This spotlight on an NCRC member's work is part of the Just Economy Solutions Hub. See more at NCRC.org/solutions!
NCRC seeks to explore the impact of small business and technical assistance education models supporting the growth of businesses owned by people of color. With support from Block, Inc., NCRC identified small business education models in the areas of entrepreneurship incubation among women owners of color; community capital resource navigation for Hispanic immigrants, and market access through procurement for Black-owned businesses.
The output of this work can be found at the Just Economy Solutions Hub which has been designed to share tools, resources and promising practices that can strengthen entrepreneurial ecosystems.
Anchor Procurement Strategies Connecting Black-Owned Businesses to Contracts
The State of Black Business & Revenue Generation
Since 1992, African Americans have added nearly 2 million new businesses, growing their business ownership share from 3.6% in 1992 to almost 10% in 2012. Across industries, the majority of African American-owned small businesses are concentrated in healthcare and social assistance. Despite the nearly threefold increase in Black entrepreneurship, the proportion of Black revenue decreased from 1% to 0.5%. In fact, Pew Research notes that most Black-owned businesses have relatively small payrolls and limited revenue generation. Achieving wealth and economic opportunity for African Americans includes ensuring stronger revenue generation among its businesses.
Strengthening Black Businesses Serving Organizations To Compete for Procurement Contracts
Anchor procurement is a strategy that public and private institutions can use to increase market access for Black entrepreneurs. Anchor institutions such as hospitals or universities can prioritize awarding supplier contracts specifically to local Black-owned businesses, which would not only build wealth for Black entrepreneurs, but also strengthen economic opportunity in underserved communities through the creation of new jobs, goods and services. Despite these benefits, traditional supplier diversity programs led by anchor institutions fall short in targeting and or meeting their goals to contract with Black-owned businesses.
The Atlanta Wealth Building Initiative (AWBI) is creating a network of business-supporting organizations (BSOs) to support the growth of Black-owned businesses through various capacity building and partnership opportunities. AWBI is securing best in class professionals and subject matter experts to work with BSOs and to share their knowledge, experience and relationships in bidding for, negotiating and securing procurement opportunities. This approach incentivizes ecosystem collaboration and provides an intentional investment in achieving long term outcomes for Black businesses.
Small businesses vying for contracts have difficulty navigating required certifications, lack deep back-offices and have limited relationships with anchor institution procurement leads. These challenges of capacity limit small businesses’ ability to compete for larger contracts and anchors are limited in their access to Black-owned business networks. Additionally, business sectors traditionally engaged in supplier work (e.g. construction, catering, landscaping, etc.), make up just a small percentage of Black-owned firms prime for anchor procurement opportunities in Atlanta.
Atlanta Wealth Building Initiative’s 1,000 Black Businesses In 1,000 Days Campaign
Atlanta Wealth Building Initiative (AWBI) advances community wealth-building strategies through thought leadership, movement building and aggregating capital to build Black wealth and reduce racialized economic mobility. AWBI is dedicated to addressing the region’s systemic racial wealth and economic inequity by removing barriers to shared economic prosperity for all, while building an inclusive economy that promotes thriving communities. As an intermediary, their work is centered on supporting and coordinating the nonprofit business support ecosystem to bolster leaders, promote widespread engagement and advance bold ideas that move the sector forward for a more significant collective impact.
Addressing the Challenge:
The value of a White-owned business in Atlanta is 11.6 times that of its Black counterparts, according to Census Bureau data. The state of Georgia supports nearly 9,000 Black owned businesses with more than 83,781 workers those businesses employ. The 2020 US census reported that there are more than 25,457 African American owned businesses within the city of Atlanta alone. This data makes Georgia second only to Maryland in the number of Black-owned businesses, and Atlanta first among all cities in terms of employees of Black owned businesses.
Additionally, according to AWBI’s 2021 Capital Ecosystem Assessment, there is a $9-12 billion gap in funding annually in the Atlanta market for all small businesses. The organization has learned first hand that Black-owned businesses have a challenging time accessing any capital from local capital providers. A recent Prosperity Now report indicated that 96% of Atlanta’s Black-owned businesses have no paid employees. Additionally, Atlanta’s White-owned businesses earn 10x more revenue than its Black-owned businesses, according to AWBI’s current Strategic Plan. This revenue disparity is not a result of differences in entrepreneurial capabilities, but rather a byproduct of the racial wealth divide, which is rooted in historic redlining practices. In Atlanta, 70% of Black households are “liquid asset poor” compared to 22% of White families. Thus, Black-owned businesses are more likely to face financial obstacles, as they have limited savings and assets to rely on to run and expand their entrepreneurial ventures. Current lending practices including discrimination and inflexible underwriting standards by banks also make it difficult for Black entrepreneurs to acquire the capital necessary to launch and sustain their businesses.
AWBI Black Business Campaign supports research and data on small businesses; the scaling of enterprises via anchor procurement strategies, workforce development training; and anti-displacement solutions to preserve community wealth. One output of this campaign is a pilot anchor institution strategy with Emory University. Through a series of training and consultations, AWBI works closely with a variety of stakeholders to increase the number of Black-owned businesses to be certified (though not all opportunities require these certifications) and enable them to be contacted for market opportunities. Additionally, AWBI works hand in hand with small businesses to help them compete for contracts.
Championing Programmatic Innovation:
- Supporting Anchor Institutions to Align to Needs of Local Suppliers
AWBI works in close partnership with anchor institutions to better identify, engage and onboard local suppliers to procurement opportunities. This requires, for many anchors, a reimagination of vendor contracting systems and processes that have historically excluded diverse actors. AWBI’s technical assistance support to anchors comes in the form of training on proposal language, consultations on bid drafts, redesigning anchor’s small business outreach and engagement strategies and more.
- Innovating Around Access to Contracts for Nontraditional Business Types
AWBI recognized that small business owners did not have deep back offices to engage with procurement leads of regional anchors. The organization is vetting a technology platform that will serve as a business-to-anchor connector. Contract opportunities can be uploaded and marketed, and small businesses can see what opportunities exist and apply directly within the system. This also includes diversifying the pool of businesses that qualify for anchor work to nontraditional business types (such as waste management, professional services and events production).
- Strengthening Small Business Technical Assistance
Capital is the number one issue impacting small businesses, particularly those AWBI has engaged with who are seeking contracts with anchors. As part of its technical assistance package, AWBI convenes investors of color to advise on investing decisions that help these businesses build their competitiveness. AWBI technical assistance to vendors include training on MWBE certification (as some large-scale contractors require certification).
Achieving Wealth-Building Impact:
AWBI’s goals across its campaign are informed by data and community input from AWBI’s Community of Practice (COP). AWBI measures all programs against a set of organizational headline indicators to ensure each aspect of programming is moving the organization’s mission forward to close the racial wealth gap. Those indicators include general revenue growth of Black-owned businesses, an increase in jobs and a trend toward livable wages, to name a few.
AWBI’s anchor procurement work is finishing it’s pilot but hopes to measures it progress by:
- Increasing contract funding allocated to Black-owned businesses
- Developing formal partnerships with 5-10 anchors institutions
- Increasing the number of registered MBE’s
- Increasing the adoption of alternative business models as effective retention and anti-displacement tools.
Joshua Devine was NCRC’s Director of Racial Economic Equity.