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MINORITIES IN BUSINESS

Study Sees Obstacles to Minority Business Growth

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July 7, 2005--Minority CEOs need to change the way they think about business or they will fall behind in the global economy, reported a recent study by the Boston Consulting Group.

The study, "The New Agenda for Minority Business Development," addresses the obstacles preventing large-scale growth of minority-owned businesses. The report defines minority-owned businesses as companies that are at least 51 percent controlled by one or more African-American, Hispanic American, Asian American, or Native American.

Although minorities are starting businesses at a faster rate than non-minorities, their companies represent only 9% of U.S. firms with more than $500,000 in revenue and just 5% of U.S. firms with more than 100 employees, according to the study.

According to the study, minority businesses have had little growth due to reliance upon personal debt and family financing over business loans, and continued operations in low-growth industries.

"Many minority business owners shut down their horizons when they reach self-sufficiency," said Jim Lowry, senior vice president of Boston Consulting and author of the study. "They're just as smart, and they should be just as ambitious as non-minority business owners. They can grow mega companies, and they can grow change."

It will become increasingly important for minority CEOs to plan for large-scale growth as the population of minorities continues to rise in the United States, Lowry said. According the U.S. Census Bureau, minorities will make up 40% of the U.S. population by 2050. The study predicted that the population shift will make the U.S. economy dependent upon minority business owners' ability to adapt and grow with the global economy.

The study outlined several ways that minority businesses could expand their companies, including increased use of mergers and acquisitions and expansion into fast-growing sectors of the economy.

According to the report, 25% of minority-owned businesses are involved in low-growth industries, such as restaurants, retail, and transportation. The study found that there has been little development of minority firms in more lucrative and fast-growing industries, including information technology, financial services, and legal services.

Lowry said more of the capital resources given to minorities should be used to develop companies in those sectors of the economy.

"I think the entrepreneurial spirit is prevailing," he said. "But we have to have a change in our mindset."

Last updated: Jul 7, 2005




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