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2014 was, in some ways, challenging for small business. While there was growth, and the economy continued to rebound, small and medium-sized businesses (SMBs) were continuously faced with the recurring question: how to attract more customers and grow? Unfortunately, while the US Small Business Administration (SBA) does lend a hand, it also came under serious scrutiny when a report showed that it had awarded huge sums to ineligible businesses, leaving other worthy businesses out.
And if SMBs in general are facing challenges, what about minority contractors in particular? Are they getting their fair share of work? Despite plenty of challenges, 2014 showed promise for minority and women-owned businesses, and 2015 will hopefully continue along similar lines. With more such businesses created on a daily basis than before the recession, even more contractors will be applying for surety bonds this year.
But what is the state of minority contractors in the US currently, what are they up against, and are there any emerging trends?
The 2014 State of Women-Owned Businesses Report
Published in March last year, the ‘2014 State of Women-Owned Businesses Report‘ holds some valuable insights about both non-minority and minority women-owned businesses. Some of its figures are astonishing, while others can serve as a strong reminder for policy and decision-makers why they need to address the needs of those businesses.
In a nutshell, the report said the following:
- Over the course of the last 17 years, the number of women-owned businesses increased by 68%, significantly outgrowing the national average, and topping growth-rate among all other private businesses for the same period. As a result, there are now between 9 and 10 million women-owned businesses in the US.
- It is estimated that there are now about 1,200 women-owned businesses being opened every day. These are slowly spreading and expanding across industries. Yet the construction, warehousing, transportation, finance and insurance sectors still comprise less than 30% of women-owned businesses.
- Out of these 9-10 million businesses, about 3 million are owned by women of color, meaning that they have tripled over the course of these 17 years.
- Businesses owned by women of color are usually smaller than those owned by non-minority women. Despite that, all minority women-owned businesses have skyrocketed over these years and currently top the list in terms of employment and revenue, in comparison to all non-minority women-owned companies.
What About the Challenges?
Despite all the good news, there are a lot of challenges ahead. In an interview in April last year, Julie Weeks, president and CEO of Womenable – the firm that issued the report – also spoke of the cost of such growth.
For example, in their research Womenable found that the cost for a non-minority small business to track, attract and win a government contract was, on average, $129,000 annually. For minority-owned businesses this figure is significantly higher – $143,000, on average.
The reasons? Minority-owned businesses lack the connections that their non-minority peers have. In Weeks’ own words: “They have weaker links to peers and other business owners who have this experience. Not having an extensive support network means they have to go to more meetings, and invest more in learning and ramping up.”
Are Minority-Owned Businesses Left to Fend for Themselves?
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Another impediment to growth is the fact that local governments’ programs targeted at minority and women-owned businesses all too-often fail to deliver to their recipients. Yet, increasingly such programs are a greater concern for local governments which have tried to introduce more accountability with regards to minority contractors.
For example, in December last year, Jersey City councilwoman Diane Coleman was appointed to chair a committee that would seek for better ways to attract minority-owned businesses. This decision was based on a report which found that there were few such businesses being awarded rewards in the city.
In Ohio, Cuyahoga county executive Ed FitzGerald introduced legislation late last year, to help resurrect the county’s minority and women-owned contracting program. This decision too was based on a recently completed study in the county, which showed that such businesses were faced with serious difficulties in winning government contracts.
And finally, though the list of news goes on, in September last year Virginia governor Terry McAuliffe signed an order that set a target of 42% of state contract money to be awarded to minority contractors. At the occasion state secretary of commerce and trade Maurice Jones commented on the reasons why such businesses weren’t receiving more contracts: “They [the reasons] include such things as us not doing as good a job as we need to do in making sure that we know who the women and minority businesses are out there and that we know their capabilities and we’re aggressively outreaching to them about the opportunities we have.”
He then added: “Those businesses also have to make sure that they do an aggressive job of alerting us to who they are, to what they can do, to getting registered.”
This statement is in many ways aligned with what Julie Weeks of Womenable also reported earlier during the year – that lack of visibility of such businesses was a major contributing factor to them not being awarded more contracts.
What to Do?
Apparently one of the things that minority contractors can do is get word out about themselves. Other productive actions include participation in state programs as well as seek funding through grant and loan programs through, for example, BusinessUSA’s grant and loan directory. There are also a number of certifications, which allow minority contractors to bid for special government contracts.
Do you lead a minority or woman-owned business? What is your experience so far in getting contracted and what does your local government make to support you? We’d like to hear more from you, please leave us a comment!
Article Submitted by Guest Author: Vic Lance
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps contractors get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.