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Limited Numbers

Big challenge for black-owned Texas businesses: limited numbers

"It was very startling to me to learn that we only make up 7 percent of all businesses in Texas,"

Houston entrepreneur Carla Lane wasn't surprised when she read that black business owners in Texas wanted more access to capital, education and decision-makers, but what did set her back was how few of them there are.

"It was very startling to me to learn that we only make up 7 percent of all businesses in Texas," she said.

That small figure, though, belies the growth in black-owned businesses in Texas. According to U.S. Census data, the total rose 74 percent from 2002 to 2007 to reach 154,283 out of the 2.1 million businesses registered in the state.

To get a better handle on the needs of these businesses, African-American chambers of commerce asked the Bureau of Business Research at the University of Texas at Austin to survey them, said Leonard James III, the new president of the Greater Houston Black Chamber.

"The data was not surprising, and I don't think it's that unique to African-Americans," said James, an entrepreneur and retired Exxon Mobil executive. "The findings are significant to everyone."

More than 95 percent of black-owned businesses are sole proprietorships with no additional employees - professionals such as accountants, lawyers or doctors, or lifestyle businesses such as barbershops, florists and consultants. The businesses also are small: An average Texas business generated $1.2 million in sales in 2007, while the average African-American business generated $60,000.

James said many business owners don't want their operations to grow, but those who do have the same needs as any other business person, regardless of ethnicity.

Specific needs

While these entrepreneurs have faith in their problem-solving and leadership abilities, they say they lack enough training in finance and accounting. Others say they want more experience with marketing and sales, and most say access to key the decision-makers at their customers' businesses is crucial.

(For the Chronicle/Gary Fountain, July 18, 2014)

Leonard James III, president of the Greater Houston Black Chamber of Commerce, standing by West African tribal art.

Gary Fountain, Freelance

(For the Chronicle/Gary Fountain, July 18, 2014) Leonard James III, president of the Greater Houston Black Chamber of Commerce, standing by West African tribal art.

Lane, president of Lane Staffing with 1,000 employees all over the country, bought her company from a black entrepreneur who had made some bad financial decisions. She knew how to solve the resulting problems because of background in finance and accounting, but many black business owners don't.

"When we talk about having exposure to understand credit, to understand banking and what you need to look like as an individual and a business, a lot of us don't know about those things, and we don't have access to people who can tell us," she said. "A lot of the people I went to high school with are not the decision-makers downtown."

Securing capital

The report also found that access to capital remains a major hindrance.

"Access to capital is a real concern, because I think culturally most of us are a generation or two from illiteracy," Lane told me.

James said the Greater Houston Black Chamber, the oldest nonprofit service organization in Houston, is working to match businesses with partners seeking services. He said he's been approached by large banks looking for good businesses to invest in, but those businesses first need to develop traditional business plans, including financial models and long-term goals.

"Once you get those fundamentals in place, it is easy to go and acquire dollars," he said. "It takes as much work, in my opinion, to pull together a business plan and a financial investment plan to present to a bank to purchase one quick-serve restaurant as it does to buy 10 or 12."

James said he will use the results of the survey to convince supporters to shift their resources to offering more practical training opportunities.

"In order for these small businesses to grow, the CEOs or chief diversity officers at major corporations can no longer do business as normal," he told me. "We've identified three or four critical success factors, regardless of ethnicity. This is not a black thing, it's not a brown thing, this is a business thing."

Recruiting role models

But the low number of African-American businesses remains the biggest problem. According to the survey, if the ratio of black-owned businesses with employees were the same in 2007 as for all Texans, there would have been 46,000 African-American companies employing people, not just 7,205.

James said the chamber has been recruiting role models for young African-Americans from the business community and last year started the Houston Black Leadership Institute, an eight-month program modeled on other city leadership initiatives.

The most interesting finding of the UT report is that black entrepreneurs face the same challenges as everyone else. James said he wants the chamber to play a greater role in the entire Houston business community in the future.

At no point in any of my conversations did anyone ask about more set-asides or affirmative action. James and Lane frankly acknowledged the past, recognized the challenges and focused on the future.

That's good business.

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