Creating a new business agenda

Black Enterprise, Jan, 1996 by Rhonda Reynolds

"WE'VE GOT THE POWER!" ROARED THE 388 minority business owners doing double duty as state representatives at the White House Conference on Small Business held this past June. Testimonials and demands were rampant as the deputized special interest group's energy vibrated throughout the Hilton Hotel.

All the while, Michael Clark, president and CEO of Atlantic-Pacific Inc., an engineering and manufacturing firm in Fremont, Calif., just leaned against a wall and stared passively. After the rally, Clark chatted with cohorts, then lobbied his case to several clusters of black entrepreneurs. "Our businesses are to small," Clark said. "We need to focus on getting ahead by reclassifying the `small' category and creating a `micro' category that caters to the needs of very small businesses."

The Small Business Administration generally defines a small business as having less than 500 employees or less than $5 million in sales. But in many industries, such as retail, firms can qualify as "small" with $21 million in sales. According to the latest U.S. Census Bureau figures of some 424,165 black-owned businesses, only 189 gave more than 100 employees. Just 328 have more than 50 employees. Total revenues for black firms is $19.8 billion or, on average, $46,592 annually. Clearly, most black-owned firms fall short of the SBA's definition of small.

Just how the SBA defines small has become a sore spot with many entrepreneurs, regardless of race. Proponents of the micro business movement say that very small firms could be better targeted and therefore more precisely serviced by the SBA. Such a distinct category would help provide fairer competition among other very small firms in the areas of loans, financial and technical assistance programs, innovative research assistance programs and government procurement contracts. The SBA's fundamental purpose is to promote fair competition among small firms.

But not every small business owner supports the micro movement. "We have to get off our feet and stop begging for equal opportunity," says Roosevelt Roby, president of the Santa Monica, Calif.-based Reese Network, a 66,000-member association of home-based businesses." We just need to lick our wounds, move on and stop asking for special treatment."

Bennie Thayer, president and CEO of the National Association for the Self-Employed (NASE), a 320,000-member association in Washington, also disagrees with the micro movement. "Congress talks a big game, but [African Americans] are the last ones on the totem pole," says Thayer. "A micro category would just further separate us and allow Congress to look further beyond our needs."

LEVELING THE PLAYING FIELD

Whatever the opinions of black business leaders on the micro movement, they all agree that the black business community is walking on broken glass. In general, white male business owners are irked by affirmative action and assistance programs targeted at minorities, and they're marshaling their voting blocs, pushing for an end to 8(a) set-asides.

Now on the chopping block are Specialized Small Business Investment Companies, which are being scrutinized for allegedly granting loans to minority entities that were destined to fail. (See "Under Fire," Enterprise, November 1995.)

Moreover, the Minority Business Development Agency remains under constant threat of being wiped out with a mere presidential signature. The agency, which came into existence under President Nixon's executive order, helps to develop minority firms.

Clark and other business owners have been trying to persuade SBA Director Philip Lader to take the Regulatory Flexibility Act and reclassify the "small" definition, adding a "micro" category, which would encompass firms with less than $10 million in revenues and 50 employees. This way, a two-employee firm with $100,000 in sales wouldn't be forced to compete for procurement contracts with a 200-employee firm reporting $20 million in sales.

Lamenting about a routine $20,000 procurement contract for plastic examination gloves, Trent Harbin, president of Assured Medical Supply in Detroit, is lobbying for the micro category. It seems that many hospitals hand over small contracts to major medical supply companies, because smaller businesses can't beat the bulk-buying capabilities of the multimillion dollar firms. "[The larger companies] have more buying power. They should not even be on the same screen," says the 43-year-old entrepreneur.

After 20 years of selling medical supplies for three major manufacturers, Harbin opened his company in 1993. He recorded a respectable $200,000 in sales his first year in business. "I had to hustle against competitors [twice my size] to get clients," says Harbin, who knows all the major players personally. "A micro status would have helped reduce unfair competition." Harbin predicts $1.7 million in sales for this year.

Needless to say, minority entrepreneurs who support the micro movement aren't merely bellyaching about the paltry 5% to 10% set-asides pecked over by African American, Latino, Asian, Native American and white women business owners.