Entrepreneurship in America’s Inner Cities

Stephen AdamsDirector of Research & Strategy

NGA Policy AcademyNovember 16, 2000

ICIC: Spark new thinking about the economic potential of inner cities

Leverage market forces to increase jobs, income and

wealth of inner-city residents.

Encourage private sector to think differently about inner

cities as economic spaces.

Help civic leaders develop strategies for business growth

based on the competitive advantages of their inner-city

location.

Inner City Competitive Advantages

Inner cityInner city

Strategic locationStrategic location

Located near regional transportation and telecommunications infrastructure nodes Underserved

local marketUnderserved local market

$85 billion of annual spending power

Underutilized Workforce

Underutilized Workforce

Largest pool of available workers in the US amid a tight labor market

Linkage to industrial/regional clusters

Linkage to industrial/regional clusters

Opportunity to leverage proximity to city and regional clusters

Focus on Entrepreneurs:ICIC/Inc magazine Inner City 100

Project to identify and celebrate fast-growing companies located in America’s inner cities.

Proof of Concept

— Inner cities as economic spaces -- successful, legal entrepreneurial activity.

— Inner city competitive advantages

Strategic guidance for inner-city business development

• Criteria

– Companies must be headquartered in the inner city or have 51% or more of physical operations in inner-city areas

– Employ 10 or more employees at year-end 1998

– Have a five-year operating sales history that includes sales of at least $1 million in 1998

– Cannot be a holding company, regulated bank, or utility

12 Inner City 100 companies are on the 1999 Inc 500

26 Inner City 100 companies grew at rates matching or

exceeding 1999 Inc. 500 companies.

23% are minority owned compared to 11% nationally.

17% are women-owned, well above average among

companies over $1 million.

Performance matching and exceeding the nation’s best companies

• Inner City 100 represent range of sizes:

– 19 companies employ 100 or more;

– 24 employ between 50 and 100;

– 67 employ less than 50

• Broad sector distribution:

– Service firms 50%

– Manufacturing 31%

– Distribution/wholesale 14%

– Retail 5%

Inner City 100 -- Not Mom & Pop Operations

50%50%

$12M$12M

742%742%

202% 202%

$10.2M$10.2M

9,330% 9,330%

$1.2B$1.2B $30.7M$30.7M

Average Compound Annual Growth (CAG) rate:

Average revenues in 1998:

Collective sales in 1998:

Average sales growth rate:

Collectively, the Inner City 100 created 4,300 jobs between 1994 and 1998

Collectively, the Inner City 100 created 4,300 jobs between 1994 and 1998

Total IC 100

Top 3

Inner City 100 -- Fast-growing companies

• Average hourly wage for “rank & file” -- $12.82, above national average

• 96% provide employer-subsidized health insurance

• 76% provide bonus plan

• 72% provide retirement plan

• 66% provide life insurance

• 53% provide tuition reimbursement

Inner City 100 -- Providing Quality Jobs

• Top 3 competitive advantages of inner-city location

–Access to highways

–Proximity to customers

–Access to available and diverse labor force

Inner City 100 -- Succeeding because of location, not despite it

• Competing on factors other than costs:

–Seldom low-cost provider;

–Competing on customer service

–Ability to quickly customize and deliver goods & services

Inner City 100 -- Succeeding because of location, not despite it

#1 Caribbean Shipping & Cold Storage (Jacksonville, FL) Access

to ship, rail, and highway infrastructure to serve restaurants and

stores in growing Latin American markets.

On-Target Supplies & Logistics (Dallas, #63) uses inner city

location to source, distribute, warehouse and manage office products

for fast-changing telecommunications and energy firms. Tucker

Technologies (Oakland, #3)-- Designs, installs and maintains

telecommunications systems for high growth Bay Area telecom

cluster. Sites access to inner city labor force as his prime locational

advantage.

Tapping competitive advantage of inner city location.

Perception of crime was greatest competitive disadvantage

Actual crime was third among disadvantages

Cost of security systems was second highest ranked competitive disadvantage -- high cost of false information about inner city security.

Inner City 100 -- Some disadvantages are perceptional

Inner City 100 -- Strategic Guidance

Leverage competitive advantages

Deal directly with disadvantages

Work force sourcing is biggest barrier to growth.

Recognition has economic value

List is making a difference for inner city companies

Tucker Technologies (Oakland)-- “As a result of being on the Inner City 100, my company has experienced meteoric growth including a multi-million dollar contract with Lucent Technologies.”

NuStyle Development (Omaha)-- “Due to the recognition, we have had several financial institutions show interest in our company by offering us their best interest and term rates to benefit them, the community, and NuStyle.”

TCG (El Paso) “Our participation has resulted in the opening of doors that before were only slightly ajar.”

Shining the national spotlight on 100 entrepreneurs with the vision to see opportunity in places others failed to look, and to find success where others see only risk.

Through their everyday business activities the Inner City 100 companies are propelling a dynamic economic recovery in inner cities.

Entrepreneurs: A Beacon of Hope for Inner City Communities