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ICIC Summit: Connecting Underserved Businesses to New Revenue Generating Opportunities
New ventures face something of a chicken and egg problem- to take away business from established companies, they often need to grow to a certain size to be considered viable competitors. To grow and become viable, they often need capital. When studies or news outlets suggest that “the deepest financial markets in the world” are an American strength, they’re referring to our capital system’s ability to solve this chicken and egg problem. As if this problem weren’t difficult enough to solve (there’s a reason an estimated 9 out of 10 new ventures fail), ICIC and others have identified additional challenges faced by minority and women-owned businesses in terms of gaining capital and credibility. Often, as we’ll see with the Connecticut example below, even local firms can be systematically excluded from gaining the scale necessary to benefit, and otherwise promising local growth is stifled. Today at the 2012 Inner City Economic Summit, an excellent panel from across the country discussed strategies to better serve underserved businesses.
“The construction industry is all about relationships- the single biggest barrier to successful inclusion of all firms in the marketplace is this fact.” - Raleigh Roussell TEXO
To alleviate this fact of commercial life, Mr. Roussell and his colleagues created the Contractor Development Alliance to bring together disparate groups to realize the gains that can be made from extending contract involvement to underserved, local firms. Through direct incentives to hire underserved businesses and indirect methods like incubation and basic training on contract acquisition, the Alliance has facilitated the extension of hundreds of billions of dollars in contracts to previously excluded firms.
Worlds away from Texas, Deborah Caviness of the City of Bridgeport Small & Minority Business Office looked at the largest city in Connecticut’s contract process and saw a gaping hole- there weren’t even vendor databases of minority contractors as of 2005. Starting from scratch, a Disparity Study was convened, a database was created, funds were established, and the city government was trained on evaluation, implementation, and importance of inclusive, local government fund dispersion. Opponents of these types of reforms often point to higher costs- Sheldon Edwards of Miami Dade College had a different experience however.
Graduating the highest number of minorities in the country, Miami Dade College is a university deeply rooted to its location and mission. Mr. Edwards, who heads the school’s Minority and Small Business Enterprise Office, spoke again of a landscape change when he sought to implement reforms that would benefit local and disadvantaged businesses. Over the last few years however, he’s succeeded in channeling large portions of university money, the bulk of which is spent on construction, to local suppliers. And, contrary to the vocal protests of those who thought it would result in disastrously high costs and deepening deficits, prices stayed essentially flat as local firms bid down the price.
The conventional wisdom says that outsourcing and offshoring are inevitable; however, the examples above suggest that, with a little creativity and a lot of hard work, commerce can be equitable, profitable, and community-enhancing. The ultimate promise of capitalism was its ability to achieve wholesale organic growth and to lift up people by their own ingenuity. That promise is being kept in corners of Miami, Texas, and Connecticut- the only question is when, not if, the rest of the country will catch on.
BY Sathya Vijayakumar on September 25th, 2012
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