Minority Suppliers Must Adopt Proactive Strategies To Overcome Tough Economic Times - business management

Black Enterprise, Nov, 2001

What a difference a year makes. Twelve to 18 months ago, corporate America was riding high. Large and small businesses were flourishing, optimism was in the air, and minority-owned small businesses (MBEs) were actually growing faster than small businesses in general. A number of larger minority-owned businesses were even consolidating, merging, and forming alliances at a rate unheard of in American history.

Combine these conditions with the continuous downsizing of America's corporate supplier base, and you get a big challenge -- especially for the minority business owner.

Businesses Can Get Started in a Downturn

But these challenges do not present insurmountable obstacles. A number of minority companies have actually gotten started during economic downturns. William Gerard Mays, founder and CEO of Mays Chemical Company Inc., is a case in point. His company ranked No. 18 this year in the B.E. INDUSTRIAL/SERVICE 100's. He says his company was founded during a recession "when interest rates were 21% and people said you couldn't make money at those rates in a business with profit margins as skinny as distribution. We've been through it before." (B.E., June 2001. p. 140)

Mays's company was not the only minority-owned corporation that came through last year with solid results. BLACK ENTERPRISE reported in June that sales of its B.E. INDUSTRIAL/SERVICE 100's companies grew 25.1% from $8.7 billion in 1999 to $10.9 billion in 2000 --cracking through the $10.0 billion mark. Meanwhile, the National Minority Supplier Development Council (NMSDC) reports that corporate members spent slightly more in 2000 with minority-owned businesses than they did a year earlier -- over $50 billion in 2000, compared to $48.7 billion in 1999. (Exact figures for 2000 not released yet; NMSDC website is www.nmsdcus.org.)

What can small businesses do to deal with the present slowdown? Be proactive, say the experts. Or, as Ralph Moore, Chicago-based expert on supplier diversity, says "Minority businesses have three options: Transformation; consolidation; or extinction."

Here are some of the actions the experts recommend to make small businesses more competitive in today's tough economic landscape:

* Build a strong infrastructure. Small businesses, like larger ones, require a strong team of managers, access to debt and equity capital, and product diversification.

* Build alliances. An alliance may enable you to serve a wider region or diversify your product offerings. Since many corporations are looking for national suppliers, this can help a smaller or mid-sized business expand its geographic reach.

* Explore Tier II opportunities. Corporations are putting pressure on their Tier I suppliers to source through minority-owned suppliers. By participating in Tier II opportunities, you may be able to grow your business substantially and move closer to becoming a Tier I supplier

* Become certified as a minority-owned business. Many types of certification are available ranging from that of the NMSDC (through its regional affiliates) to programs of various state and federal agencies. "Try to find someone who understand all types of certification, so that you select wisely and make sure that certification works for you," advises Lisa Tolliver, a New York-based business consultant who specialize in the development of MBEs. (Website at www.36omeridian.com)

* Make sure you are included in major MBE databases. Certification by NMSDC will automatically put you into that organization's national database, the Minority Business Information System. You should also go through the certification process for PRO-Net, the large database run by Small Business Administration in conjunction with other federal government offices.

* Become active in local council job fairs and events. NMSDC regional councils and other organizations hold annual marketing fairs for suppliers with corporate members, as well as smaller one-to-one events and company-sponsored activities. These events can help you establish excellent contacts at major corporations.

* Attend MED Week. The Minority Business Development Agency of the U.S. Department of Commerce holds an annual week-long event in Washington, DC each fall called the Minority Enterprise Development Week, (MED Week) to honor minority business and help suppliers expand contacts within the corporate world. For more information see www.mbda.gov.

* Take advantage of other government programs and resources. The federal government operates the 8(a) program for minority business. The Department of Defense has a network of special offices which help minority businesses work their way through the certification process and win government contracts.

* Look for funding sources. Capital resources are expanding for minority-owned businesses. Coca-Cola, for instance, recently doubled its investment to $1 million in the Consortium Fund, an NMSDC program which supplies capital to minority-certified businesses

* Become Internet accessible and e-commerce ready. Your company must have the appropriate computer systems and information technology needed to serve your clients. A good computer system, website, and e-commerce strategy are minimal requirements.