A collection of five short articles about companies from the 1999 Inner City 100. CEOs explain why they started their businesses in the inner cities and cite key inner-city disadvantages.
The Inner City 100
Cofounders: Michael Shaughnessy, president, and John Haugh, CEO Company: ColorMatrix Corp., #37 Location: Cleveland Business: Manufactures liquid color for plastic products
Reasons for locating in the inner city: Proximity to suppliers, labor, public transportation, and warehousing facilities is important. But, says Shaughnessy, "the thing that's really kept us here is our close connection with the revitalization of the city." In 1998, Labor Secretary Alexis Herman visited ColorMatrix and held a press conference on welfare-to-work programs. "She invited us to attend a lunch with her at the National Press Club in Washington, D.C.," says Shaughnessy. "For us, the welfare-to-work program is good, cheap branding."
Key inner-city disadvantage: "The buildings in Cleveland's inner city, for the most part, were built in the 1920s and '30s," says Shaughnessy. "They weren't designed for today's industries. We're always adapting the business to fit the structure rather than designing the building around our business."
Quote: "We don't do welfare-to-work for the tax credits," says Shaughnessy. "There are some available, but the red tape makes it more trouble than it's worth. Plus, the image that tax credits project to the employees is that ColorMatrix is getting a credit for tainted merchandise. When we hire people from welfare, we want them to come here and be on equal footing with their coworkers." --Mike Hofman
CEO: Pedram Fararooy Company: ABB Labels, #92 Location: Los Angeles Business: Manufactures labels and tags
Reasons for locating in the inner city: ABB's location near downtown L.A. gives Fararooy a relatively short commute of 30 to 40 minutes, and also means easy access to suppliers, customers, and labor. To his surprise, ABB's inner-city location generated some walk-in business from manufacturers in L.A.'s garment district. Overall, Fararooy says, such traffic accounts for 5% to 10% of his business. "When we started, people would walk in and ask, 'Are you doing these kinds of labels--fabric labels?' Even though that was not what we did, eventually we realized there were no marketing costs, so we expanded our product line."
Key inner-city disadvantage: In downtown Los Angeles, Fararooy estimates, his tax bill is about 5% higher than it would be in the surrounding suburbs. "There are other cities 10 or 15 minutes away from here that are actually business oriented," he says.
Quote: "Our sales would be 20% to 30% lower elsewhere," Fararooy says. "Lots of customers call up and say, 'Can you have this by Tuesday?' and the only way we can do that is by having quick access to suppliers and delivery." --Emily Barker
CEO: René Diaz Company: Diaz Wholesale & Manufacturing (dba Diaz Foods), #63 Location: Atlanta Business: Manufactures and distributes Hispanic foods
Reasons for locating in the inner city: Diaz knows the area intimately: he grew up in midtown Atlanta, where his father and grandfather owned five grocery stores. His father, Julio Diaz, founded the business, which made a gradual transition from retailer to manufacturer/distributor when René, at 18, began buying spices from Florida and putting out feelers to area stores and restaurants. The company is 12 minutes from the airport. Diaz often uses that advantage to strike deals with Mexican manufacturers during their stopovers. "I can get there between the time they arrive at the gate and the time they're finished with baggage claim," he says.
Key inner-city disadvantage: "There's not really a pool of people in the inner city to hire," Diaz says. "We're often looking for Spanish speakers, and a lot of the Latino population lives in Norcross [some 40 miles away]. It's difficult drawing people in, because of the big commute and the traffic." Of Diaz's 25 salespeople, all but 3 know Spanish. "We want the operator to know Spanish and funnel customers in immediately, instead of having the callers hold for the next available Spanish speaker."
Quote: "My dad is the best salesman we have," Diaz says. "He sold his store, and now he leads us in sales. In a year he put 70,000 miles on his new Lincoln Navigator." --Ilan Mochari
CEO: Carol Ann Clements Company: Jen-Cyn Enterprises, #52 Location: Camden, N.J. Business: Distributes galvanized sheet steel