Hard work and luck help minority startups survive

Leslie Garcia could see a big problem developing shortly after she took ownership of East Bay Pizzeria in East Providence in August.
When the former owner left, most of his customers went with him. And so did the profits.
Garcia, 29, of Providence, had no prior business experience, and neither did any of her relatives. Her father, a native of Puerto Rico, bought the restaurant for her without either of them researching it.
So she relied on her enthusiasm, walking the surrounding residential neighborhoods and visiting local businesses, meeting potential customers face to face. Things are starting to turn around now but the pizza shop is still not turning a profit. Garcia is optimistic, however.
“I’m developing my own customer base. I’m a go-getter, and I’m going to make this work,” she said last week. “And considering I didn’t know anything about restaurants, I’m doing a pretty good job.”
Local officials involved in economic development among minority entrepreneurs say Garcia’s story is not unusual. One of the obstacles many of them face is a lack of a network of mentors who could provide guidance in running an enterprise.
Garcia is working hard to overcome it, and apparently others are, too.
While minority-owned businesses certainly face many obstacles to success, the failure rate of those businesses doesn’t appear to be much greater than white-owned businesses, according to local officials.
Victor Barros, urban development manager at the R.I. Economic Development Corporation, doesn’t see a difference.
Barros said common business mistakes he runs across in overseeing the EDC’s Microloan Fund include misjudging the market and undercapitalization – difficulties that can strike any business.
“Most of the challenges that are faced by minority-run businesses are the challenges that are faced by everyone,” Barros said.
Adriana Dawson, a regional director at the R.I. Small Business Development Center, has a different take. She said last week that she believes minority-owned businesses have a greater chance of failure for a number of reasons, but she added, “the numbers aren’t as dire as they were before.”
Recent data on the matter aren’t readily available, but a U.S. Small Business Administration study of national statistics from 1997 to 2001 did, in fact, determine there was a lower survival rate among minority-owned companies – nearly 3 percent lower than the 72.6 percent survival rate of white-owned companies.
Minority entrepreneurs did even better in Rhode Island during that period, according to the SBA. Minority-owned businesses posted a 73-percent success rate – including 73 percent for blacks and 70 percent for Hispanics. (The report did not specify the survival rate of white-owned businesses in Rhode Island.)
The amount of resources available to minority businesspeople may account for the successes in Rhode Island. Several local organizations offer business training, counseling and financial assistance.
Although not exclusively for minorities, the EDC’s microloan program focuses on urban businesses with less than five employees and less than $300,000 in annual revenue. The loans – there have been 25 loans awarded since the program started two years ago and one defaulted – range from $5,000 to $50,000.
Barros said 24 percent of the loans have gone to Latino-owned businesses and 4 percent have gone to black business owners. Another 36 percent of the loans went to woman-owned businesses, and 32 percent were awarded to white-owned businesses.
Although minority entrepreneurs appear to be holding their own for the most part, Denise Barge, executive director of the Minority Investment Development Corporation, said they do face obstacles that many white business owners don’t.
Like Garcia, they often jump into business without having some support from an earlier generation with experience. “That can make a big difference,” said Barge, whose agency helps finance small, disadvantaged businesses.
Among some Latinos, language can be a barrier, particularly in deciphering legal matters. Barge said these entrepreneurs are advised to hire a lawyer or a financial adviser, but to cut costs, they often don’t.
“There’s not a full understanding of what the rules are,” Barge said. “Then they’re surprised at the outcome.”
In Pawtucket, for example, a woman’s recent plans to buy a building and open a Cape Verdean restaurant were dashed when she failed to check whether the parking plan met zoning ordinance, then she failed to win a variance from the zoning board, city officials said.
“Sometimes the inexperience of running a business can run you out of business,” Barge said.
Dawson agreed that the lack of “business savvy” among minority entrepreneurs is a critical problem. That’s why the RISBDC at Johnson & Wales University has put an emphasis in recent years on reaching out to the minority communities.
As a result, more than 40 percent of the people seeking either business counseling or training at the center are minorities, according to John Cronin, executive director. Such training and counseling can boost a business owner’s chances of success.
Garcia said she contacted the center after the pizzeria started struggling and followed some of the suggestions to boost business. Others ideas, like offering delivery into Providence and offering free slices of pizzas at certain times of day, are her own.
With the experience she’s gaining, Garcia is already thinking of future business plans.
“I wanted to open a clothing store, but we bought the restaurant,” she said. “Maybe in three or four years, I’ll be ready to open a clothing store.” •

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