Recent years have brought minority-owned
businesses in the LACE>United StatesLACE> unprecedented
opportunities-as well as new and significant risks.
Civil rights activists have long argued that one of
(5) the principal reasons why Blacks, Hispanics, and
other minority groups have difficulty establishing
themselves in business is that they lack access to
the sizable orders and subcontracts that are gener-
ated by large companies. Now Congress, in appar-
(10) ent agreement, has required by law that businesses
awarded federal contracts of more than $500,000
do their best to find minority subcontractors and
record their efforts to do so on forms filed with the
government. Indeed, some federal and local agen-
(15) cies have gone so far as to set specific percentage
goals for apportioning parts of public works con-
tracts to minority enterprises.
Corporate response appears to have been sub-
stantial. According to figures collected in 1977,
(20) the total of corporate contracts with minority busi-
nesses rose from $77 million in 1972 to $1. lbillion
in 1977. The projected total of corporate contracts
with minority businesses for the early 1980’s is
estimated to be over 53 billion per year with no
(25) letup anticipated in the next decade.
Promising as it is for minority businesses, this
increased patronage poses dangers for them, too.
First, minority firms risk expanding too fast and
overextending themselves financially, since most
(30) are small concerns and, unlike large businesses,
they often need to make substantial investments in
new plants, staff, equipment, and the like in order
to perform work subcontracted to them. If, there-
after, their subcontracts are for some reason
(35) reduced, such firms can face potentially crippling
fixed expenses. The world of corporate purchasing
can be frustrating for small entrepreneurs who get
requests for elaborate formal estimates and bids.
Both consume valuable time and resources, and a
(40) small company’s efforts must soon result in
orders, or both the morale and the financial health
of the business will suffer.
A second risk is that White-owned companies
may seek to cash in on the increasing apportion-
(45) ments through formation of joint ventures with
minority-owned concerns. Of course, in many
instances there are legitimate reasons for joint
ventures; clearly, White and minority enterprises
can team up to acquire business that neither could
(50) acquire alone. But civil rights groups and minority
business owners have complained to Congress about
minorities being set up as “fronts” with White back-
ing, rather than being accepted as full partners in
legitimate joint ventures.
(55) Third, a minority enterprise that secures the
business of one large corporate customer often run
the danger of becoming--and remaining—dependent.
Even in the best of circumstances, fierce compe-
tition from larger, more established companies
(60) makes it difficult for small concerns to broaden
their customer bases: when such firms have nearly
guaranteed orders from a single corporate bene-
factor, they may truly have to struggle against
complacency arising from their current success.
