How America can help mint more million-dollar businesses amid the pandemic
The payoff from nurturing start-ups and adding an accelerant to scale these businesses will be new jobs in many communities at a time when Americans of all backgrounds desperately need them.—Orv Kimbrough
When architect David Mason started David Mason & Associates, his infrastructure engineering company in St. Louis in 1989, it was a two-man operation, run from a 10 x 12 room. He and his business partner, James O. Hacking, did business development during the day, then worked until midnight on their engineering and architectural projects.
With credit hard to come by, neither could take a paycheck for the first eight or nine months. “It was very rigorous and took a lot of sacrifice,” says Mason.
Steady commitment to the business paid off. The business, which now has offices in St. Louis, Chicago and Philadelphia, has grown to 180 people. Its revenue was in excess of $20 million last year and the business was profitable.
With many small businesses struggling and shutting their doors during the pandemic, the U.S. economy desperately needs more job-creating businesses like David Mason & Associates.
However, even in good times, few businesses break the million-dollar mark, let alone the $20 million mark. Even fewer of these million-dollar businesses are minority owned, like David Mason & Associates.
As a community banker, I am confident it is possible to turn this situation around, but we need to rethink the support we provide to small businesses in this country. Many of them need meaningful assistance right now, and that is particularly true of minority-owned firms, which lack the access to capital they need to grow and often never get to the stage of hiring employees. They are an untapped national resource that could provide a tremendous boon to the economy if we provided them with even a modicum of nurturing.
Here are my recommendations:
Prioritize access to capital
U.S. businesses are the backbone of the economy, but many lack access to low-cost capital and missed out on the last two rounds of stimulus aid for small businesses. That was a problem particularly pronounced among the smallest minority and women-owned firms.
One thing that David Mason did that positioned his firm well to get the funding needed to grow was to formalize his business early. Mason and Hacking formed an S Corp early and opened a business bank account right away. Many small business owners would benefit from taking similar steps — which give bankers confidence — but may not have advisors or entrepreneurial friends to guide them in this direction.
Mason’s conscientiousness enabled him to get his first $10,000 loan in the early 80s. It came from a community bank, after a major regional bank said no. “That made things difficult,” Mason recalls. “Capital and cash flow are the fuel for many businesses.”
Mason finally made real headway in building up his access to capital after some bankers from his community asked him to serve on an advisory board for the bank. As the bankers got to know him and learned about how he ran his business, his tiny line of credit grew to about $25,000.
“What many small business people don’t know is commercial bankers have to go into a loan committee and pitch that the individual is worth loaning money to and can be trusted,” says Mason. “They believed in me and made the pitch.”
Mason strategically built relationships with bankers at a few community banks, including the one I now run. By 1993, he was able to get a commercial real estate loan for approximately $350,000 to buy the 26,000-square-foot building his business occupies. That allowed his business to expand. “That was a very good thing for my business,” he says.
Shine a spotlight on mentorship
One reason Mason knew how to make the right moves to build the creditworthiness of his business was that he had great advisors. He started his relationships with large, local professional service firms in accounting, law and insurance early on, and he has retained the same firms for more than 40 years.
“They have been mentors,” says Mason. “If I ever have a question, they are great people to bounce ideas off of.”
Although there are a number of excellent mentorship programs to help entrepreneurs, there are still many entrepreneurs who don’t hear about them because they are not part of the networks where they would learn about them. We need to change that.
Commit to supplier diversity and minority business development
In the early years of David Mason & Associates, clients who’d never met Mason in person would sometimes walk into his front office and ask for him, not realizing he was the company owner. He understood the reason for their surprise: It was unusual at that time for a black man to own a firm like his.
It’s almost as rare today. Many firms that use B2B services like his don’t work with many diverse suppliers, who would benefit from the revenue.
Large and midsize companies can help turn things around by making formal commitments to not only look for diverse suppliers but to also support those who are starved for cash, through flexibility on payment terms.
“We pride ourselves on being extremely good at what we do,” says Mason, the son of a Tuskegee Airman. “But there is a certain portion of our work where our entrée may be the fact we are a minority-owned business. Once we have gotten in the door, we tend to build long-term relationships based upon the quality of work we have provided.”
Although some dismiss supplier diversity programs as set asides, Mason says they are crucial for small firms that are just getting started and might not ever get a shot at work otherwise. “We live in a world where there is bias,” says Mason.
Recruit talent from outside your network
Even business leaders who aren’t directly involved in purchasing decisions at their company can help minority-owned firms grow. Simply making an effort to network with business owners in the minority community can make a difference.
“Whether you are running a woman-owned firm or a minority-owned firm, access to those with money and power and having them believe in you are difficult things,” says Mason. “We need people who are unafraid to stand up and advocate to open the door and allow us in the room.”
You’d be surprised at how much good can result from simply giving more diverse business owners a seat at the table so they can make the connections they need to grow.
Ultimately, taking all of these steps requires a conscious commitment. However, the payoff from nurturing start-ups and adding an accelerant to scale these businesses will be new jobs in many communities at a time when Americans of all backgrounds desperately need them.