Minority-owned businesses (MOBs) are growing faster in numbers and receipts than companies overall in the U.S., according to the Census Bureau. Census figures show just over three million MOBs in 1997 with about $591 billion in revenues (3.2% of the U.S. total) and 4.5 million employees (4.4% percent of the total).

Based on data from the last Census of Manufacturing (1997) released this year, MOBs increased in numbers four times faster than all businesses since the last census in 1992. Receipts rose 60% over the period compared to 40% for all U.S. firms. Growth in numbers of Hispanic-owned firms outpaced other minorities, while revenues of Asian-owned firms were higher. Women own nearly four out of 10 African American MOBs. Another fact: MOBs are concentrated in five states: California, Texas, New York, Florida and Illinois, which accounted for nearly 50% of the nation's MOBs.

MOBs have shown staying power in the federal procurement market despite a Supreme Court ruling in the late 1990s that overturned a 10% price preference system for minority firms in Federal highway projects. MOBs and those classified as small and disadvantaged (SDBs) have continued to earn 6.5-7% of the Federal government's $200 billion plus buys over the past two fiscal years, according to the Federal Procurement Data Center. The Defense Department, the leading Federal buyer, continues to exceed its legislative mandate to award more than 5% of its contract dollars to SDBs, but most of that represents subcontracts not primes. The program is scheduled to terminate Dec. 31, however, unless Congress extends it.

Despite these gains, MOB and SDB association spokespersons and small business advocates in Congress are dissatisfied. Sen. John Kerry (D-Mass.) chair of the Small Business Committee, who accuses the administration of shortchanging "millions of small businesses in competing for the federal procurement dollar," is sponsoring bills that would:

• Boost the target for small business procurement to 30% from 23% (for fiscal years 2000 and 2001, the small business shares of federal procurement were 22.5% and 22.7%, respectively, just short of the legislative mandate),
• Create an ombudsman for SDBs, and
• Loosen up procurement "bundling" practices that Kerry says are keeping government dollars away from smaller firms (see box on page 21).

In addition, Kerry has written to the Small Business Administration complaining that it has not implemented provisions of the Small Business Reauthorization Act of 2000 to determine whether women-owned businesses require special help.

Assessing the federal programs for setting aside some contracts for competition only within MOBs, John Robinson, president of the Minority Business Development Council says the current administration has not been "as aggressive in marketing the program," for setting aside some contracts for competition only within minority businesses. He would like to see the Department of Defense small and disadvantaged business program extended.

Size and scope of MOBs has changed dramatically over the last 30 years since the government started giving them preferences in contracts. Some employ thousands of people and top $1 billion in revenue. When the minority preference program began in 1969, Robinson says the average Council member's revenue was less than $40K annually, and typically they had only one employee. Now, he says, sales average $5 million and go up to $330 million and beyond.

Nevertheless, the Census figures show that minority enterprises still lag significantly behind other businesses in revenue. They have average gross receipts of about $194,600, approximately 5% of the $1.0 million average for nonminority firms.

Growing status of women-owned businesses among minority populations signals a growth sector in small businesses. "Women of color continue to start businesses at a faster rate than other women and all businesses, " says Nina McLemore, chair of the Center for Women's Business Re-search. "The number of minority women-owned firms in-creased 31.5% between 1997 and 2002, more than twice as fast as all women-owned firms, and more than four times the national average. Women owners have increased their presence in every major ethnic group, she says. Based on recent growth rates, she estimates there are currently 14,116 minority women-owned firms with revenues of $1 million or more, and 111 with 100 or more employees.

Traditionally government's approach to small and disadvantaged businesses, including MOBs, has focused on training and preferences for government contracts. The Small Business Administration's 8(a) or minority-owned business preference program, for example, certifies business for such preferences for nine years. The businesses are then graduated out of the program. Many former 8(a) firms have disappeared in the mainstream, however. Of about 1,500 firms that completed their 8(a) program recently, only 41 confirmed that they were still operating independently, 10% went out of business and most of the rest failed to respond.

Some businesses that use MOBs and SDBs say the certification process itself is a barrier to greater participation by minority enterprises because it involves a lot of time, paperwork, and money. The rules and procedures for certification take up 61 fine-print pages in the Federal Register.

William Lewandowski, vice president for supply management at the Aerospace Industries Association, calls the certification process "onerous." He says business owners have to pay SBA-approved consultants hundreds to thousands of dollars to fill out the paperwork in order for them to be counted as SDBs by prime contractors who hire them. As a result of the limited participation in government-certified preference programs, advocates for MOBs and SDBs are looking elsewhere.

The trend now is to help MOBs and SDBs become part of the larger economy. Two examples of mainstreaming, according to Robinson, are a Commerce program to get venture capital into deserving companies and a proposal the Council has made to the Department's export programs to help minority firms export to West and East Africa.

Ronald N. Langston, Minority Business Development Agency (MBDA) national director, says minority firms receive only 2% of private equity investments.

In July, Langston announced formation of the MBDA Equity Capital Access (MECA) Program, which is a partnership with the Emerging Venture Network, the first national program to offer minority enterprises training to obtain venture capital. The first MECA project is identifying up to 200 entrepreneurs in a competition. Twenty five will be selected to participate in an intensive training session or "boot camp," which will take place during the National Minority Enterprise Development Week Conference in Washington, D.C. on Sept. 24-27. Five will present their concepts to a panel of venture capital experts for feedback and coaching.

In order to gain revenue and provide more jobs, policymakers and minority advocates are trying to encourage use of MOBs and SDBs outside their traditional concentration in services. As of 1997, 44% were in services, 14% in retail trade, 8% in construction, and only 2% in manufacturing.