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SMALL BUSINESS | Special Report: Small Business Survey

For Minorities, It Takes More Doing : They Face More Obstacles, Experience Slower Growth

BIG CHALLENGES: Small business in Southern California

September 30, 1998|LEE ROMNEY | TIMES STAFF WRITER

Minority business owners in Southern California are under greater pressure and confront more obstacles to growth than their white counterparts but share the same concerns about taxes and regulation, according to a Los Angeles Times/USC Marshall School of Business survey.

Minorities surveyed reported slower sales growth and less access to capital than other business owners, felt greater pressure from competition and were more troubled by crime.

Some concerns varied sharply by ethnic group. Asians said they were more hampered by competition and crime, and Latinos and African Americans ranked access to capital as their most pressing worry. But on some basic issues, small businesses closed ranks: Minorities as a whole were as concerned about taxes, regulation and the availability of skilled labor as their white counterparts, troubles that analysts see as healthy growing pains.

In short, the survey paints a picture of a dynamic and diverse community of businesses central to the region's health.

"You can make a very, very good case that this is the beginning of the new L.A. economy," said Joel Kotkin, senior fellow at the Pepperdine Institute for Public Policy. "Particular immigrant groups recognize that the path to upward mobility in America is the entrepreneurial path."

The Southern California Business Climate Survey, taken this summer, drew on a Dun & Bradstreet database weighted toward veteran companies with higher-than-average sales and does not mirror the universe of minority businesses, many of which operate below that radar. However, it does reflect the strengths and concerns of the region's more established minority entrepreneurs.

Their responses offer a road map to a community growing at a dramatically faster rate than small businesses as a whole. How minority entrepreneurs fare, and the issues that constrain them, will have an increasingly powerful bearing on the Southern California economy. Already, more than a quarter of the Southland's small businesses are minority-owned--the vast majority by Latinos or Asians. In Los Angeles County, more than one-third of small businesses are owned by nonwhites, according to the U.S. Census Bureau.

Minority businesses surveyed did not differ from white firms in their range of sizes and types. But they were generally younger, having been in business an average of 14 years, compared with 19 years for white-owned companies.

Troubles in Asia Reflected in Data

Overall, minority businesses reported slower growth in sales in the last year than did white-owned enterprises. Twenty-two percent said their sales shrank by 10% or more, compared with 15% of whites. And although 19% said they were seeing double-digit growth, that figure was overshadowed by their nonminority counterparts, 25% of whom reported such increases.

The difficulties in part reflected the financial turmoil in Asia. Tapping their international roots, minority businesses exported at a slightly greater rate than whites, a statistic that correlates with the high number of Asian entrepreneurs with ties abroad. But that global reach has also translated into declining profits and greater worries as Asia's financial crisis deepens: Asian business owners were more concerned about both foreign and local competition than any other group, and predicted the slowest growth rates for the coming year.

"We wish that the U.S. government could do something about the Asian economy," said Adam Shyu, whose 6-year-old company, Aries Marketing, distributes computer hardware manufactured in Taiwan and exports software games there. Shyu, who was born in Taiwan, said sales have dropped 50% over the last year. Business began dipping before then, however, forcing him to move operations into his Walnut home at the end of 1996.

"The big enterprises still make money," he said. "Small businesses--nobody feels good."

Stagnant sales were also linked in part to geography. A higher percentage of minority-owned businesses are situated in the inner city, and therefore rely more on a low-income clientele largely unaffected by the general economic upturn.

"In this area, there's not that many people with jobs," said Elias Acevedo, who manages Best Buy Auto Sales on South Figueroa Street in Los Angeles. He estimated that 50% to 70% of customers default on their car loans.

Francesca Anuluoha told of similar troubles. In her 28 years selling African clothing through her Crenshaw business, Africana Imports, she has managed to put four kids through Catholic school, three of whom are now in college. But making ends meet is a "big struggle."

"General economics have hurt us," said Anuluoha, originally from Zambia. "Right now people are saying the economy is booming, but we don't feel it in the black area. [We're] really pinching pennies."

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