Minority Businesses Feeling More Optimistic About Future Business Prospects

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Minority Businesses in New England expressed more optimism based on a recent survey conducted by the Greater New England Minority Supplier Development Council. This is the third year of the survey of certified Minority Business Enterprises (MBEs). The "Great Recession" had a devastating effect on minority businesses and their attitudes on the future. It appears that improved business conditions have improved their expectations for business growth.

Minority Businesses in New England expressed more optimism based on a recent survey conducted by the Greater New England Minority Supplier Development Council. This is the third year of the survey of certified Minority Business Enterprises (MBEs). The "Great Recession" had a devastating effect on minority businesses and their attitudes on the future. It appears that improved business conditions have improved their expectations for business growth.

The GNEMSDC conducted the third annual MBE Performance Survey of certified minority business enterprises last week. While some of the findings were mixed, most of the results support the conclusion that MBEs are feeling better about their business prospects and the economy. There were several interesting results of the study:

1)     The proportion of small MBEs with sales under $1,000,000 increased in 2010 from 34.2 percent in 2009 to 46.4 percent in 2010. This perhaps is a reflection of MBE sales slipping in 2010 and the increase in the number of smaller MBEs in our program.

2)    The percentage of MBEs who expect their sales to decline continued to fall. In 2009, 57.7 percent of MBEs expected their sales to decline compared to 2008. This percentage fell to 18.5 percent in 2010 compared to 2009 sales and declined further in 2011 when only 10.7 percent of MBEs reported that they expected declines in 2011 sales compared to 2010. This indicates that MBEs are perhaps over their worst fears associated with the deep recession.

3)    MBEs in Distribution and Logistics continue to be the largest sector within the GNEMSDC with over 23.2 percent of MBEs reporting that they are distributors of one form or another. At the other extreme, MBEs in Manufacturing fell most dramatically from 14 percent in 2010 to 0 percent in 2011. This finding requires further investigation, but perhaps is an indication that the recession had a more damaging impact on minority businesses in manufacturing.

4)    The percentage of MBEs who reported having zero contracts with NMSDC corporate members continued to increase in 2011. Fifty percent of MBEs reported having zero contracts with corporate members in 2011 compared to 42.8 percent in 2010 and 38.8 percent in 2009. These percentages are consistent with anecdotal information of corporate members continuing to cut back on spending and reducing the number of suppliers in their supply chains.

5)    The length of time MBEs report it takes to secure a contract with a corporate member increased in 2011. In 2010, 37 percent of MBEs reported that it took at least a year to secure a corporate contract. In 2011, 48.2 percent of MBEs reported that it took at least a year to secure a contract.

6)    The percentage of MBEs reporting that they had received a stimulus related contracts declined in 2011 from 12.8 percent in 2010 to 8.9 percent in 2010. In 2009 only 3.3 percent of MBEs reported having won a stimulus related contract. This finding is consistent with the winding down of the fiscal stimulus program of the American Recovery and Reconstruction Act.

7)    The percentage of MBEs who had either no change in total employees or growth in the numbers of full-time employees continued to grow in 2011. In 2011 94.6 percent of MBEs expected to either maintain their current level of full time employees. In 2010 79.8 percent of MBEs expected to have either no growth or growth in FTEs. In 2009 this percentage was only 60.9 percent. This pattern reflects greater optimism in business conditions.

8)    The percentage of MBEs who had applied for a loan from a financial institution and been declined fell from 17.1 percent in 2010 to 5.3 percent in 2011. The loosing up of credit may finally be impacting MBEs.

9)    The percentage of MBEs who “considered” closing their business declined in 2011 from 18.5 percent in 2010 to 7.1 percent in 2011. Again, this could reflect an improvement in sentiment by MBEs.

10)    The percentage of businesses who considered major organizational changes in 2011 declined from 44.2 percent in 2010 to 30.3 percent in 2011. Again an indication of improving conditions and sentiment.

11)    Two new questions were asked in this year’s survey:

a.    Sixty six percent of MBEs reported that they would not be willing to merge their business if it resulted in a dilution of ownership below 51 percent.

b.    Fifty five percent of MBEs reported that given their current organizational and financial capabilities they could handle contracts valued over $1,000,000.00.

The Greater New England Minority Supplier Development Council (GNEMSDC) is a regional affiliate of the National Minority Supplier Development Council (NMSDC). The mission of the NMSDC is to provide a link between Corporate America and certified MBEs. The GNEMSDC covers the six New England states of CT, MA, RI, ME, NH and VT. The GNEMSDC has 240 corporate members and 400 certified MBEs.

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Fred McKinney
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