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Growing Minority Businesses: A Community Building Strategy for Cincinnati : by Ananta Dubey
SOUTHPORT, CT Ė/ -- DiversityBusiness.com /- Today minority-owned businesses are experiencing unprecedented growth. The number of minority-owned businesses in the U.S. increased by 168 per cent in a ten year period to an estimated 3.25 million businesses. Revenues for these businesses grew at an even faster pace during the same time period Ė an impressive 343 per cent increaseĖto $495 billion business ventures. Despite of this growth, the share of minority-owned businesses is still not proportional to the size of minority populations.

The unemployment rate among Cincinnatiís African American population has historically been more than double the average unemployment rate of Caucasians. African American men in Cincinnati are three times more likely to be unemployed as white men (U.S. Dept. of Labor).

Cincinnatiís Economic Inclusion Efforts
The Cincinnati USA Chamber of Commerce works closely with the minority communities under its Minority Business Accelerator Program (Accelerator Program). The Accelerator Program actively seeks to improve the capacity of minority-owned businesses by increasing recognition of the value of minority businesses as suppliers, strategic partners, and, ultimately, as effective engines for job growth, economic development and wealth creation.

In 2005, the Accelerator Program completed a brief survey of the employment demographics of Minority Business Enterprises (MBEs) it had collaborated with over the past 12 months. The survey included 15 firms that highlight the potential that MBEs possess to positively impact the local African American unemployment gap, allowing the entire community to make efficient progress. The survey showed that over 40 percent of the executives in MBE firms were African American, while African Americans are less likely than their counterparts to hold executive positions in Fortune 500 businesses.

Key findings of the survey:
  • MBE workforces were 57 percent minority and 50 percent African American on average;
  • African Americans make up at least 40 percent of the senior management at the surveyed MBE companies;
  • 93 percent of MBEs stated that they have specific programs that insure African American participation in their applicant pool. A number of MBEs noted successes in hiring from the urban core
Impacts of Cincinnatiís Minority Business Accelerator Program

Upon request from the Cincinnati USA Regional Chamber, the Economics Center for Education & Research prepared a study on the economic impact of the Minority Business Accelerator Program on the Cincinnati region. This study examined the economic impact of the Accelerator Programís recent activities during 2004-06. The Accelerator Program works with a number of local MBEs to expand minority business participation in the local economy. This development of local businesses has the potential to achieve substantial economic impact.

An economic impact analysis measures the total economic effect on the region. The total economic effect is derived not only from the direct expenditures made by the local business or organization, but also from the economic benefits that accrue to local businesses and households from the recirculation of this money. This approach requires understanding the nature and extent of these local expenditures in order to calculate how they affect overall business sales, household earnings, and employment in the region. Economic impact analyses multiply local expenditures by an industry and location specific factor that reflects how much indirect business activity, earnings, and employment will result from the initial spending or investment.

The total economic impact of Chamberís Minority Business Accelerator Program is equal to the sum of the sales, income, and the employment provided by MBEs plus their indirect and induced impacts on the local economy. More simply stated the total economic impact is the value of MBE sales plus the value of any other local economic activity that is directly or indirectly linked to them.

Following are the results of this economic impact analysis:

During 2004-06:
  • The Accelerator Program worked closely with 20 of the regionís largest MBE firms;
  • Contract with Accelerator Program corporate partners generated more than $127.9 million in new revenues for local MBEs;
  • This business activity resulted in an economic impact of $273.5 million for the business activity with $195.3 million in earnings and close to 4,500 jobs.
Jonathan Railey, Vice President-Economic Inclusion Strategy at the Cincinnati USA Chamber of Commerce points out that, ďThe results are reflected in contractual activity between regional corporations and local MBEs. Results are also evidenced by the overall revenue growth of the Minority Business Accelerator portfolio companies. Maybe even more important result is the significant increase in entrepreneurial activity of MBE firms observed by the Minority Business Accelerator Program, particularly in firms pursuing acquisitions as a growth strategy."

Because of MBE hiring trends, it can be expected that between 40 and 50 percent of the new jobs created would go to minorities. According to the report, these new jobs would generate $195.3 million in earnings - further augmenting the cityís tax base.

The Accelerator Program has specific goals of creating large, scalable, and sustainable minority businesses. The Economics Centerís study suggests a positive relationship between these objectives and the tactical creation of substantial local demand through the Accelerator Programís Corporate Partners. Jonathan Railey, Vice President-Economic Inclusion Strategy at the Cincinnati USA Chamber of Commerce says, ďEconomic Inclusion is a vital strategy for regional economic growth. The Minority Business Accelerator Program has demonstrated success in furthering Economic Inclusion by collaborating with a very engaged corporate community, strong African American entrepreneurs and other organizations operating in the minority business development spaceĒ.

The Freedom Center Makes an Impact on the African American Community

The National Underground Railroad Freedom Center (Freedom Center), a museum and a national educational center, was opened in August, 2004 in Downtown Cincinnati. The Economics Center for Education & Research undertook a study in 2004 to analyze the economic impact of the construction and operation of the Freedom Center on Cincinnatiís regional economy.

The study found that the construction of the Freedom Center directly benefited the local African American community through the employment and earnings of African Americans who worked for the Freedom Center and under contracts for construction, exhibits, and related capital items. Of the total direct employment and earnings from cash outlays for the Freedom Center, the African Americans have held 40 percent of the jobs and earned 36 percent of the total pay.

The study found that the local African American community also benefits from the indirect employment that occurs within the local economy as a result of the initial spending. While the indirect impact is not as great, in total, the local African American community has received 27 percent of the jobs and 23 percent of the earnings generated by construction of the Freedom Center. These percentages include both the direct impact of the Freedom Center and the economic multiplier effects from subsequent economic activity.

Comparing these numbers with figures on the overall African American participation in Cincinnatiís local economy, the following table from the impact report shows that the Freedom Center has achieved total rates that are nearly three times the overall averages for the Cincinnati metropolitan area.

African American Share of Employment and Earnings (From construction of the Freedom Center)

 

Employment

Earnings

Freedom Center construction

39.9%

36.5%

Indirect impact of construction

13.6%

10.9%

Total Construction impact

27.1%

22.8%

Cincinnati MSA average

  9.4%

  7.7%



When all employment and earnings are taken into consideration, the study found that the African American workersí share of the Freedom Centerís impact is 802 jobs, with earnings totaling $17.4 million.

African American Share of the Economic Impact of the Development of the Freedom Center

 

Employment

Earnings

Percent African American

27.1%

22.8%

African American

802

$17,368,879

Total

2,960

$76,263,657



Some other strategies of economic inclusion:
  • Many of the MBEs recruit directly from historically Black Colleges and Universities in Cincinnati region;
  • In addition to working with the Urban League and several other minority organizations that have focused on employment, African American-owned construction companies have organized a particularly interesting program. The E.Y.E.S. Program (Engaging Youth in Engineering and Science) seeks to identify African American high school sophomores who are interested in a career in construction services (e.g. architecture and structural engineering). After admittance in the program, the students are rotated among several MBE construction and construction related firms as interns. The students are able to identify mentors as well as choose an emphasis for further study. Following high school graduation, the students attend college and intern during the summer in their field of study. While none of the students has graduated from college (the program is less than 6 years old), the participating MBEs hope to recruit the students back to Cincinnati.


In conclusion, studies point to the fact that strategies related to economic inclusion at local levels can go a long way in contributing to the development of minority groups. Employment generation among minority groups has always shown impacts on the larger community. Such strategies lead to economic development of the region along with the betterment of the target minority group. The nationís fifth largest Chamber, Cincinnati USA Chamber of Commerce, realizes that ďaccelerating the growth of sustainable MBEs is a strategy that has positive local community effects, especially on minority employment.Ē

About DiversityBusiness.com
Launched in 1999, DiversityBusiness, with over 50,000 members, is the largest organization of diversity owned businesses throughout the United States that provide goods and services to Fortune 1000 companies, government agencies, and colleges and universities. DiversityBusiness provides research and data collection services for diversity including the "Top 50 Organizations for Multicultural Business Opportunities", "Top 500 Diversity Owned Companies in America", and others. Its research has been recognized and published by Forbes Magazine, Business Week and thousands of other print and internet publications. The site has gained national recognition and has won numerous awards for its content and design. DiversityBusiness reaches more diverse suppliers and communicates more information to them on a more frequent basis then all other organizations combined. We also communicate with mainstream businesses, government agencies and educational institutions with information related to diversity. Our magazine reaches over 300,000 readers, a monthly e-newsletter that reaches 2.4 million, and website visitors of 1.2 million a month. It is a leading provider of Supplier Diversity management tools and has the most widely distributed Diversity magazine in the United States. DiversityBusiness.com is produced by Computer Consulting Associates International Inc. (CCAii.com) of Southport, CT. Founded in 1980.


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