Mid-size businesses are often shunned and less understood overall, although they make huge contributions to America’s economy. One important sector standing out in that landscape with even scarcer comprehension is Black-owned middle-market businesses.
That discovery emerged in “2024 Insights and Perspectives from Black Leaders in the Middle Market,” a fresh research report released June 12 by the National Center for the Middle Market (NCMM) at Ohio State University in alliance with Wells Fargo Commercial Bank.
The “first-ever” analysis shows that those firms grew faster than their peers, while facing new obstacles as minority business enterprises (MBEs).
The findings came from researchers who interviewed 13 Black middle-market business owners and leaders in decision-making roles. Their organizations are from different industries including construction, logistics, financial services, and information technology. Their companies have annual revenues ranging from $20 million to $500 million. Wells Fargo sponsored the report.
OPPORTUNTIES EXIST AMID ONGOING CHALLENGES
Notably, middle-market businesses are often viewed as potentially strong acquisition targets by investors for multiple reasons. Their attributes include strong revenue growth, resiliency in uneven economic times, and greater flexibility for operational improvements than larger firms.
An intriguing revelation from the report was that companies led by Black business leaders outpaced the overall middle market in 2023. According to the report they grew revenues (17.7% versus 12.4%), employees (11.5% opposed to 9.6%), and research and development spending (28% compared to 19%). According to Moses Harris, Black/African American segment leader for Wells Fargo Commercial Banking.
Harris shared with BLACK ENTERPRISE exclusively by email that while that data is encouraging, there is also tremendous room for improvement. He stated that only five of the more than 4,000 publicly traded companies in the U.S. are majority-owned by Black leaders. He said that means there is untapped opportunity for successful small black businesses to take their companies to the next level.
More specifically, Harris says taking their businesses to an elevated level may call for those firms to focus on building more revenue-growth strategies. He said that he could possibly achieve that by working with organizations like the National Minority Supplier Diversity Council and NCMM.
He suggested they unite with their local Black Chamber of Commerce and other trade-specific organizations with supplier diversity initiatives to help bolster engagement with private and public procurement officers.
“Deepening rapport and relationships with those organizations help provide access and introduction to CPOs (chief procurement officers) that they might not have gotten on their own.”
Further, he says that to serve diverse clients better, the middle-market banking industry needs to continue to evolve. That includes being more intentional about advancing the creditworthiness, unique strengths and capabilities, and industry concentrations of the Black leaders and their firms.
“To be candid, we are not where we want to be as an industry, but we are on a journey, working to build greater opportunities for mid-market Black-owned firms. In fact, the point of this research is a step to help us get there.”
He explained all the previous research on Black business centered on small business. He said the new report is a call for action for the nation’s business ecosystem and corporate leaders to learn and better understand the needs of mid-sized Black firms, stop overlooking them, and explore solutions.
Harris affirmed the lack of inclusion of diverse folks in the economy has cost the U.S. $16 trillion over the last 20 years, according to research from the Federal Reserve Bank of St. Louis.
“Our economy just hasn’t worked for Black people. Advocacy, storytelling, and data help decision-makers understand the nuances of what needs to be accomplished – to propel Black-owned firms into the future. This story needs to be elevated so more people can participate in the conversation. People just don’t know. It’s not that they don’t care! They just don’t know.”
Among key findings from the report included:
- “A shared sentiment that diversity initiatives and programs are shifting away from Black-owned businesses.”
- “Clear feelings that an MBE designation means less today than it once did; or that the opportunities such certifications have become watered down or less available to Black-owned companies.”
- “A view that programs that contribute to the initial success of Black-owned businesses often end up limiting future growth.”
- “Frustration by Black business leaders at what they view as broken government contracting and certification processes, with some even contending that the programs put in place to help Black entrepreneurs are ultimately hurting them instead.”
SUPPLIER DIVERSITY PROGRAMS: A DOUBLE-EDGED SWORD
Harris explained federal contracting programs are likely a big reason the report shows Black middle-market businesses, on average, are 50% younger than their peers overall. “Adoption of these programs takes time, and much of the growth in number is likely connected.”
James Hill, chair of the Department of Operations and Business Analytics at The Ohio State University Max M. Fisher College of Business, offered this take among comments, “Black-owned businesses often must go through supplier diversity programs and certifications, where their majority-owned counterparts can go straight to procurement. These additional steps are structural barriers they must overcome.”
Harris added government and corporate supplier diversity programs are a double-edged sword. “Initially, they spur business but ultimately limit Black-owned firms’ growth, as often lucrative procurement decisions are made with business decision-makers that sit outside the supplier diversity channel.”
EXPERIENCE CONTRIBUTING TO BLACK BUSINESS SUCCESS
The survey revealed experiences and strategies as well that have helped Black businesses succeed. It showed that discrimination is a universal experience that is not likely to go away anytime soon, but it does not define Black business owners or their paths forward. It was also mentioned that establishing and maintaining a network of peers and an economy in which Black business leaders are valued can help generate opportunities and overcome challenges.
Addressing that, Harris stated, “Black business owners are often emphatic about not wanting to win opportunities solely based on their designations. Instead, they seek to win based on their unique qualifications and the perspectives they bring to the table.”
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