been a declining share of minority contracting, [such as] the 8(a) program,” Williams says. “Part of that has to do with changes in priorities, [but] part of it is just the continued effects of bundling of contracts, making it harder for minority firms and all small firms to get in. And that’s because the government has downsized its procurement staff in order to handle more procurement for fewer people.”
Bundling of contracts puts most black businesses out of the running, since 95% of black businesses are sole proprietorships. But one entrepreneur who has managed to not only stay afloat, but also thrive in this inclement business environment is Stephen Powell, CEO of Powell Steel Corp., a Pennsylvania-based structural steel fabrication and erector company that provides steel frames for schools, bridges, prisons, and skyscrapers.
Powell, 54, started out as an employee of the company — then named SS Fisher Steel Corp. — in 1985. But when the former owners filed Chapter 11, he purchased the company’s assets in 1994, growing it from $800,000 in sales to $22 million in revenues and 90 employees.
Of course, success didn’t come easy. Powell had no problem putting up his house to raise capital. But when he applied for a $3 million loan to buy the plant, rolling stock, equipment, and other assets, a dozen banks turned him down cold.
Luckily, it was the 1990s, a period when government was more responsive to small and minority businesses, so Powell was able to secure a $2 million loan guarantee from the Federal Rural Development Agency. He was also awarded two grants of $250,000 each from the now-defunct Pennsylvania Minority Development Authority to provide working capital so that he could make payroll and pay for receivables during the company’s startup phase.
The B.E. board of economists: Boston, Simms, Williams, Spriggs, Jaynes, and Brimmer.
Over the past 11 years, Powell’s company has built more than a dozen school and university buildings, as well as bridges, airport extensions, and other structures for state and local governments and corporations in Pennsylvania, New Jersey, Maryland, and Delaware. Despite his success, Powell says he continues to fight racial stereotypes and skepticism about his business acumen, the quality of his work, and whether he will complete the job on time.
He says it’s harder now than five years ago to submit the winning bid for contracts because bigger companies can “buy work” by underbidding smaller firms. He also points the finger at the Bush administration for not having government induce prime contractors to take on minority subcontractors. The picture is not much different for startups and emerging companies.
To overcome the obstacles of starting a business during these turbulent economic times, the BE economists suggest identifying the fastest growing businesses, which include architectural and engineering services, professional business services, and maintenance services, to name a few.
If you are already in business, Boston recommends forming strategic alliances with other enterprises to gain access to business opportunities that might otherwise be closed to you.
The economists also point out that black entrepreneurs, particularly young entrepreneurs,