Rethinking Minority Business

As the barriers facing minority business owners begin to fall away, many of them are succeeding in entrepreneurship as never before and finding their "minority" label not to be a Scarlet Letter but a business incentive. As the minority population swells in the United States, those entrepreneurs are finding more allies in business and an environment that is more open to diverse ways of thinking. Technology has also helped join U.S. business leaders to international business communities, spurring globalization. The result is thousands of minority entrepreneurs leading some of the nation's most successful small businesses. For the first time, Inc.com put together a list of the top 10 minority CEOs and they all agree that the concept of "minority" will eventually be obsolete.

Minority Population is a Boon for Business

The 1950 census counted 150.7 million people in the United States, with just over 10 percent of that a minority. At the turn of the century, the census counted 281.4 million people, with 21 different ethnicities comprising a 30 percent minority. This month, the Census Bureau released projections that predict the 2050 population census will count 439 million people in America, and 54 percent of them will be "minority."

In just over 40 years, this population trend will make the United States even more of a melting pot of ethnicities and cultures, and "minority" as a social concept will have to be redefined. But the 10 top minority CEOs on the Inc. 500|5000 list say they are already ahead of that trend: Within their demographic, a greater minority population translates to more diversity in business leaders' backgrounds, which means opportunities to venture into new markets. It seems success is the greatest equalizer, and among high-income executives, ethnicity is just another strategy in the international economy.

William Teel, Jr., an African-American from North Carolina, founded his IT consulting business in 1999; he struggled to work his way into capitalism, then met Rodney Hunt, a prominent black entrepreneur who taught him how to maneuver the small business world. Now 1 Source Consulting--No. 76 on the Inc. 500--is worth $133.4 million, growing more than 2,337 percent in three years. He says part of the business development battle was lack of capital, historically a challenge for minority start-ups: Big businesses are the source of lucrative contracts, but they hesitate to enter agreements with under-funded companies, which in turn hinders start-ups' growth, creating a Catch-22 of development. However, Teel says, that's not necessarily a minority disadvantage as much as an entrepreneur's hurdle. "No matter who you are, no matter your color, and no matter your ethnicity, you have to have the right building blocks to be successful," he says.

And increasingly, minority entrepreneurs are jumping that hurdle. Data from 2002, the most recent Census Bureau Survey of Business Owners, shows that minorities owned 18 percent of privately-held companies that year, compared to 7 percent two decades ago. With a projected working-age population (18- to 64-years-old) consisting of just over 50 percent minorities in 30 years and of 55 percent by 2050, Teel says the diversity trend is an increasing force in the business world. "During the Clinton administration there was lots of help for small businesses with the 7(a) loan; during the Bush administration, those loans decreased, but the number of minority-owned businesses has increased," he says. "That is a sign of a momentum that won't slow down."

A rise in minority population is contributing to the more eclectic group of business leaders. Currently minorities represent 34 percent of the population, up from 32 percent in 2002 and 21 percent in 1982. Ying Lowry, senior economist at the Small Business Administration (SBA), says that as minority population catches up with the majority, there is more human capital available, which is driving entrepreneurs out of the underground economy—like cleaning houses or cutting grass—and into the mainstream economy. Human capital means hiring people from the same home country or with the same ethnic background, and convenience tends to drive minorities to employ people who share culture and language.

Arul Murugan, CEO of enrich IT, moved to the United States from India in 1997, and says his hires are largely Indian. He founded his Oracle technology consulting business in 2003, and accrued $11.2 million in revenue last year, representing almost 2,516 percent growth from 2004. The company ranks at No. 67 on this year's Inc. 500 list. While he attributes the majority of his growth to securing his place in a niche market, he says many of his business associates are also Indian—stemming from the country's school system's emphasis on math, science and engineering—so his background has helped him build business relationships in America, and to open a facility in his home town of Chennai, India's fourth-largest metropolitan area.

As these entrepreneurs encounter more human capital and more financial success, more of the minority population will participate in the economy, Lowry says. Her 2006 report for the SBA shows a correlation between the rise in minority population and the rise of minority business ownership from 1997 to 2002. In that five-year period, the number of white-owned firms increased six percent, while the number of black-owned firms grew by 45 percent, Hispanic-owned by 31 percent, and Asian-owned by 24 percent. She says these implications are better demonstrated through business density—the number of businesses per 1,000 persons in a given population. By density, white-owned firms lost representation, declining four percent. However, black-owned businesses' representation grew by 38 percent, to a presence of 24 businesses per 1,000 persons. Asian owners' density grew by five percent, and Hispanic owners' by two percent.