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FOR
IMMEDIATE RELEASE
FROM: Nancy
Gardner (206) 543-2580
nancylou@u.washington.edu
DATE:
May 10, 2007
Competition from big businesses, unmet financing needs and
weak sales forecasts are the most pressing concerns shared
by Washington state's minority small-business owners, according
to researchers at the University of Washington. They found
that minority business owners in the state are, much like
entrepreneurs across the country, confident about their abilities
to succeed despite the fact that fewer than one-third of
them feel the state's business climate is supportive.
University of Washington Business School Professors William
Bradford, Vandra Huber and Richard Yalch, co-authors of the
Washington Minority Small Business Survey, asked 376 randomly
selected minority small-business owners from across the state
to describe their confidence levels and expectations about
future industry trends.
 Minority-owned businesses are defined as companies in which
majority ownership is Asian, black or Hispanic. Of those
surveyed, 155 were Asian, 114 were Hispanic
and 107 were black. All of the companies had fewer than 250
employees
and 80 percent have fewer than five full-time employees.
About 16 percent were sole proprietorships, employing only
the owner. Owners from multiple service sectors, including
construction, government, finance, retail and transportation,
participated in the survey.
Their overall confidence level, a measure of how favorably they viewed the future,
was 56 on a 100-point scale. The higher the score, the more favorable the outlook.
This index reflects the owners’ responses to questions about the future
prospects of their business. A flat or neutral outlook would be 50.
"Entrepreneurs everywhere tend to see the glass half-full rather than half-empty
and minority small-business owners in Washington are no exception," said
Huber, a professor of human resources management. "While more than 50 percent
of minority small-business owners said that sales and profits were poor or just
ok during the last quarter of 2006, 60 percent were confident that business prospects
in upcoming months would be good. This optimism keeps Washington’s minority
entrepreneurs going, even when business performance falls short of expectations."
The researchers said that because the number of minority businesses in the state
is growing faster than non-minority-owned businesses, it is important to understand
what helps or hinders their success. According to the U.S. Department of Commerce,
minority-owned businesses have grown three times faster than other businesses
in the last decade.
Bradford, a professor of finance and business economics, added that minority
owners will employ an increasing share of Washington's workforce and provide
a growing share of business tax revenues to support public expenditures. He said
that nationally, small businesses report that competition with bigger businesses
is only the fifth-largest financial hurdle they face (after taxes, insurance
costs, employee costs and weak sales), while minority-owned businesses in Washington
report that competition with bigger businesses is their top challenge. Conversely,
in Washington taxes – including concerns about the business and occupation
tax – ranked only fourth.
"The threat of competition from large businesses is particularly felt by
minority
firms that seek government contracts," Bradford said. "Minority businesses
have lost government contracts to large businesses since the passage of I-200
in Washington state. Initiative 200 outlawed affirmative action in government
contracting and we're seeing the repercussions of it."
According to the survey, the ability to obtain credit is a major sticking point
for Washington's minority business owners. Bradford added that this could be
because the business is not credit-ready or because bias exists in lenders’ credit
decisions.
"Academic studies using national data have found evidence of lending bias
against minorities in general and African-Americans and Hispanics in particular.
Clearly,
more research is needed to understand what’s going on in Washington state
and what needs to be done in the future to keep minority business growing."
The survey also found that:
- Compared to small businesses nationally, more than three
times as many minority
businesses in the state report credit needs are not satisfied.
- 17 percent of minority-owned businesses in Washington said they could
not secure
financing vs. just 5 percent nationwide.
- Black-owned businesses reported the highest proportion of credit needs
not being
achieved at 24.5 percent.
- Asian- and Hispanic-owned businesses reported about the same in proportion
of
credit needs not satisfied at 13.2 percent and 15.2 percent, respectively.
The Washington Minority Small Business Survey was partially
funded with a grant from the UW's Diversity Research Institute,
the Office of Minority Affairs
and Diversity and a grant from the Business School. The researchers
will survey minority
and women-owned businesses this fall.
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