Monday, August 30, 2010

MEDweek 2010 Recap - The Good, The Bad and The Ugly

I think I will start with the grim reality (The bad) of minority owned business. From the official MBDA (minority business development agency) disparities in capital access report, "The probability of self-employment is substantially higher among the children of the self-employed". Studies generally find that and individual who had a self-employed parent is roughly 2 to 3 times as likely to be self-employed as someone who did not have a self-employed parent. In a study by Michael Hout and Harvey S. Rosen, they note a "triple disadvantage" faced by African-American men in terms of business ownership. They are less likely than white men to have a self-employed fathers, to become self-employed if their fathers were not self-employed, and to follow their father in self-employment. Across all ethnic groups business ownership is 10.1% but in the African American community business ownership is just 5.5%. Of course, we all know access to capital creates job and minorities are redlined in being denied access (which creates jobs) by the financial markets.

The MEDWeek conference showed initiatives (The good) the federal government,through the small business administration, has implemented to addressed these concerns. The SBA is guaranteeing loans up to 90% to mitigate the banks risks in making loans to small business. The SBA has also dropped or substantially reduced the loan application fee . The IRS has creating tax incentives (health care credits) to help employers create jobs and provide benefits which in turn allow employees to stay longer. The SBA has initiatives from the white house to to help small businesses. Quote from "

Administration Announces New Small Business Commercial Real Estate and Working Capital Programs

President Obama announced on February 5, 2010 two new small business lending initiatives to help increase access to capital and create jobs. These temporary Small Business Administration initiatives include a refinancing program for small business owner-occupied commercial real estate and an expanded working capital loan program. At the same time, the president continued his call for a permanent increase of the maximum loan sizes for SBA’s 7(a), 504 and microloan programs and to extend the successful small business Recovery Act lending programs. These initiatives are part of the Administration's broader agenda to improve access to credit for small businesses, including a proposal to transfer, through legislation, $30 billion to a new Small Business Lending Fund that will support lending by community and smaller banks." Small businesses especially minorities are have the upper hand when it comes to importing/exporting goods and services. As we all know people do business with people of a similar ethnic group. The world is brown and 95% of all consumers are OUTSIDE of the United States.

The truth of the matter is that small business is stuck in a rut (The Ugly). Small businesses create 2 out of every 3 new jobs. But inadequate financing and red tape bureaucracy limit job creation. The cycle of business is too dependent on the financial markets. Businesses are required to make the product, pay the employees and wait and average of 60 -90 days from job completion to getting paid from the commercial or government job. To hire employees, businesses must have a solid plan, good credit in order to build a working capital account and float salaries. This is a post on the website that is specific to Philadelphia " I have learned about many business programs that designed to help women and minorities. I hate to say that all of them are dysfunctional. I have wasted my time trying to get any help from those programs.They all nothing but running around service, and they all limited to phone calls and bureaucracy. I suggest to have all these business programs under one umbrella. Through my experience, I learned that those business programs have negative impacts on those who are seeking to start their own business. These programs are: Mayor Action Business Team,Business Development Center,Philadelphia Commission Development Center, SCORE, Profile Re-Employment Program, Fox Business School, Temple University,Women Business, Minority Business.PANO, women WAY etc.. I have tried all of them,until I got exhausted and lost interest."

In this economy, we have to change the financial model of business. We are too dependent on the broken banking system. Commercial contracts need to work with their suppliers and pay deposits on the goods and services they buy. Businesses must give each other lines of credit and work in partnership to complete jobs. We have to shorten the time it takes to get paid from a completed job from 60-90 days to a number under 30 days in the commercial and government sector and the banking system must start providing lines of credit (AGAIN) for commercial accounts.

I was personally impressed that MED Week did not sugar coat these issues. This year they attempted to bring businesses together in the form on a B2B Expo. I found the Expo to be a great idea in theory but the businesses that were there said go to our website and sign up in our database as a diversity supplier. (WASTE OF TIME). Somehow the MBDA must act as an intermediary to build 3rd party creditability (edification). Though the company is IBM, there is still a biased person making a decision to work with that company. The supplier diversity reps did not have a white paper of the type of businesses they were looking for. The responses I heard was they were looking for businesses with capacity and a strong financial foundation (see the good and the ugly with the reason MBE firms do not have this) and that is where the vicious cycle begins. But I am optimistic that a change is coming. Why? Because we have NO choice. Now is a great time to start or be in business because your business in INNOVATION ( read -! The president has even dedicated 3% of the US economy's GDP (gross domestic product) to fund research and development. The world is open to your new ideas and technology has dramatically lowered the overhead to get your business off the ground. Capacity (i.e scalability) is key and while the financial door is closed, capacity can be built through leveraging partnerships that provide resources with your business idea. In a very short time, we are now realizing that discrimination has SUNK ALL SHIPS and MBE firms and non-MBE firms must find a way to work together. What a great concept for business (and for schools, for education, for religion, for life)!