The Status of Large Minority Businesses in the Chicago Region: Long-term Implications for Job Creation and Neighborhood Stability
JUNE 30, 2014
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Introduction Chicago United has a 45-year history of advancing parity of economic opportunity for people of color in the Chicago area through strategic collaboration between large corporations, the nonprofit community, and minority business leaders. In 2008, Chicago United launched an effort to strengthen the relationships between corporations headquartered or doing business in Chicago and minority owned firms. There is mutual benefit between these stakeholders when the regional economy grows as local minority owned businesses increase capacity, grow in scale, and become capable of facilitating larger contracts. This increase in scale enables these firms to bid competitively for contracts to support the global needs of multinational corporations and, as a result, hire more Chicagoans. This mutually beneficial strategy is implemented through Chicago United’s Five Forward Initiative™. To evaluate the vitality of Chicago’s minority owned business community, it is important to compare it to peers in other major cities. This report presents an assessment of the status of Chicago as a center for minority business in comparison to other diverse metropolitan areas. Chicago United reviewed gross revenues and job creation as indicators in our assessment. This study is a companion to the analysis presented in the 2013 report from Chicago United on the economic impact of Five Forward. This comparative analysis was conducted by Chicago United in June 2014. It clearly shows that there is a critical need for concentrated efforts to support local minority business enterprises (MBEs) as a means to increase the economic health and competitiveness of the Chicago region. Based on publicly available data, it appears that minority owned businesses in other cities are experiencing more growth than Chicago-area businesses, and they are creating more jobs. The 2013 Five Forward report indicated that a more concentrated effort to do business with locally owned minority firms will accelerate growth and job creation. Several corporations have made such a commitment through the pilot Chicago United Five Forward Initiative. The initiative is a model for economic growth that calls for increased spending by the region’s major corporations with local MBEs. Chicago United’s contention is that such increased spending with companies that are capable of supporting the large-scale needs of large enterprises will lead to job growth in local communities most in need of increased employment. The 2013 economic impact report, titled “Building a Stronger Regional Economy through the Utilization of Minority Business Enterprises,” provided evidence that the Five Forward pilot program, if expanded, can deliver on its model for increased job growth and minority business expansion. In the following competitive analysis, we support the case for increased spending with Chicago based minority owned businesses. Chicago’s MBE community is not enjoying the same support and growth seen by their peers in competitive markets, and in the interest of the economic health of the region, we must reverse this trend. There are good business reasons to focus on expanding capacity and scale of minority owned firms. For example, according to World Business Chicago, the city seeks to increase its export profile, (i) and data provided by the Department of Commerce, Minority Business Development Agency show that minority owned enterprises are twice as likely to export as their majority counterparts (ii). Job creation has long been a focus of Chicago’s business leadership, particularly for minority communities. Studies show when doing business in communities of color, minority owned firms tend to hire more people of color than similarly situated white-owned companies (iii). As these indicators show, a focus on growing local minority firms is both a business and social imperative for the region.
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(i) A plan for Economic Growth and Jobs, World Business Chicago, March 2012 (ii) Minority owned firms lead the nation in exporting. Minority Business Development Agency April 2012 (iii Utilization of minority employees in small business, Timothy Bates. The review of Black Political Economy, Summer 1994
Creating This Competitive Analysis Chicago United conducted this analysis of the state of minority-owned businesses in similar metropolitan areas to better understand Chicago’s competitive position in commerce. The analysis uses data from publicly available reports published by Black Enterprise and Hispanic Business magazines. Black Enterprise (BE) publishes an annual listing of the top 100 (BE 100) Black-owned businesses in the country; and Hispanic Business publishes an annual listing of the top 500 Hispanic-owned businesses in the country. These reports provide rich data. Chicago United evaluated the data from a number of selected cities whose population, demographics, and concentration of Black and/or Hispanic businesses were similar to Chicago’s. We wanted to understand if Chicagobased MBEs were growing at rates and in concentration similar to firms in other cities. Black Enterprise and Hispanic Business are frequently used resources for consistent data that is considered reliable and credible to illustrate the trajectory of these MBEs. The top businesses lists rank the largest African American and Hispanic businesses according to annual gross receipts. Data were gathered from the Black Enterprise and Hispanic Business lists for the years 2005, 2010, and 2013.* Chicago United cannot certify that each publication captures data for all Black-owned or all Hispanic businesses; however, we can rely on their consistent processes for collecting and reporting the data, reflecting generally accepted information about the positions of the country’s largest populations of minority-owned businesses. Eight markets were selected for their diverse populations and the presence of at least one minority firm on each of the two lists: Atlanta, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami, and New York. The data gathered consisted of the listings from both magazines which contain company name, location, name of the CEO, number of employees and sales for each one of the three years studied. Lists produced by each of the two publications, in 2005, 2010 and 2013 were analyzed to understand the competitive position of the Chicago Market. The objectives of this analysis were to determine the following for each period studied: •
Ranking: The rank firms from each market enter the list based on revenue, indicating the largest firm from each metropolitan area.
•
Market Concentration: The quantity of large MBEs in each market.
•
Employment: The number of jobs associated with the large MBEs listed in the BE100 and the top 100 of the Hispanic Business 500.
•
Competitive Standing: The overall strength of minority firms in Chicago compared to other markets through analysis of Chicago’s competitive position based on the concentration of large MBEs by market, aggregated reported revenues, and jobs created by those firms.
Based on the findings, there is a clear need for a call to action in Chicago’s business and civic communities.
* The 2013 Hispanic Business 500 was the last published report. Hispanic Business has ceased publishing the report.
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Key Findings There are critical and startling findings based on the combined 2013 listings in Black Enterprise and Hispanic Business: •
The Chicago market ranked last of eight markets in large minority owned business revenues.
Los Angeles ranked first with a total of 8 minority firms earning $21.9 billion in revenues; Chicago ranked last with a total of 7 minority firms in Chicago earning a total of $637 million in revenues.
•
The Chicago market ranks second to last of 8 markets in job creation by large minority owned firms.
Miami ranked first with 25,356 jobs created by large minority owned firms; Chicago was in seventh place with 2,506 jobs created by large minority owned firms.
Large Black-owned Businesses in Chicago Chicago’s Black-owned Businesses Have Fallen Behind Examination of Black Enterprise (BE) magazine’s ranking of the top 100 largest Black-owned companies reveals a diminished standing for Chicago. Chicago’s largest Black-owned firm entered the 2005 BE 100 list in the 5th position with revenues of $498 million; however, by 2013 Chicago’s largest Black-owned firm entered the list in 23rd place with revenues of $174 million. This means that corporations looking for diverse partners that can meet the capacity requirements of their large contracting opportunities may look to Black-owned firms outside of Chicago to meet their needs.
Chicago’s Largest Black-owned Firms Listed in the BE 100
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Company
Year
Rank
Revenue
Johnson Publishing Co.
2005
5
$498,224,000
Harpo, Inc.
2010
15
$315,000,000
Baldwin Richardson Foods Co.
2013
20
$174,900,000
Largest Black-owned Firms Listed in the BE 100 2005
2010
Metro Area
Staff
Metro Area
Staff
2
Houston
2
Houston
3
$645.3
3
300
$622.7
Chicago
1,699
11
New York
Rank
Revenues
2013
(In Millions)
Rank
1,300
$987.0
Detroit
1,100
4
Los Angeles
5
Revenues
Metro Area
Staff
Revenues
(In Millions)
Rank
200
$1,200.0
2
Los Angeles
1,800
$1,900.0
Detroit
1,514
$1,092.0
3
Detroit
2,068
$1,838.7
4
Los Angeles
1,372
$998.7
15
Atlanta
1,388
$248.4
$498.2
13
Atlanta
1,521
$316.0
20
Chicago
280
$174.9
180
$360.0
14
Chicago
459
$315.0
25
Houston
560
$129.5
(In Millions)
13
Atlanta
1,907
$304.2
32
Dallas
57
$120.0
33
Dallas
82
$90.0
18
Miami
274
$202.9
68
New York
245
$55.0
40
New York
225
$80.0
24
Dallas
300
$160.0
83
Miami
63
$40.2
97
Miami
104
$23.0
Employment generated by the listed Black-owned firms in Chicago fell a dramatic 83% during the measured period. In 2005, Chicago firms on the BE 100 list boasted 1699 employees; by 2013, that number fell to 280.
Revenue of Black-owned Firms Listed in the BE 100 $2,000.00
2005 Revenue (in Millions)
$1,800.00
2010 Revenue (in Millions) 2013 Revenue (in Millions)
$1,600.00 $1,400.00 $1,200.00 $1,000.00 $800.00 $600.00 $400.00 $200.00 $0
Atlanta
Chicago
Dallas
Detroit Houston Los Angeles Miami New York
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Key Findings Chicago’s Largest Hispanic-owned firms listed in the Hispanic 500 Strong Growth in the Number of Businesses…But They Remain Relatively Small Although Hispanics are starting businesses in the Chicago market at a rapid rate, they remain small. Between 2002 and 2007, the number of Hispanic-owned businesses increased by 43 percent and the total number of people employed by Hispanic-owned businesses increased by 28 percent. On average, Hispanic-owned firms earn $182,747 in business revenue compared with $1,370,694 for all other Illinois businesses. (iv)
Based on the information gathered from The Hispanic Business 500 list published by Hispanic Business, Chicago is declining in status as a leading market for Hispanic-owned firms. In 2005, the largest Chicago area Hispanic-owned firm entered the list in the 30th position with $185 million in revenues. By 2013, the largest Chicago area Hispanic firm entered the list at number 87 with revenues of $71 million.
Company
Year
Rank
Revenue
Heartland Food Corp./C.T.G. Investments
2005
30
$185,050,000
Gusto Packaging Co.
2010
25
$194,000,000
United Building Maintenance Inc.
2013
87
$71,080,000
Largest Hispanic-owned Firms Listed in Hispanic Business 2005
2010
Rank
Metro Area
Staff
1
Miami
4
Revenues
2013
Metro Area
Staff
Rank
Metro Area
Staff
1
Los Angeles
2,800
$3,700.0
1
Miami
5,500
$1,100.0
2
Miami
2,400
$703.0
12
Houston
98
$2,757.0
11
Detroit
400
$612.0
$375.5
16
Houston
156
$537.7
702
$456.9
14
Dallas
1,500
$365.0
21
Dallas
8,000
$390.0
3300
$185.1
16
Detroit
280
$319.0
25
New York
2000
$350.0
Dallas
350
$160.0
25
Chicago
550
$194.0
34
Atlanta
993
$234.6
42
Houston
70
$133.5
29
Atlanta
360
$185.0
55
Los Angeles
70
New York
250
600
$130.0
$84.3
88
New York
400
$59.0
87
Chicago
1,800
$71.1
(In Millions)
Rank
400
$2,125.0
Los Angeles
1299
6
Detroit
288
11
Atlanta
30
Chicago
36
Revenues (In Millions)
Revenues (In Millions)
$6,300.0
(iv) T he State of Hispanic-Owned Businesses in Illinois: Untapped Economic & Job Creation Potential, DePaul University’s Driehaus College of Business in partnership with the Illinois Hispanic Chamber of Commerce, 2013.
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Employment generated by the listed Hispanic-owned firms fell by 45% during the measured period. In 2005, Chicago firms in the top 100 of the Hispanic Business listed 3300 employees by 2013 that number fell to 1800.
Revenue of the Top 100 Hispanic-owned Firms Listed in Hispanic Business $7,000.00
2005 Revenue (in Millions) 2010 Revenue (in Millions)
$6,000.00
2013 Revenue (in Millions)
$5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $0
Atlanta
Chicago
Dallas
Detroit Houston Los Angeles Miami New York
Concentration of Large Minority-Owned Firms by Metropolitan Areas Measurements of revenue of the largest minority firms on each of the lists are only one part of the equation. Chicago United also looked at the concentration of Black-owned and Hispanic-owned firms as an indicator of the minority business environment in each market.
Key Finding: Aggregating the largest Black-owned and Hispanic-owned firms in each of the 8 regions studied, the Chicago metropolitan area ranked last in revenues of large minority firms and second to the last in job creation.
When Black Enterprise began collecting data in 1973, Chicago was home to 13 of the top 100 Black-owned businesses on the list; New York had 10. Chicago firms on the BE list were concentrated at the lower end of revenues in 2013, and there were only 5 firms listed.
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Key Findings Market Population Data It is useful to consider the market demographics when reviewing the profile of large minority firms. However, it is clear that size and concentration of MBEs do not necessarily correlate to the size of minority population. For example, despite the fact that there is a smaller African American population in Detroit and Atlanta than in Chicago, those metropolitan areas led the Black Enterprise 100 list with 12 and 7 firms respectively.
Metropolitan Area
Total Population
African American Population
Number of firms listed
Los Angeles
12,828,837
907,618
5
Houston
5,920,416
935,371
2
Dallas
6,426,214
961,871
3
Detroit
3,734,090
980,451
12
Miami
5,654,635
1,169,185
1
Chicago
9,537,289
1,721,578
5
Atlanta
5,286,728
1,772,569
7
New York
19,567,410
3,362,616
3
Source: 2010 U.S. Census; 2013 BE 100
In 2013, Hispanic Business listed only two Chicago area Hispanic firms in the top 100 compared to 24 in Miami, although Chicago’s Hispanic population was larger than Miami’s by 300,000 residents. Metropolitan Area
Total Population
Hispanic Population
Number of firms listed
Detroit
3,734,090
167,569
4
Atlanta
5,286,728
530,000
3
Miami
5,654,635
1,610,000
24
Dallas
6,426,214
1,746,000
4
Chicago
9,537,289
1,934,000
2
Houston
5,920,416
2,044,000
5
New York
19,567,410
4,242,990
4
Los Angeles
12,828,837
5,723,999
3
Source: Pew Hispanic Center and 2010 U.S. Census; 2013 Hispanic 500
Revenue and Job Creation Trends Lag Among Chicago-Based MBEs Reviewing the Black Enterprise and Hispanic Business rankings together provides an indication of Chicago’s overall status as a business market of choice for the two largest minority populations.
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Jobs and Revenues by Market: Combined Data Reported in Black Enterprise and Hispanic Business 2013 Aggregating the largest Black-owned and the largest Hispanic-owned firm in each region, the Chicago metropolitan area ranked last in revenues of large minority firms and second to the last in job creation.
Ranking Metropolitan Area by Revenues Metropolitan Area
Jobs
Revenues (In Millions)
Number of firms listed
Los Angeles
2,756
$21,935,530,000
8
Miami
25,356
$16,144,620,000
25
Detroit
7,447
$4,290,525,000
16
Houston
1,771
$1,709,724,000
7
Atlanta
7,303
$1,298,446,000
10
Dallas
13,547
$1,211,681,000
7
New York
6,887
$779,738,000
7
Chicago
2,506
$637,675,000
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Ranking Metropolitan Area by Jobs Metropolitan Area
Jobs
Revenues (In Millions)
Number of firms listed
Miami
25,356
$16,144,620,000
25
Dallas
13,547
$1,211,681,000
7
Detroit
7,447
$4,290,525,000
16
Atlanta
7,303
$1,298,446,000
10
New York
6,887
$779,738,000
7
Los Angeles
2,756
$21,935,530,000
8
Chicago
2,506
$637,675,000
7
Houston
1,771
$1,709,724,000
7
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Conclusion Creating Sustainable Minority Businesses of Scale in the Chicago Region Relative to other major metropolitan areas, the Chicago area is not building capacity of the large minority business enterprises that are most likely to create jobs in communities most plagued by poverty. There may be structural impediments or simply a lack of awareness that has diminished efforts to support local minority firms. Whatever the genesis of the decline, it is time to focus on the job creation in communities of color that is provided by minority owned employers. Chicago has the public and private sector infrastructure as well as the ability to rally the corporate commitment required to do business with these firms. There are many MBEs that have the wherewithal and the infrastructure to support a corporate client’s requirements, and they should be considered strategic partners in building a stronger regional economy. With a committed effort to grow the capacity of these firms, they will grow in scale and be enabled to compete nationally. The Five Forward Initiative™ is a successful model for driving growth among minority firms in Chicago. The pilot program results showed that the expenditures by Committed Corporations with their MBE partners generated a direct impact of $227.7 million. About $67.2 million of these direct expenditures were paid in wages and salaries. This led to the creation of 1,424 jobs. When the multiplier (2.376 for goods/services and 2.184 for jobs created) was calculated and applied, the total combined direct and indirect impact increased to $540.8 million in goods and services and 3,110 jobs created. The satisfaction surveys that are conducted on a semi-annual basis provide verification that the MBEs selected by corporate partners are performing and growing, indicating that both corporations and MBEs benefit from the relationships. As Chicago’s population continues to grow in racial and ethnic diversity, it is incumbent upon the business community to ensure that the minority business community is seen as an asset worthy of investment. The investment will provide returns by delivering job creation and more stable communities.
Information Sources: www.emeraldinsight.com/journal https://www.flickr.com/photos/usnationalarchives/ Reference materials: 2005, 2010, and 2013 BE 100 List, Black Enterprise 2005, 2010, and 2013 Hispanic 500 list Hispanic Business 2013 University of Illinois study
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A Corporate Membership Organization Chicago United’s unique three-tiered platform holistically advances a culture of inclusion and contributes to a more diverse business community. Members focus on increasing multiracial leadership in corporate governance and executive level management; developing a pipeline of future multiracial executive leaders; and cultivating multiracial business partnerships.
Chicago United serves as a unique thought partner in corporate inclusion strategy by providing: •
Exposure to national thought leaders in diversity and inclusion research and practice like Dr. Mazarhin Banaji, a scientist in the study of unconscious bias and its effects on decision making; Professor Scott Page, a leading consultant on market and organizational performance; and Dr. Martin Davison, a teacher, researcher, author, and global Fortune 500 business consultant.
•
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•
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Members come to the Chicago United for unparalleled, honest, and candid discussions of race and ethnicity in business. Some have earned national accolades for their efforts to promote multiracial leadership by leveraging best-in-class diversity and inclusion practices. Others may be implementing first-time programs and processes. Regardless of where they are on the curve, every member contributes to the environment and learns ways to optimize their businesses through their participation. If you want to take part in these courageous discussions, then your company should become a member of Chicago United.
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FIVE FORWARD COMMITTED COMPANIES FIRST COHORT: Advocate Health Care
City Colleges of Chicago
Microsoft
Aon
ComEd, An Exelon Company
Northern Trust
Aramark Healthcare
Ernst & Young LLP
Northwestern Medicine
Ariel Investments
GE Healthcare
Northstar Lottery Group, LLC
Baxter International Inc.
Kraft
Rush University Medical Center
Blue Cross Blue Shield of Illinois/ Health Care Service Corporation
Loop Capital
SDI (System Development.Integration LLC)
BMO Harris Bank N.A.
Macy’s
The University of Chicago Medicine
McDonald’s Corporation
University HealthSystem Consortium (UHC)
BP America Inc.
Mesirow Financial
THE CHICAGO UNITED FIVE FORWARD INITIATIVE™ IS PRODUCED IN PART THROUGH FUNDING PROVIDED BY:
THE WORK OF CHICAGO UNITED IS MADE POSSIBLE BY THE SUPPORT OF OUR MEMBERS: Abbott
Federal Reserve Bank of Chicago
Northwestern University
AbbVie
Financial Executives International
Odell Hicks & Company, LLC
Access Community Health Network
Franczek Radelet P.C.
Peoples Gas & North Shore Gas
Advocate Health Care
Golin
PNC Bank
Allstate
Grant Law, LLC
Prado & Renteria CPAs Prof. Corp.
Aon
Greeley and Hansen
Primera Engineers, Ltd.
Ariel Investments
Heidrick & Struggles
Pugh, Jones & Johnson, P.C.
Astellas US, LLC
Hispanic Housing Development Corporation
PwC LLP
Bank of America
Holland Capital Management LLC
Quarles & Brady LLP
Baxter International Inc.
The Hollins Group Inc.
Quintairos, Prieto, Wood & Boyer, P.A.
Blue Cross Blue Shield of Illinois/ Health Care Service Corporation
Hyatt Hotels Corporation
RGMA
BMO Harris Bank N.A.
Johnson, Blumberg & Associates, LLC
RME (Rubinos & Mesia Engineers, Inc.)
Katten Muchin Rosenman LLP
Roosevelt University
KPMG LLP
Rush University Medical Center
Krieg DeVault LLP
Sanchez Daniels & Hoffman LLP
Laner, Muchin, Ltd.
Seaway Bank and Trust Company
Loop Capital
Sidley Austin LLP
LSL Healthcare Inc.
Sodexo
Macy’s
Spencer Stuart
Manpower
Tampico Beverages, Inc.
McDonald’s Corporation
UBM Facility Services Inc.
Mesirow Financial
United Airlines
MillerCoors
The University of Chicago / University of Chicago Medicine
BP America Inc. Bryan Cave LLP Cabrera Capital Markets, LLC Carrington & Carrington, Ltd. Central City Productions, Inc. Chicago Botanic Garden The Chicago Community Trust Chicago Sun-Times The Chicago Urban League The Chicago Zoological Society CIVIQ Smartscapes ComEd, An Exelon Company Crain’s Chicago Business CSMI Cushman & Wakefield Deloitte Dinsmore & Shohl LLP Endow, Inc. Ernst & Young LLP
Mitchell & Titus, LLP Montenegro Morgan Stanley MZI Group Inc. Nicor Gas NJW Consulting Northern Trust Northstar Lottery Group Northwestern Medicine
University of Illinois at Chicago UPS USG Corporation Walgreens Washington, Pittman & McKeever, LLC Weber Shandwick Wedgeworth Business Communications Wynndalco Enterprises, LLC
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