One positive that emerged from the 2007–2008 credit crisis—and its subsequent recession—was a spark in entrepreneurship. Nearly one of every 10 U.S. companies operating today was launched within the past five years, according to a September 2016 U.S. Census report.
To narrow it even further, approximately 13 percent of today’s Black-owned businesses were also started during that time frame. There are now more than 2.5 million Black-owned businesses in the United States, which generate more than $150 billion in gross revenue, according to a 2016 report from the Minority Business Development Agency.
But those numbers still pale when compared with those of nonminority firms, which total $10.5 trillion across nearly 19 million companies. With regard to other minorities, U.S. Hispanic-owned firms (3.3 million) produce three times more revenue than Black firms, while a smaller number of U.S. Asian firms (1.9 million) generate nearly five times as much revenue Black firms do.
Reasons for the disparity abound, from higher rates of failure with Black-owned businesses to lack of access to capital and resources.
There is a solution, however: Growing existing African-American-owned enterprises.
“We need more companies to move out of the small-business category and into the middle-market business category,” says Steven Rogers, the MBA Class of 1957 Senior Lecturer of Business Administration at the Harvard Business School.
Middle-market firms—which generate at least $10 million in revenue—are economic engines, despite their diminutive presence. Of the 136,603 middle-market companies in the United States, only 1.6 percent are minority-owned, yet those firms employ 34 percent of employees in the category and produce 42 percent of annual revenue, according to a 2015 American Express report.
But growing a company isn’t easy. It requires an approach that focuses on finding ways to increase market share and also deals with scaling the operation properly, which include hiring new employees, locating (or building) more office space and retooling processes to handle the increased output.
“You’ve got to know your product and/or service and the demand for that,” says Marc Wallace, a chair at Vistage Worldwide, a San Diego-based executive coaching firm. “And once you’re out of the blocks and generating top-line revenue, it’s imperative to think beyond that first year or two and how you’re really going to expand.”
EBONY spoke with Wallace and two other experienced executives who share their practical tips for small-business owners about growing their enterprises.
A slight pivot can lead to tremendous growth
For Janice Bryant Howroyd, CEO and founder of the ACT•1 Group, a Torrance, Calif.-based employment and management company, the aha moment came more than 20 years ago when a client needed to quickly staff up its company.
She and her team flew to Silicon Valley and, within days, laid the groundwork for finding the right team, processed payments and provided the client with detailed reporting and employee metrics.
The client was so impressed it offered to buy the proprietary management software from Howroyd. “My brother encouraged me not to sell. He said, ‘If they want it that badly, they’ll buy through you, not from you,’” says Howroyd, who is No. 34 on the Forbes list of America’s Richest Self-Made Women and also runs a leadership management blog (askjbh.com). “In that moment, I saw our future.”
Howroyd and her team pivoted and developed their software into AgileOne, a company that provides management and staffing programming for clients. The move has helped the Act•1 Group grow its annual revenue to more than $2 billion, with 2,700-plus employees serving 17,000 clients across 21 countries. But “as you consider pivoting or expanding, know your 3Cs: your core, your customer and your credit bandwidth,” she advises.
Bring in the right people
The mid-’90s were good for David Steward and World Wide Technology. Thanks to the U.S. Small Business Administration’s 8(a) initiative for small disadvantaged businesses, the St. Louis-based technology solutions provider landed contracts with the Department of Defense and the General Services Administration, which constructs and manages government buildings.
World Wide’s annual revenue jumped from $17 million in 1994 to $74 million in 1995. A few years later, the company broke $1 billion and had to scale up, fast. “We were re-engineering the entire business and at the same time having accelerated growth,” recalls Steward, the company’s chair and co-founder. “That’s like changing the engine while the plane is in the air.”
Keeping up with that kind of growth meant identifying, hiring and grooming employees who were a good fit for the company. “It’s all about culture,” Steward says. “If you can get the right people with the right mindset, the right core values and the ability to change on a dime, then you have the ability to invest and do what’s best for the health and long-term value proposition of the business.”
Annual revenues topped $9.347 billion last year for World Wide, which has 4,000-plus employees and is about to move into a new $95 million corporate headquarters.
Plan, plan, then plan some more
The biggest hurdle for many small business owners, in Wallace’s opinion, is a lack of planning. Figuring out ways to grow and scale up is one thing, but resource planning is integral to sustaining any business. “People don’t give enough thought to things such as ‘Am I capitalized enough?’ or ‘Am I willing to commit to what it’s going to take to make that happen?’” he adds.
Business owners should develop a business strategy that’s at least three to five years out, Wallace advises, supplemented with one-year business plans that focus on the more tactical work of getting things done and meeting goals. “Step by step, year by year,” says Wallace. “If you try to circumvent this and go haphazardly about it, you may be OK for a while, but chances are you’re going to fail.”