Minority Business Development in Cleveland

1. john a. powell Executive Director Kirwan Institute for the Study of Race & Ethnicity, Ohio State University http://www.kirwaninstitute.org Roger Clay Jr. President National Economic Development & Law Center http://www.nedlc.org Minority Business Developmentin Cleveland Prepared for the Cleveland Foundation August 29, 2005

2. Purpose of this Study • Identify strategies for The Cleveland Foundation to improve its minority business development approach

3. Methodology • Analysis of national MBE trends • Identify best practices • Analysis of minority businesses in Cleveland & Cuyahoga County • Interviews with stakeholders

4. Presentation Overview • MBE development matters • Economic and geographic analysis • What is and what isn’t working in Cleveland? • Community leader perceptions • Best Practices among Intermediaries • Emerging Opportunities • Conclusion

5. Why Does MBE Development Matter? • MBEs will become an increasingly important factor in local, regional and national economies • Minority businesses tend to hire non-white employees at a higher rate than do majority businesses

6. National MBE Trends • The number of minority owned businesses is growing faster than the rate for all U.S. firms • 17% of all companies in the U.S. were owned by minorities in 2002

7. Yet, A Decline in National Market Share for MBE’s 92-02

8. 1997-2002 – Sales up nationally for African-American- and Hispanic-owned businesses, but down in Ohio

9. Description of Cleveland’s MBEs • Sales and receipts of African American-owned businesses grew by 284% from 1992-1997. • Larger MBE's are doing relatively well compared to other metropolitan regions • Most Hispanic or Latino MBEs are non-certified and disengaged from the regional economy

10. Firm Expansion Rate Number of Employees Number of Years Average Credit Rating

11. Industry Concentration

12. Size by Industry • LARGE: • Wholesale Trade • Manufacturing • SMALL-to-MID-sized: • Retail Trade • Financial Services • Construction • Micro OR SMALL-to-MID-sized: • Professional Services • Growth: Financial Services were the only sector where the proportion of MBEs over $2.5 million in sales grew from 2000 to 2004

13. Credit Rating by Industry

14. Geographic Distribution • Our analysis looked at the geographic location of MBE’s and how they were located in respect to other regional trends

15. Where are MBEs located?

16. MBEs by Sales Volume

17. MBEs by Change in Sales Volume 2001-2005

18. What is Working in Cleveland? • Targeted technical assistance, business networking, mentoring, and supplier diversification efforts • Mainstream lending institutions compete for MBE lending • Cleveland has best practice community development financial institutions and community development venture capital funds • Good support from universities and colleges

19. What is not working? • Exclusivity • Competition • Informal business networking • Need for more accountability and measurable outcomes • Need for programs to monitor and take advantage of public procurement programs

20. Community Leader Perceptions • Structural challenges to MBE development • Limited social capital • Racism and weak political environment • Economics • Public education • Institutional based challenges • Difficulty in accessing capital • Need for more cooperation and specialization • Individual based challenges • Limited skill sets; talent; and strategic vision • Tendency toward life-style businesses

21. Best Practice for foundations funding MBE development – a comprehensive approach • Targeted Business Development Assistance • Well-planned Business Networking • Research, Advocacy & Public Policy formulation • Community development financing • Promotion of regional climate to support MBEs

22. Emerging Opportunities • Strategic partnerships • National trend toward supplier diversity • Strong and emerging sectors locally • New public sector affirmative procurement programs – especially Cuyahoga County

23. More Emerging Opportunities • Ohio’s new Minority Business Venture Capital Tax Credit Program • Large land bank of the City of Cleveland • New workforce development strategies • Local market gaps for small-businesses • Retail and Services in the growing Latino community

24. Recommendations • The Foundation should serve as a funder and convener of intermediaries working to promote and develop MBE • Support for MBE intermediaries serving various parts of Cuyahoga County, in addition to Cleveland • Provide multi-year grants

25. Recommendations • Fund intermediaries that: • Articulate measurable goals and outcomes • Coordinate and cooperate with other intermediaries funded by the Foundation • Partner with diverse stakeholders to support minority businesses • Develop a tracking system to monitor the health of minority businesses

26. Recommendation • Support the following: • A clearinghouse intermediary • Technical assistance and professional development grants to intermediaries • Research and evaluation to support the continued refinement of MBE services • Public policy formulation and advocacy

27. Recommendations • Support for multi-organizational and regional strategies that target specific industry sectors • Support for micro-enterprise and small-business development strategies that target industries with the most potential to grow to the next level

28. Conclusion • The Cleveland Foundation has a strategic opportunity to take its MBE promotion and development to the next level, with the combination of the intermediaries in place and many exciting, emerging opportunities.