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Businesses owned by minorities, women boomed before recession, census says

By Carol Morello
Washington Post Staff Writer
Wednesday, July 14, 2010; A14

Emogene Mitchell spent two decades in the cocoon of a multinational research institute, rising to vice president in charge of events planning. Then the economy tanked, and the workload shriveled.

In the heart of the Great Recession, Mitchell was ready to join the soaring number of minorities and women who are starting their own businesses and are expected to fuel much of the job growth over the next decade.

During a meeting on cost-cutting last year, Mitchell, who is African American, told her bosses they should axe her position and replace her with a contractor -- Mitchell's Meetings and Events, the company she runs out of a home office in Arlington County with her husband, La Mont. Her old firm is now one of her main clients.

In the years preceding the recession, the ranks of minority and female entrepreneurs exploded, according to census statistics released Tuesday. By 2007, minorities owned one in five small U.S. businesses, and women owned almost one in three.

The number of U.S. companies increased 18 percent between 2002 and 2007, from 23 million to 27 million -- and minority-owned businesses showed outsize gains. Black firms rose by 60 percent. There was a 44 percent jump in Hispanic-owned businesses, and a 41 percent increase for Asian-owned firms. Firms run by whites, in contrast, rose just 13 percent, although they still account for 83 percent of all small companies.

The largest numerical increase in the five-year span was in businesses owned by women, up 1.3 million, to a total of 7.8 million. That represented a 20 percent increase.

But even as the statistics were released, they were eclipsed by the recession that started in December 2007, leading economists to wonder whether the downturn will reverse much of the progress.

Some experts say that small businesses have been devastated in the past three years and that their numbers are surely diminished. Carlos Castro, founder of Todos Supermarket in Woodbridge, said he has seen many small Hispanic companies disappear in the past few years, particularly those tied to real estate.

David Hinson, director of the Minority Business Development Agency in the Commerce Department, predicted an increase in bankruptcies and failures of minority-owned firms, especially those run by African Americans.

"Many minority firms have had their access to credit essentially cut off," he said.

But others say that rising unemployment has accelerated the growth, as the laid-off become entrepreneurs.

"Latinos were generally the last ones in to the corporate structure, and oftentimes the last ones in are the first ones out," said Javier Palomarez, president of the United States Hispanic Chamber of Commerce. "I have a theory that some of the growth we're seeing in entrepreneurs indicates Hispanics who were laid off from large corporations."

In an era when such high-profile female business executives as Carly Fiorina and Meg Whitman have entered politics, an increasing share of U.S. businesses are run by women. A study published last year by the Guardian Life Small Business Research Institute projected that small businesses run by women will create one-third of all new jobs.

More women are starting firms in nontraditional fields; they own about 11 percent of construction firms, for instance.

Melissa Schneider and Amber Peebles, both former Marines, have 12 employees at their Dumfries firm, the Athena Construction Group. Schneider started the company in 2003 to do home remodeling after sensing that she was bumping up against a glass ceiling at the international technology firm where she was a network operations manager. Peebles, who had worked on government contracts as a paralegal, became Schneider's business partner in 2008, figuring that the base realignment known as BRAC offered an opportunity for two female veterans to stand out when going after government contracts.

Neither regrets branching out in such a severe downturn.

"I couldn't go back to corporate America," said Schneider, who handles much of the engineering work. "I just couldn't go back and work for somebody else again."

However, the challenges and inequities many minorities and women face in business remain formidable.

According to the census, minority-owned firms averaged $179,000 in gross receipts in 2007, up from $167,000 five years earlier but less than half the $490,000 averaged by companies run by non-minorities. Receipts for black-owned businesses actually dropped, from $74,000 in 2002 to about $71,000 in 2007.

Nevertheless, the latest census statistics are encouraging to Harry C. Alford, president of the National Black Chamber of Commerce. When the organization started in the 1990s, the census said 300,000 black-owned firms were doing $30 billion in business a year. In 2002, 1.2 million black-owned businesses had $89 billion in sales. The latest figures show 1.9 million firms with $137 billion in sales.

"The growth is phenomenal," said Alford, the grandson of a sharecropper and son of a truck driver. "When you write your own signature on both sides of the check, you start building wealth. I think America's getting better."

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