6:34am

Thu August 29, 2013
Business

Fifty years later, African-Americans entrepreneurs say business community still lags behind

This week marks the 50th anniversary of one of the largest political rallies for human rights in United States history. Half a century ago, hundreds of thousands of people marched on Washington and gathered to hear Martin Luther King, Jr.’s iconic “I Have a Dream” speech.

Fifty years later, Del Smith, director of the Center for Urban Entrepreneurship in Rochester, says African-Americans have made a lot of progress, but the business community is still catching up.

“If we look back just 50 to 60 years ago, what we found were a lot of African-American businesses that were very, very successful. We had African-American grocery stores, we had numerous banks that were owned by African-Americans that primarily served the African-American community. And if we compare that to today, those numbers have dwindled significantly,” Smith says.

“We know there are significant disparities when it comes to the number of African-American businesses, specifically when we talk about businesses that hire people. And we also know there’s significant disparity in terms of their success, in terms of revenue, and their tenure, the amount of time they stay in business.”

In Rochester, Smith says, those disparities translate to only four percent of businesses that hire employees being African-American owned and run. And it’s a similar story elsewhere.

What it comes down to, Smith says, is a shift away from the traditional model where African-American businesses could grow by catering to African-American communities.

“I think the politically correct way of looking at it would say, 'well let’s try to have a more inclusive policy.' But if we look back on traditionally what’s been very successful in many of these markets and demographic groups, it’s the prospect of helping companies grow by serving the needs of communities they know best.”

Additionally, he says, policies that try to create a level playing field aren’t always effective.

“Policies have been put in place for financial institutions to encourage them to lend to African-American entrepreneurs and business owners and individuals. But when we look at the outcome of that, what we find is that there’s not a higher rate of lending to African-American business owners because banks, for example, by the nature of their business are risk adverse, and we know that in our African-American population things such as wealth, things such as credit are challenges. And in business it takes money to make money. In business, in order to be able to go to a bank you have to have these things in place.”

The challenge of financing

Realtor Carm Diamond has first-hand experience with such challenges. She’s been in the real estate game for close to a decade and is still pursuing capital to set up her own operation.

“Even to this day it’s a struggle. And you know, you hear about small businesses, we need money pumped into small businesses that’s going to re-build the economy. Let’s do it. And you would think ok, hooray, I’ve been in this business nine-plus years, somebody’s going to be willing to give me a loan.”

Diamond says she’s reworked her business plan many times trying to attract support, but at the end of the day she doesn’t have a credit history she can take to the banks.

“Here I am, being a realtor for nine plus years, and I still have yet to get the funding that I need for my business and everyone keeps telling me the money’s out there, go get it, you’re black and you’re a minority, there’s money for you, it’s just much easier said than done.”

Del Smith says it’s imperative for upstate cities to invest in businesses like Diamond’s if they want to revitalize their urban economies.

“If you are really trying to revitalize the region and use entrepreneurship as a way to revitalize that region, but yet you do not include the African-American community in that, it’s an uphill battle.”

Luckily, Smith says, the entrepreneurial space provides a perfect platform for the breakdown of remaining barriers in the civil rights movement.

“You kind of rely less on relationships and it really gets to be more about what solution are you bringing to the table, different from what we’ve seen before, that has the ability to solve a problem. And that’s what entrepreneurship provides for us.”

Education is vital

Dean of the Simon School of Business, Mark Zupan, agrees. But he says there needs to be more focus on improving graduation rates for African-American children before expecting barriers in the business community to be broken down.

“The critical part that’s still misfiring is at the K-12 level, when you have graduation rates, high school completion rates, that are below 50 percent that’s where we’re sacrificing the next generation. And if we don’t improve in this dimension to inspire individuals to develop the fundamentals, especially in the more central city areas because that’s where the public schools predominantly play a role, we’re not going to see the successes we’d like to see on the economic front.”

But Zupan says if the inequality in the education system can be addressed, the business sector has the opportunity to become the ultimate equalizer.

In an environment that fosters innovation and change, he says the focus will shift from background, skin color and gender, to the goods and services a business owner can provide.

“What markets reward is actions on the margin, the increment of what you can do today, what you can do tomorrow. It doesn’t matter where you come from, what your gender is, what your race is, your geographical background, what’s your sexual orientation, it more matters what you can do. And markets ultimately are the great equalizers but if people don’t come armed to those markets with the right education, with the sufficient education, they’re at a disadvantage.”

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