Many Black Firms Considering a Move

Inner-city redevelopment may be the hot topic in political and academic circles, but Los Angeles County’s black entrepreneurs continue looking elsewhere for economic opportunity, according to a Los Angeles Times Poll.

The survey, which included responses from more than 1,400 minority business owners, showed that blacks are more likely than other ethnic minorities in the county to be considering relocating their firms. Fully one-third of blacks surveyed--many of them in older urban areas where neighborhood deterioration is taking its toll--said they’re contemplating a move.

While a number of these business owners may end up staying put, the responses underscore a long-standing migration pattern that has seen tens of thousands of blacks leave Los Angeles’ historically black areas for the far reaches of the county, the Inland Empire and other parts of the Southland. Attracted by good schools and lower housing prices, many are finding these regions to be fertile ground for starting businesses as well.

“We’ve got attorneys, computer businesses, employment agencies, all kinds of professional businesses out here,� said Rich Wallace, president of the 300-member San Gabriel Valley Black Chamber of Commerce. “Black business and inner city aren’t synonymous anymore. That’s not where we are.�

Research shows successful black entrepreneurs increasingly are emerging in skill-intensive fields, serving a diverse client base that’s taking them far beyond the boundaries of traditional black business districts. That’s good news for enterprising black business owners once confined to segregated areas. But it’s a bittersweet victory for those who’d like to see black business owners lead the rebirth of communities such as South-Central Los Angeles.

“We have a drain of our elite people that’s taking their money and expertise to other communities,� said Hank Wilfong, a longtime Leimart Park resident and head of the National Assn. of Small Disadvantaged Businesses. “That’s the downside� of their success.

The Times Poll provides an extensive look at the small minority firms that now make up four out of 10 small businesses in Los Angeles County. The data show a well-established black business community, with an average company age of 19 years, older than the countywide average of 13 years. That’s partly a reflection of the Dun & Bradstreet database from which the respondents were culled, since that list tends to capture more established firms. It also reflects the low levels of new immigration into the black community. Only 8% of the black business owners surveyed were foreign-born, compared with three-quarters of Asian entrepreneurs.

The poll found the county’s black respondents to be active in a wide variety of fields, with the heaviest concentration in consumer, professional and business services and with light representation in manufacturing and technology. Local black-owned businesses tend to have smaller revenue than other minority-owned firms, they’re more likely to be home-based and they’re less likely to employ anyone full time.

They also have more difficulty financing their businesses, an ongoing national problem that has been the subject of much research and discussion. Nearly two-thirds of black entrepreneurs surveyed said access to capital was an important problem for them, compared with 44% of Latinos, 38% of whites and 34% of Asians.

“After a while, you can’t help but wonder if it’s a racial thing,� said Ron Johnson, owner of Torrance-based Management Health Care Products & Services. Johnson founded the medical supply company in 1984 and was turned down for nearly a decade before finally landing a credit line to help grow the firm, which posted more than $2 million in sales last year.

Still, black survey respondents generally proved more optimistic than any others in the survey, with a whopping two-thirds predicting increased sales in the coming year and 45% saying they plan to add employees.

Of course that optimism depends on where you’re standing. The survey captured the increasing bifurcation in the black business community documented by researchers such as Wayne State University professor Timothy Bates. The author of “Race, Self-Employment and Upward Mobility� (Johns Hopkins University Press, 1998) has written extensively about the dual worlds of black enterprise: one populated by college-educated entrepreneurs offering high-end services to the broader market, another characterized by traditional mom-and-pop businesses serving an increasingly poor, inner-city clientele.

Take Christine Van Koll, for example. In 21 years of doing business on Florence Avenue, the owner of Chris Cakes & Catering has watched her address change from an asset to a liability. The civil unrest of 1992 cut her sales in half as old customers fled the neighborhood or refused to drive into South-Central for her premium German chocolate cake and petit fours.

She has managed to hang on by cultivating catering clients in the movie industry, but can’t recall the last time she sold a wedding cake to anyone in the neighborhood.

“We have a Beverly Hills product in a declining area,� Van Koll, 65, said. “We’d like to stay here, but that may not be possible.�

While The Times survey showed that L.A. County’s white entrepreneurs were about as likely as blacks to consider relocating their businesses, black owners singled out an unsafe location as the motive for the move about five times more often than whites did. Nearly half of all black respondents cited deteriorating neighborhoods as an important problem confronting their businesses, about double the percentage of whites.

Such concerns are proving too high a price to pay for business owners like Rodney Jeffries. The three gunmen who burst into his family’s Crenshaw District real estate office a few years back took more than the monthly rental receipts. They also robbed Jeffries of his desire to remain in the area where he grew up. Now the young husband and new father is scouting for a new location to live and to work.

“It’s kind of sad,� said the 33-year-old African American, who runs Morris Jeffries Realty with his parents. “But I’ve got to look out for my little girl.�

Clearly, areas like the Crenshaw District remain viable for many black entrepreneurs. Danya Carter, the owner of Supreme Escrow Services, would like a better location than her present one on Martin Luther King Boulevard, but she wouldn’t dream of moving out of the area that supplies many of her clients and contacts.

Still, black concentration in Los Angeles has been ebbing for three decades. In 1970, the population of South-Central was 80% black, according to the book “Ethnic Los Angeles� (Russell Sage Foundation, 1997). By 1990, they were barely a majority, spurred by black migration and the influx of Latino immigrants.

Census data released this week show that blacks declined as an overall percentage of L.A. County’s population, to 11.3% in 1998 from 11.7% in 1990. Currently, just over 1 million reside in Los Angeles County. Meanwhile, the black population in Riverside County jumped 31% in the same period to nearly 87,000 residents. The increase in San Bernardino County was 14%, to about 136,000 residents.

This exodus of middle-class blacks and solid black-owned businesses has been a cause for much soul-searching in the community. Local groups such as Recycling Black Dollars have urged blacks to support black businesses so those entrepreneurs can remain in the area. Nonprofit Operation Hope has funded black entrepreneurship and encouraged bankers to lend in the inner city.

Still, experts such as Wayne State University’s Bates contend that a geographically centered black business community has little relevance to a new breed of entrepreneurs whose focus increasingly is regional, national and international.

Alexander Elliott’s West Covina-based janitorial-contracting firm services buildings throughout the Southland. His 100-member work force includes a diverse mix of blacks and Latinos and he networks with other black professionals. But he’s too busy running his $1.5-million operation to give much thought to the ethnic composition of his company’s neighborhood.

“In our business, it doesn’t matter where you are located,� said Elliott, the 46-year-old chief executive of PAA of California. “My biggest problem right now is finding two good operations managers to help us grow. . . . I’m looking to expand down in San Diego.�

Complete poll results are online at https://wwwlatimes.com/timespoll. They will be discussed at The Times’ Small Business Strategies Conference Sept. 24-25 at the L.A. Convention Center. For more information, call (800) 350-3211 or go to http://ukobiw.net/sbsc.

*

MORE COVERAGE

TODAY: Black entrepreneurs are the most likely to consider relocating.

FRIDAY: Chinese and Korean entrepreneurs show vastly different success rates.

BOOST YOUR BUSINESS: Get insights, advice and inspiration for your business at The Times’ Small Business Strategies Conference on Sept. 24-25 at the Los Angeles Convention Center. For more information or to register, call (800) 350-3211 or log on to http://ukobiw.net/sbsc.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Blacks in Business

Blacks entrepreneurs are the most optimistic in L.A. County, forecasting larger sales gains and hiring increases than any other ethnic group.

Project sales increases over next 12 months:

Black: 67%

Asian: 47%

Latino: 51%

White: 63%

*

Expect to hire additional workers in next 12 months:

Black: 45%

Asian: 28%

Latino: 33%

White: 38%

Relocating

However, black business owners are feeling pinched by location and financing to a greater extent than other entrepreneurs and are more likely than other minority entrepreneurs to be considering relocating. While the reasons for contemplating a move vary, blacks cited an unsafe location much more frequently than did other business owners.

Has the owner considered relocating the business?

Yes

Black: 33%

Asian: 23%

Latino: 25%

White: 36%

*

No

Black: 66%

Asian: 76%

Latino: 74%

White: 64%

Note: Numbers may not add up to 100% because “don’t know� responses are not included.

*

Considered relocating because area is unsafe*:

Black: 31%

Asian: 19%

Latino: 18%

White: 6%

*Top response among blacks. Respondents were allowed up to three replies.

Financing

Blacks also are having a much harder time securing financing, experiencing higher loan rejection rates than other entrepreneurs.

Rejected for financing in the last 12 months:

Black: 30%

Asian: 14%

Latino: 21%

White: 14%

Source: Los Angeles Times Poll

How the Poll Was Conducted

The Times Poll surveyed Los Angeles County small-business owners--with an emphasis on minorities--from May 26 through Aug. 19. Questionnaires initially were mailed to 875 Asian, 875 Latino and 875 African American owners. Interviewers called those who did not return the mailing. The response rates were 59% (432) for African Americans; 52% (394) for Latinos; and 53% (401) for Asians.

In the survey’s second phase--an overall sample of the county’s small companies, 683 owners (including 353 whites) were interviewed out of 1,500 randomly selected businesses contacted by phone Aug. 4-19. The overall county response rate was 58%.

Those surveyed were selected at random from Dun & Bradstreet’s business database. Companies that were no longer in business or that could not be located were deleted, which affected response rates.