Although the number of minority-owned businesses in the United States has more than tripled in the past 20 years, more minority-owned companies need to position themselves for significant growth. Here are six strategies to help you pursue size and scale.
By Matt Alderton
When Napoleon Barragan moved to the United States from Ecuador in 1969, he wanted to be a teacher. Instead, he was making $1.75 per hour and just $70 per week as a factory worker manufacturing plastics, carpeting and shoes.
But in 1975 Barragan used his savings to open a small furniture store in Queens, N.Y., and became an entrepreneur.
After opening his second location in Manhattan, Barragan saw an ad for Dial-A-Steak in the New York Post and decided to sell mattresses by phone in order to increase his bedding sales. More than 32 years later, Dial-A-Mattress — now 1800mattress.com — has more than 350 employees, annual sales of more than $170 million and scores of customers worldwide.
"It began in a single store, and the principles learned were then applied on a larger scale," says Barragan, now 67. "The success that has followed has been wonderful."
The Minority Business Landscape
Barragan's company is just one of approximately 4.1 million minority-owned businesses in the United States, according to a 2002 report from the U.S. Census Bureau, the latest data available. That number was 35 percent higher than 1997 figures, suggesting enormous progress in the evolution of minority business enterprises in the country.
It's promising, but it's not good enough, says James Lowry, former senior vice president and current senior advisor for The Boston Consulting Group, a Boston-based management-consulting firm. That's because 1800mattress.com is the exception rather than the rule. Although Barragan continues to grow his business, Lowry observes, his peers are doing the opposite, starting businesses that neither grow nor profit.
Lowry, who authored a 2005 Boston Consulting Group study on minority business enterprises titled Realizing the New Agenda for Minority Business Development, says it's important to think big. He advocates 'growing businesses of size' that have the potential to survive and grow.
Fueling Global Growth
To help you expand in an increasingly global marketplace, Lowry and his team identified six strategies for minority entrepreneurs. To be successful, minority business enterprises must:
The biggest obstacle to minority business growth is the mindset of minority business owners. "Many minorities who have built successful businesses will stop psychologically at $5 million [in annual revenues]," Lowry says. "I tell them, 'If you can make millions, why not make billions?'"
Focus on Growth
Many minorities start businesses in low- or no-growth industries, where there are low or no barriers to entry. To grow in both size and scale, Lowry says minority business enterprises must expand and diversify through mergers and acquisitions, as well as outsourcing opportunities. It's not enough to do what you've always done, he says. Instead, minority business enterprises must pursue new opportunities to create added value for new and existing customers.
Partner for Success
Although many entrepreneurs are reluctant to embrace joint ventures, aligning strategically with large corporations, other small businesses, trade associations, government agencies, universities and advocacy groups enables them to be more flexible and responsive within the marketplace, Lowry insists.
Serve Minority Consumers
Just as minority businesses are growing, minority markets are, as well. Minority business enterprises, therefore, have a unique opportunity to serve those markets, Lowry says. They are equally well positioned to help mainstream corporations serve them.
To thrive in the global marketplace, minority business enterprises must pursue a global footprint, pursuing relationships and sales opportunities within developing economies in Asia and South America. "The world is shrinking," Lowry says. "We need to be thinking globally, investing globally and forming partnerships globally."
Get Money Smart
Lowry urges minority business enterprises, like any small businesses, to develop a clear understanding of capital markets. That means learning about the options available — including credit card financing and bank loans — and aggressively pursuing private equity from angel investors and venture capitalists.
For his part, Barragan offers a seventh — and far simpler — strategy for achieving long-term growth: Start small and grow big, one customer at a time.
"Don't go in with expectations of trying to achieve global success," he says. "Start with an individual customer and satisfy them, take the principles learned and apply them to others. Before long, the momentum will build your company."
More Information on Minority Business Development