Best regions for business: achieving business success today may depend on where you locate your business - Entrepreneurship

Black Enterprise, March, 2003 by Rebecca Rohan

JUST WHERE IS THE BEST PLACE TO LOCATE YOUR company? These days that question may be a head-scratching proposition--especially with the number of states reeling from budget crises and slowly recovering from last year's recession. But geography is a worthy consideration if one of the following statements applies:

* Your business is incredibly successful and it's time to clone it across the country.

* The market you're in is as dry as the Dust Bowl from The Grapes of Wrath.

* You're sizing up sites to sprout your first venture.

One way you can make such a daunting choice is through the use of the research, first-hand accounts, and advice from the regional fronts you'll find in this article. We begin by pointing out the four regions of the country--Northeast, South, Midwest, and West--that have high numbers of fast-growing, black-owned businesses. Of course, regional information is only one piece of the puzzle: You have to choose a location that is suited to your type of business and determine how state, city, and community policies will affect it. As always, you'll need to do market research if you provide a product or service in a given locale, as opposed to owning a factory that ships parts all over the country. Still, starting off in a region that has proven fertile ground for fast-growing businesses could put your business one step ahead, depending on key factors for your particular enterprise.

How have we identified these areas? First, we pored through data compiled from the ING Gazelle Index (www.gazelleindex.com), a quarterly survey of the fastest-growing, black-owned businesses in the United States conducted by Dr. Thomas D. Boston, president of the Atlanta-based Boston Research Group Inc. (www.bostonresearch.com) and member of the SLACK ENTERPRISE Board of Economists. Next, we gained valuable insight from experts like Boston and Dr. Karen Y. Wilson-Starks, president and CEO of Transleadership Inc., based in Colorado Springs; information from resource organizations; and front-line intel from owners of successful businesses classified as "gazelles."

WHERE THE GAZELLES ARE

Boston Research Group Inc. (BRG) identified 1,497 African American-owned businesses with 10 to 100 employees (the average was 25) and employment that increased by at least 5% over the last five years. BRG surveys 350 of these "gazelles" at random each quarter and beaks the country into the following regions:

* The South Alabama: Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia, and the District of Columbia.

* The Midwest: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.

* The West: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

* The Northeast: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont.

The highest concentration of fast-growing black businesses is in the South, with 52.9%; followed by the Midwest, with 21.1%; the West, with 14.9%; and the Northeast, with 11.1% (see chart). In interviews with experts and entrepreneurs, we found that the characteristics of a certain region that appeal to entrepreneurs include a favorable climate for black business development, a viable support system for small enterprise, and the expense of doing business there--including labor costs and tax structure.

According to Boston, fast-growing African American entities flourish in areas with economic activity and growth and a strong history of expansion in African American businesses. The renowned economist asserts, "Studies I've done have demonstrated three factors that affect the growth of African American business: a large in-migration of black entrepreneurs, along with a large general population growth; income growth in the general population; and, most important, black political power." Boston says he found those elements in the places with the most vigorous growth of African American businesses--notably, the South and Midwest. "Atlanta, D.C., Richmond, Baltimore, Chicago, and Detroit have a strong and long history of black entrepreneurship," says Boston. "As blacks in those cities gained power, they created opportunities for others. The extent to which blacks can exercise power in a particular area [for example, having a mayor who can influence procurement] can create a more favorable economic environment.

"If a politician's political base is black," he adds, "the politician is more closely aligned with the African American community. Local city governments establish affirmative action for minority businesses, and that influences others in the private sector to do the same thing; it influences practices. It's bad business practice for a big corporation to have no commitment to affirmative action. The programs themselves are important because there is still discrimination, and we need government to make sure they are successful."