interest from the 22 participants. When asked if they would be interested in the workshops if offered at a low cost, twenty-one of the twenty-two responded, "Yes".

Table 4
Expressed Interest in Attending Workshops on Business-related Subjects
Understanding the Federal System 21
Getting Credit 18
Advertising and Marketing 18
Preparing Bids and Proposals 18
Keeping Books 18
Insurance 18
Financial Management 16
Pricing Your Services 16
Preparing a Business Plan 16
Law and Legal Matters 15
Expanding Your Business 13
Hiring Employees 12
Licensing Application 9
Setting Up Vendor Accounts 9
* The total number of businesses exceeds the number of respondents (N=22), because some respondents listed multiple reasons.

Recommendations

As a result of the research, both the survey results and the review of the literature (Pride, 1993), the following recommendations were presented for use in developing programs for minority business entrepreneurs.

1. Organize training for professional persons, such as bankers, insurance sales persons and lawyers to increase sensitivity to potential clientele.

2. Provide the opportunity for minority business people to tour a bank and interact with bank personnel in order to become more aware of services, and procedures.

3. Offer an educational program to minority contractors to develop skills for successfully bidding on federally-funded jobs in housing renovation.

4. Organize and support a coalition of minority business entrepreneurs for the purpose of networking, collaboration on construction methods, and business management.

Implementation

The University of Illinois CES and the City of Urbana invited other representatives from the public and private sector to help implement the recommendations and form an organizing committee. The goal of the committee was to increase the number of minority subcontractors working in the local government housing rehabilitation programs.

In addressing the first recommendation, an educational session was organized and 30 loan officers from local banks attended a sensitivity training about diverse cultures.

The second recommendation to introduce minority contractors to banking personnel and banking operations has not yet occurred. The committee decided that a bank tour may be demeaning to the contractors and it was difficult to choose a bank from the many institutions in the area.

The third recommendation was carried out on three consecutive Thursday nights in January 1993. The name of the workshop was "Getting Ahead: Increasing Your Construction Business in Hard Times." Topics included licensing, insurance and bonding, legal considerations, financing, record keeping, business planning, and mentoring. The classes were taught by local experts including one attorney who is African-American.

Personalized invitations were sent to all contractors registered with the cities of Champaign and Urbana for construction work. The workshop was held in an African-American neighborhood during the month of January when the work pace tends to be slower.

During the three workshops, eighteen people attended, ten of whom were African-Americans. There was one woman present at the first workshop. Fourteen persons attended all three workshops. All evaluations indicated that the information was considered helpful and that the participants reported receiving information applicable to their business; the range of experience of the participants proved to be a challenge.

After the last session, three-fourths of the participants said they wanted more workshops. A coalition of minority contractors and subcontractors has been formed by one of the African-American workshop participants.

Epilogue

In January 1995, the City of Urbana and University of Illinois Cooperative Extension Service offered another series of workshops to minority contractors. Twenty minority contractors successfully completed the course. Topics were modeled after the first workshop in 1993. Extension educators and instructors from the Cosmopolitan Chamber of Commerce, Chicago, were used.

A series of successful workshops for 30 minority contractors and small business owners was held in Danville, Illinois, in the Spring 1996. The Vermilion County Unit of CES worked with a committee composed of bankers, the Small Business Development Corporation Director, the Vermilion County CES Unit Leader, a CES Community Leadership and Volunteerism Educator, an alderman and other City of Danville personnel. This committee ensured a revolving loan fund of $50,000 for small business persons who had not been successful in attaining loans through traditional banking procedures. The Vermilion County Community Development Committee will award loans to applicants who have successfully completed the course and have developed a sound business plan.

The series of activities has been well-received by local minority contractors. It has provided CES an opportunity to work with an audience that traditionally has been hard to reach. It also provided CES at the local level with functional contacts to local government and the local business community. CES has been influential in helping these activities get started. Over time, local committees are taking on leadership and CES has been providing educational input.

References

Boyd, R.L. (1990) Black and Asian self-employment in large metropolitan areas: a comparative analysis. Social Problems 37: 258-272.

Drake, S.C., & Clayton, H. (1962) Black metropolis. New York: Harcourt, Brace.

Black Enterprise (June, 1992) BE 100s: A 20-year overview: 210-214.

Frazier, E.F.,& Gupta, U. (February 19, 1993) Cash crunch. The Wall Street Journal

Mann, P. H. (1990) Nontraditional business education for black entrepreneurs: observations from a successful program. Journal of Small Business Management, 28, (April): 30-6.

Mescon, Timothy S. (1987) "The Entrepreneurial Institute: education and training for minority small business owners." Journal of Small Business Management 25. 61-66.

Pride, M. L. (1993) Designing educational programs for small business minority contractors; Unpublished master's thesis, University of Illinois at Urbana-Champaign.

Smith, J.(February 21, 1993) Black and blue." Hamilton, Ohio Journal-News. D12.

Task Force on Education and Training for Minority Business Enterprise (1974). Report of the Task Force on Education and Training for Minority Business Enterprise. Washington: U.S. Department of Commerce, Office of Minority Business Enterprise: xxi, 1-179

Creator

Michelle L. Pride, Bruce Stoffel and J.C. van Es

Publisher

Journal of Extension

Date

December 1997 // Volume 35 // Number 6

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Citation

Michelle L. Pride, Bruce Stoffel and J.C. van Es , “Designing Educational Programs for Minority Entrepreneurs ,” eBlack Champaign-Urbana, accessed July 24, 2019, http://eblackcu.net/portal/items/show/116.

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