Press Release

Black Enterprise

Christmas Outlook

CEOs of growth companies look toward Christmas with cautious optimism and offer hints on how things will fare for the new year
By Cliff Hocker

Cautious optimism is the mood this Christmas holiday season for one special set of black CEOs. A national survey of 350 African American business owners found that their opinion was mildly positive as they anticipated what the end of the year would bring for their companies and the U.S. economy.

The third quarter ING Gazelle Index found that for the group of companies it tracks (small, black-owned businesses with the fastest growth of employees), 6.9% of the CEOs expect fourth quarter business activity will be significantly better than last year's Q4. Marginally, 24.9% expect only slightly better and 46.6% expect no change, while a grim 19.4% foresee it to be worse. On a more cheerful note, 50.6% plan to increase hiring in the future.

Conducted by Atlanta-based Boston Research Group Inc. for ING Financial Services, the ING Gazelle Index follows African American-owned businesses that both employ 10-100 workers and have the most rapidly expanding staffs. Each quarter, 350 of the 1,497 companies in the Gazelle database are randomly selected as the survey sample.

Upbeat U.S. Department of Commerce statistics show economic recovery. Third-quarter growth of 7.2% was twice as much as the second-quarter growth. But don't imagine Gazelle companies will ring jingle bells at the cash register. A last-minute flurry of Christmas spending would have but a muted impact on most of these firms. Only 5% are retail establishments. Less than one third of Gazelle companies operate in direct consumer markets, calculates Dr. Thomas Boston, head of the Boston Research Group Inc. and author of the survey. Almost 20% of Gazelle companies provide engineering and management services, and about 18% sell business services.

Although it's good news that the economy is getting stronger, overall employment is giving only feeble signs of a turnaround. The U.S. Labor Department reported that the unemployment rate dipped to 6.0% in October, down from 6.1% in September. Industry's revival is cold comfort for people who don't have a job.

Yet it is precisely the issue of employment that generated one of the most significant ING Gazelle findings says Boston, also a member of the BLACK ENTERPRISE Board of Economists and a professor of economics at the Georgia Institute of Technology. "I was most surprised to find that the majority of CEOs of these companies (50.6%) plan to increase hiring three months into the future. By contrast, only 8% plan to decrease hiring. This contrasts significantly with the largest U.S. corporations, because they are still downsizing and outsourcing jobs abroad to cut costs. The real job growth in the economy is being generated in firms like these Gazelles," he continues. "Similarly, 40% of these CEOs indicated that they plan to increase capital spending three months into the future, and only 15% said they plan to decrease spending. These two figures are very important, because the same survey found that 64% of the workforce of these companies is African American. Hence the hiring and spending will create jobs in our community."

Average Gazelle employment is about 26 workers. Boston estimates that nationally, 5% of the African American workforce is employed in black-owned firms [in general]. By 2010, it could reach 10%.

Gazelles surveyed indicated that 25% of their revenue comes from black customers and clients. Therefore, business-to-business or direct from consumers, black support makes a tremendous difference, Boston reasons. Nationally for black businesses in general, every $100,000 of generated revenue creates one job.

There's a serious hang-up, though. "Our survey found that black consumers spend only five cents out of every dollar of their disposable income with black-owned businesses.

This means that of the $645 billion in disposable income we received in 2002, only $32 billion was spent with black businesses. This is a shame," says Boston. "If we change our purchasing pattern and support these businesses more aggressively, perhaps they wouldn't have to be so cautiously optimistic during the coming holiday season."

12/03/03

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