A measure of profits. - Free Online Library

Thirty years ago, Birmingham was seen by many as the Johannesburg of the United States. So rigid was its segretion system that it was comparable to South Africa's apartheid. Birmingham had a downtown withim a downtown, a separate business section of shops and stores operated by blacks for blacks. With the Carver Theater on one corner and the Famous Theater on another, blacks flocked to Fourth Avenue North to spend their money. With black consumers imprisoned behind the walls of racial hatred, black-owned businessess were plentiful--and they were successful. But that was thirty years ago. Today Birmingham is no lnger the segregated, dirty, steel town that only allowed blacks into City Hall to clean up. Arican-Americans run City Hall, and the steel industry has been replaced by white-collar service jobs. The new Birmingham's leading employer is not U.S. Steel International Inc., but the 60-block University of Alabama at Birmingham (UAB) Medical Center. Birminghamm's success at diversifying its economy, while manufacturing jobs are drying up across the nation, has allowed it to keep its unemployment rate at 5.7% in 1991, compared to 70% for te state of Alabama and nearly 8% for the nation. With UAB and regional telecomunications giant BellSouth Corp. poised for continued growth, the city's future looks bright. Unfortunately, the success story for business in Birmingham has not mirrored the African-American companies. Their story is quite different-one that, only in recent years, has begun to change for the better. The depths to which black entrepreneurship fell in Birmingham became glaringly obvious to the rest of the world when a 1987 American Demgraphics magazine article listed the city dead last among 48 cities suveryed for their rate of balck business ownership. The statistic was an ambarassment to Richard Arrington Jr., who was sworn in as Birmingham's first black mayor in 1980. While pointing out that the article was based on statistics from 1982, when his first admistration had yet to make many changes, Mayor Arrington had to admit that much needed to be done to improve the environment for black enterprise in his city. Now, five years later, the intensified efforts by Arrington, working in concert with the city's predominantly white corporate and financial institutions, have made a difference. "Whe are still in what I would call the early evolutuinary stages for the development of black business," says Arrington. "It is especially important for people to take a look at the development in the city in the last decade. They will see the environment emproving. That improvement includes a greater awareness by the corporate community as a whole about the advantages of black business development for the entire community." Indeed, through public/private initiatives designed to give minority-owned businesses a boost through special capital investment and joint venture programs, rather than set-asides, the climate for black businesses in Birmingham is greatly improved since 1982. Black-owned companies, such as telecommunications consultants T.A. Lewis & Associates Inc., construction company BIRC Inc. General Contractors, investment bnankers Gilchrist & Co, Inc. and pest control company Ala PestCo., are positioning themselves to one day join black-owned Midfield Dodge Inc., which had nearly $16 million in sales last year, as one of the handful of Alabama companies on the BE100s lists of the nation's top black-owned companies. But getting to this point has not been easy and there is still much to be done. The Tough Lessons Of Integration Ironically, when Martin Luther King Jr.'s dramatic demonstration in the streets of Birmingham finally brought segregation to an end, the rise of integration also helped tighten a vise that choked black entrepreneurship in the city. Many black-owned companies were unprepared to pursue white customers--and even less prepared to compete for black customers who suddenly had access to the mainstream consumer marketplace. Louis J. Willie is president and CEO of Booker T. Washington (BTW) Insurance Co. Inc., a black company founded by BLACK ENTERPRISE Entrepreneur of the Century Arthur G. Gaston Sr. (See "True Grift," this issue) that continued to grow after integration. With $13.3 million in revenue and nearly $40 million in assets last year, BTW Insurance is among the top insurance firms on the BE INSURANCE LIST. Willie remembers well the end of segregation. "A lot of businesses were operated strictly in the black community," Willie recalls. "They never dreamed of having a white customer. Then things opened up; blacks found they could go to all kinds of places," he continues. "During this period of experimentation and euphoria at the dropping of the bars of segregation, we left the little dining room and cafe in the neighborhood and moved dowtown. After folks saw the difference, the light-colored furniture and waitresses bustling around, they didn't want to go back to the greasy spoon. Since a good number of the black businesses were small, service types, they fell by the wayside." Another Faston protege, Kirwood R. Balton, agrees with Willie. Balton, the president of both BTW Broadcasting Service Inc. and A. G. Gaston Construction Co., says that black businesses had to learn a tough lesson about the inevitable change in black consumer behavior. "With integration, blacks no longer shopped with blacks because they were black," he says. "They shopped because they had something to offer, and we have to keep that in mind. Yes, we call on loyalty, on blacks to support black busenesses, but we have to warrant that support. We have to offer our products and services in a way that can compete with whatever's out there." After intergration, competition became virtually impossible for many black businesses that simply did not have the resources to offer what whites could. Then, too, some blacks more operating businesses owned bby whited who did not want to see them become competitive outside the city's black neighborhoods. Harold Gilchrist, whose investment banking company manages more than $50 million, points out another reason the number of black businesses dwindles: a shortage of new black entrepreneurs. He blames segregation, not integration, for that. In post-World War II Birmingham, U.S. Steel International Inc. was the city's number one employer. Most of the city's black citizens worked at a plant or in the mines. Many who got enough education develop entrepeneurial skills left the segregated city seeking greater opportunity and never came back. "You had a mssive exodus," Gilchrist says. "Some of the brightest minds in the country left here to go to other areas of opportunity. That left a big void. Those young people who might have had entrepreneurial interests went to other markets. And that's why you see some of the numbers showing up here now." Those numbers are improving. The American Demongraphics article showing Birmingham's dearth of black-owned businesses was actually based on 1982 data from the U.S. Department of Commerce. According to Commerce Department information for the 15 years through 1987, the latest data available now, Birmingham actually experienced 98% growth in its number of black-owned businesses, from 1,156 to 2,289. However, during that period the number of black firms nationally increased 118%. The number of black-owned businesses in several other Souther cities also grew at a faster rate than Birmingham's. Augusta, Ga., had 213% increase and Charlotted, N.C., had 293%. Atlanta, widely recognized as a mecca for black enrepreneurship, saw a 264% increase in its number of black businesses from 1972 to 1987. Looking at the last five years for which Commerce Department data is available, one can see that Birmingham is continuing to improve, with a 38.8% growth rate during the period 1982-1987, compared to nationwide growth of only 37.6%. Again, however, other Southern cities did better; Nashville had a 39% increase in black-owned businesses; Memphis, 29.6%; Ausgusta, 56.7%; Atlanta, 66.8%; and Charlotte, 78.1%. Birmingham did outperform Baton Rouge, La.'s 25.4% black-business growth rate. While there are several BE 100s companies in Alabama, none of the nation's largest black-owned industrial/service companies and auto dealerships are based in Birmingham (Midfield Dodge, in Midfield, Ala., is located about 5 miles outside of the city). BTW Insurance, Citizens Federal Savings Bank (both founded by A.G. Gaston) and Protective Industrial Insurance Co. of Alabama remain the only black-owned Birmingham concerns tracked by BLACK ENTERPRISE. Arrington's "Birmingham Plan" Whether Birmingham will continue to improve in the area of black business development will greatly depend on a plan Mayor Arrington developed in 1989 to ensure adequate capital availability for black entrepeneurs. The city had operated its own loan program that provided about $550,000 to black businesses since 1985. But by 1989, 17 of the 20 loans were in default, with all but about $53,000 of the loans deemed uncollectible. The problem, observers now say, was that politics played too great a role in who got a loan. The "Birmingham Plan" Arrington developed to take the place of the cmbarrassing city loan program was inspired by two incidents. The first was the 1989 U.S. Supreme Court decision in the case of the J.A. Croson v. City of Richmond, which invalidated minority set-asides in construction projects unless there was documentation of past discrimination. The other impetus was a series of articles by The Birmingham News, which showed Birmingham banks and savings and loans made nearly three times as many home mortgage loans in white neighborhoods as they did in black neighborhoods of similar income. Though the series only considered mortgage loans, there was anecdoctal evidence that a similar prejudice might exist in commercial loan applications by black entrepreneurs. To their credit, Birmingham's banks and construction companies decided to take positive action. In 1989, the Associated General Contractors of America Inc. settled a lawsuit filed a year earlier against the city's minority set-aside construction program. The settlement led to the creation of the Birmingham Construction Industry Authority, a program which has promoted joint ventures such as construction of the $103 million University of Alabama Health Services Clinic. BRIC Inc., owned by black contractor Rick Bentley, is in partnership with Brasfield & Gorrie to build the clinic designed by famed architect I.M. Pei. Bently said the lawsuit settlement has helped a lot, but a sustained effort is needed to give black contractors and subcontractors a fair share of the construction work being done in Birmingham. 'The construction industry is such a competitive field, such a good old boy network," says Bentley, "that even when you are given a chance to show what you can do and do it well, people sometimes fall back into their old contractor-subcontractor relationships." Just as key to the Birmingham Plan as the contractors' settlement was the creation of a Cmmunity Development Corp. (CDC) established by a consortium of area commercial banks and the city ot provide capital to black- and women-owned businesses. The banks heve commited $1.5 million a year to the program, with the city providing $500,000 a year in loan guarantees. Gilchrist & Co, manages the CDC as well as the Alabama Small Business Investment Co., a $5 million enterprises small business investment company (MESBIC). The two contracts have provided a boost to the small investment banking firm, which also includes Gilchrist Securities Co. Inc. Gilchrist says no politics is involved in who gets assistance in either the CDC program for bidding businesses of the MESBIC, which helps established small businesses. "If we can't help someone, we tell them. If a deal can't work, if it's nor financially feasible, we have to be honest and tell them," he says. The CDC loan, with nine financial institutions participating, currently stands at $5 million pool is the result of a 4-to-1 years. The MESBIC's $5 million pool is the result of a 4-to-1 match of federal dollars to private capital raised locally. The CDC, which is more specifically targeted at black companies, has loaned about $2.6 million to about 100 firms in the last three years. It has been responsible for the creation or retention or more than 300 jobs since 1990. It has helped 20 businesses get started and has had only one client default on a loan. The Case Of The Doomsday Loan Of course, sometimes all the money in the world won't help a business survive, black-owned or not. A case in point is the Maternal Infant and Child Development Center, which finally had to seek bankruptcy protection from all the agencies that willingly gave it capital, but no advice on how to run a business. Betty J. Evans, owner of the conbined child care and adult care center, believes her Birmingham-based company was set up with a "doomsday package" of loans to make it look like the lending agencies were trying to help black businesses when they could care less about their business' survival. Evans, a registered nurse, had a lifelong ambition to have her own business. In 1986, a tragic car accident, that injured both her and her then 18-year-old daughter Marcia, provided the opportunity to make that entrepreneurial dream come true. She resolved to combine the insurance settlement with other financing to open a day care facility. Unable to generate interest in her idea, she followed the advice of a friend who suggested she hire a consultant who could put together a proposal seeking a minority enterprise loan package. Evans paid the consultant, $3,0000 up front. Three months later she was presented with a lona package totaling nearly $250,000, with refunds coming from the Jefferson County Office of Economic Development, the SBA and Southtrust Bank. "I never filled out an applicant," Evans recalls. "I just gave this lady $3,000 and three months later it was done. She took care of everything." Still without anyone to advice her properly, Evans bought a piece of property to locate her day care center--property not zoned for commercial use. Unable to get the property rezoned, she had to find a new location. When she found one outside the city limits, her consultant took care to have the Jefferson County Community and Economic Development Program assume the city's portion of the $250,000 in loans. But Evans needed more than money--she needed advice. Before the first child was enrolled, she spent half the money loaned to her to buy the property and make the facility comply with stringent regulations conerning the operation of a day care center. "By the time I opened the place in December 1988, I had three children enrolled and only $15,000 to run the place," she says. Evans went bank to the bank and was given a $50,000 line of credit. It wasn't long before most of that money was gone and she accused her bookkeeper of embezzling. The bookkeeper fled the state. "It was another good lesson for someone new in business," says Evans. "Learn to handle your own money." She avoided foreclosure on the day care center by the skin of her teeth by getting a bankruptcy order first. Now, with government subsidies to provide food for low-income children and to take care of elderly people who need someone to watch over them during the day, it looks like her company will survive. The facility has 40 children and ten adults enrolled. In the meantime, Evans is filing suit against the consultant who set her up with the loan package. "Everytime I closed on another loan she was in my face asking for her commission," says Evans, who says she paid the consultant a total of $9,000. "I believe a lot of people in the Birmingham area are being set up with these doomsday packages to make it look like we don't know how to start a business. There are people who have been in business and are pretty good at handling their business who can't get loans the size of what I did. I don't believe they want you to have it if you know what you're doing." Programmed For Progess While Evans never found an agency, Birmingham has a number of programs that might have advised entrepreneurs to sidestep some of the pitfalls in business. The Mayor's Office of Economic Development has been reinvigorated by Arrington to support black-owned business. With the Birmingham Area Chamber of Commerce, the Office of Economic Development, headed by C. Mark Smith, last year began a business retention program that includes an annual survey to isolate problems facing black-owned companies and provides technical assistance. Arrington says one of the most significant accomplishments during his administration has been using City Hall assistance to change the ownership of most of the business in the historically black district. "Twelve years ago, 95% of the businesses in that area were owned by non-blacks," Arrington asserts. "Now, because of the city's promotion of black business development, 95% of that property is the hands of black business owners." Arrington says that the city's emphasis now will be to shift the focus on black business ownership to other communities outside of the downtown area. One of the best programs helping black businesses survive once they have found the capital to get started has been a public/private partnership called the Birmingham Business Assistance Network (BBAN), a nonprofit incubator for budding businesses that provides technical counseling and guidance, financing information, and office space in the business incubation center with copy and fax machines, postage meters, computer stations, conference rooms, receptionists and janitorial, clerical and word processing services. BBAN is about to move to a larger facility. But one of its beneficiaries that won't be moving into the new incubator is T.A. Lewis & Associates, a 5-year-old telecommunications consulting firm owned by Tim Lewis. The company, with revenues exceeding $1.2 million last year, is ready to graduate to its own offices. Lewis, who used to work for a telephone long distance service expects an additional $1 million in contracts this year. His company advises businesses on the types of voice, video or data systems that could make their company more efficient. "What I saw was a number of changes in the telecommunications industry," he recalls. "People kept asking me about equipment and how to better utilize it. I realized there was a niche for someone to provide independent, unbiased recommendations." Lewis didn't just jump into the enterprise; he kept his other job for 18 months before putting out his own shingle. During that time he identified his client base. With Birmingham's economy today linked to the health care industry, he was not surprised to find customers in that field. Architects and developers who want to know how to wire a building for future technology also seek Lewis' adive, as do information service companies that want to keep up with trends in the marketplace. One of the BBAN incubator's greatest attributes is its board of directors, which includes some of the top corporate executives in the city. Lewis credits a presentation he made to the board for getting him a contract with Parisians Inc., a multistate department store chain whose chairman, Emil Hess, is a BBAN board member. Lewis got whatever capital he did not already have from family and friends, rather than going to a bank or one of the other loan programs. It was the technical assistance provided through BBAN that nurtured him and allowed him to grow. A number of other efforts are ongoing to increase the number of black businesses in Birmingham, among them a collaborative effort between a public utility, Alabama Power Co. Inc., and a black-owned public relations firm, Thom Gossam Communications. The two have made presentations to black companies in other states to get them to consider expanding into Birmingham. Gossom says some interest has been expressed by Louisiana Nut & Bolt Service Inc. in Belle chase, La., Power M Cable Co. In Denver and SUCA Pipe Supply Inc. in Tampa. Fla. H.J. Rusell Construction Co. of Atlanta has alreday expanded into the Birmingham area. Gregory B. Calhoun, president of Calhoun Enterprises in Montgomery, Ala., is planning to build three supermarkets in Birmingham as part of a joint venture with Joe and Katherine Jackson, parents of the superstar Jackson family. Calhoun Enterprises is the largest BE 100s company in Alabamam, with 1991 revenues of $35.8 million. The stores are expected to employ 250 people and have annual sales exceeding $2 million. The Future: Struggle--and Progress Overtures such as these are a result of the change in attitudes that have occurred in Birmingham since segregation ended. Few would subscribe to Betty Evan's assertion that deliberate efforts are being made to sabotage Birmingham's black businesses, though the prejudices of individuals still impact some business decisions. Kirkwood Balton, who runs BTW Broadcasting's WENN-FM and WAGG-AM radio stations, says black businesses can flourish if they remember to talk to each other, sharing advice and experiences. "Fifty years ago, black companies studied each other--they had an open-door policy, belonged to trade associations--so they could see how they might improve their businesses," he says. Business community interaction programs such as Project Corporate Leadership and Leadership Birmingham help improve the climate for black entrepreneurship by bringing black and white businesseowners and professionals together at forums and in smmall discussion groups to consider such issues and others affecting the city. The Birmingham Area Chamber of Commerce's "Partnership" program, run under the auspices of the chamber's minority business council, matches minority-owned firms with majority-owned companies. Armond F. Bragg, president of AlaPestCo, says he had tried in vain to get a contract with the Big B chain of drugstores until the Partnership program paired the two. "I never got to first base with Big B before," says Bragg. "Now the are pleased with my work." Bragg, whose company had revenues of $592,000 last year, is not alone in feeling that while greater efforts must be made to provide capital and technical assistance to black businesses, the real key to survival is the same as it would be for any business--having a good product or service and correctly identifying the market for it. Harold Gilchrist's company continues to grow in the investment banking industry, having recently been chosen to be a subcontractor in a Tennessee Valley Authority investment program involving $15 million in seven states. As part of a joint venture with the Birmingham Parking Authority, the firm holds a 30-year lease on the Fifth Avenue Square development of professional offices that make up the bottom tier of a city parking deck. The development is at 100% occupancy, including an optometrist's office, a physician's office, a day care center specializing in seeing after working parents' sick children, and Gilchrist & Co. But Gilchrist won't admit he is a success. "Not yet," he says. "From my perspective, you have to sustain a business for a long period of time, pass it down from one generation to the nest, before it's a success. Survival is important." Survival has eluded many black-owned businesses in Birmingham over the last 30 years. First, segregation limited their opportunities and sent many who would become entreprenuers to other parts of the country. Then, intregration forced the limited number of the city's black businesses to compete in an environment of de facto economic exclusion. The achievements of BE Entrepreneur of the Century and Birmingham business luminary Arthur G. Gaston Sr. are monumental exceptions in a otherwise bleak landscape for the city's black entrepreneurs. (See "True Grit," this issue.) The ascension to political power that came with Richard Arrington's mayoralty 12 years ago did not instantly translate into economic power for blacks. It has been a struggle to make the playing field level, with the city's corporate and banking community only recently playing a proactive part in the effort. "The corporate community has come a long way," Arrington asserts. "The same thing can be said of city government." href='http://www.thefreelibrary.com/A+measure+of+profits.-a012247551' - http://www.thefreelibrary.com/A+measure+of+profits.-a012247551 -