Minority firms should try acquisitions Actions build jobs and create wealth for entrepreneurs

January 18, 1998|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

For Brenda Sterling, the keywords for 1998 are "maximize resources."

It's a daily challenge developing a year-old, home-based, one-person training and consulting firm on a part-time basis while holding down a full-time job, she said.

The solution, she discovered, is to strike up alliances.

Joint venturing will be a major trend this year among minority firms looking to penetrate new markets and foster growth, business counselors said.

Another will be minority entrepreneurs acquiring companies instead of starting their own, they added.

Acquisition is a desirable option because not only does it create jobs, but also retains them, stabilizing the state's tax base, said Larry J. Smith, president and CEO of the Council for Economic and Business Opportunity (CEBO) in Baltimore.

CEBO was founded 30 years ago to help small and minority businesses grow and become competitive.

Buying an existing business and infusing it with new capital, new ideas and new energy is "the most expedient way to run up a business' success curve," Smith said. "We're now seeing a more sophisticated, prepared minority entrepreneur who is about wealth-building and job creation."

Those industries in which CEBO sees entrepreneurs express interest in purchasing are technology and manufacturing companies, Smith said.

Acquisition requires more capital than a typical start-up company, but money "should be plentiful because these are the type of deals bankers and venture capitalists want to finance," Smith said.

But for those entrepreneurs who prefer to start on the ground level -- and maybe without all of the necessary capital -- joint venturing may be the key to growth, business counselors said.

"In many instances, when minorities go to borrow money, they can't because they don't have the assets to offer as collateral," said Sonia Stockton, the Baltimore region's executive director of the Small Business Development Center, which is managed by Towson University.

Combining forces with other companies will allow a start-up to pool their resources, Stockton said.

Sterling operates Enable Business Development Institute, which counsels new businesses on how to grow, out of her East Baltimore home. She's taking her own advice by partnering with other businesses and nonprofit organizations. "In the past, businesses have treated one another as merely competitors. There's room for so much more," said Sterling, a department administrator in Johns Hopkins University School of Hygiene.

Sterling's first joint venture is with the Small Business Development Center, which provides nonprofit counseling services. Her institute will co-sponsor workshops with the center to boost her list of clients and assist them with more of the day-to-day care they may need, but a nonprofit organization most likely can't give, she said.

In the new year, she also wants to build alliances with banks that are approached by entrepreneurs who want loans but don't have business plans. Sterling said she wants the banks to refer the entrepreneurs to her.

"For me to continue to grow, I have got to bring about cooperative kinds of relationships," Sterling said.

According to the National Foundation for Women Business Owners, there were 167,000 women-owned businesses in Maryland in 1996, the most recent year for which statistics are available.

The number of black-owned firms totaled 35,758 in 1992, according to the most recent figures available from Bureau of the Census data. There were 7,289 Latino firms, and 13,697 firms owned by Asians, Pacific Islanders, American Indians and Alaskan Natives.

More recent figures are difficult to come by -- and their accuracy is suspect -- because many minority firms are extremely small and may not be on anyone's radar screen, said Arthur E. Petersen, a CEBO business development officer.

"Since the last census count of businesses, many of them are probably no longer around and many, many more were probably created," Petersen said.

Also ahead this year, said Smith, of CEBO, will be more minority business participation in three "growth" sectors: construction, the funeral business and food service.

He said Baltimore's tourism industry will lead to more food-related businesses; the city's high death rate offers increased opportunities for those interested in the funeral business; and participation in the "second renaissance" of the inner city will drive business in the construction industry.

"These sectors represent fairly modest capital requirements," Smith said, "and will be real comers for the minority entrepreneur in 1998."

Pub Date: 1/18/98

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