Memphis pushes to level the playing field for black entrepreneurs

"We can never be the kind of community that we want to be until we have the minority firms have a much larger piece of the pie."
Memphis, Tenn. — Darrell Cobbins’ grandfather was a real estate man.

Samuel Peace opened Peace Realty in 1959, a company whose legacy includes building Memphis’ first neighborhood for middle-income African-Americans — the 600-home Lakeview Gardens subdivision.

“I grew up seeing him go to work six days a week. He had six children, a wife that didn’t work and he provided for all of them,” Cobbins said. “From an entrepreneurship standpoint, I’ve seen a great model for success — especially black entrepreneurship.”

Shortly before Peace died, Cobbins’ mother showed him a 1967 edition of the Memphis Press-Scimitar that included the headline “Negroes Climb Ladder To Success.” The piece profiled 10 black businessmen of the era, including Benjamin Hooks, a civil rights attorney who ran his own law firm before becoming the first black criminal court judge in a court of record in Tennessee; A.W. Willis, another local civil rights attorney who opened the city’s first integrated law firm and founded Mutual Federal Savings and Loan in 1955; Antonio Maceo Walker, whose family founded the Universal Life Insurance company and Tri-State Bank, which supported black entrepreneurs that had been denied loans; and Peace.

Cobbins is also a pioneering black entrepreneur. He founded Universal Commercial Real Estate in 2007. It’s Memphis’ first black-owned commercial real estate company, and its name is a nod to Walker’s company, which Cobbins calls “the quintessential example of everything great about the black business legacy in Memphis.” He keeps a portrait of his grandfather hanging in his office.
“I wanted to make sure that I had that to look at every day, something to remind me of that legacy,” Cobbins said.

Although Memphis has given birth to black entrepreneurs like Peace and Cobbins, very few black-owned businesses have had the kind of success necessary to build a solid middle class. It’s a majority-minority city — 63 percent of residents are black — and more than half of the city’s small businesses are black-owned. Yet 30 percent of Memphis’ black residents live below the poverty line, compared to the city’s overall poverty rate of 26.2 percent.

Black businesses have struggled with growth. Only 0.83 percent of all the revenue generated in Memphis is coming through black-owned businesses, according to the 2012 U.S. Census of Small Business Owners, down from 1.08 percent in 2007. That number went down even though the number of black-owned businesses doubled between 2007 and 2012.

Darrell Cobbins, president and principal broker at Universal Commercial Real Estate, LLC, near his office in Downtown Memphis.

Just 2 percent of the 39,864 black-owned businesses in the city have paid employees.
It’s not just Memphis. Nationally, only 4 percent of black-owned businesses have employees. Despite black entrepreneurs starting more businesses than their white counterparts, white-owned firms outperform black-owned ones across all business sectors, according to the Association for Enterprise Opportunity’s analysis of data from the 2012 U.S. census.

Making Memphis’ black-owned businesses more robust is essential to carrying on the city’s legacy, according to Cobbins.

“If black businesses were thriving more in Memphis, they could employ more black people. They could open up vocations in these black communities,” he said. “[People] would be able to economically reinvest in their communities and in the Memphis community, and just make it a stronger, more viable place to be.”

“The majority of the wealth has resided in the white community,” he added. “A black businessperson has to work hard to develop relationships that could be beneficial to the growth of your business.”

Leaders of Memphis’ public and private sectors are trying to change that.

Along with the Greater Memphis Chamber, a membership-driven organization made up of 2,200 local businesses and leaders, the city of Memphis has backed a variety of new initiatives aimed at expanding the capacity for women- and minority-owned businesses to pursue economic opportunity.

“Minority” is an all-encompassing federal category that includes African-Americans, Asian-Americans, Native Americans, Hispanics and women. The city’s various initiatives can’t directly target businesses owned by African-Americans. But most of the emphasis has been on black-owned businesses because there are more of them in the city, said Joanne Massey, the director of the City of Memphis Office of Business Diversity and Compliance.

“There’s no question that what we’re doing is to help black people in this community,” Massey said.
Her department was created in 2016 to help the city of Memphis grow its contracts with minority- and women-owned businesses and to lead programs that boost those businesses so they can seek contracts with public, quasi-public and private entities. The Office of Business Diversity and Compliance is the result of a merger between two offices that previously focused on minority-owned businesses.

The city could specifically see improvement when it comes to contracting. About 88 percent of county contracts awarded between 2012 and 2014 went to firms owned by white men, according to an April 2016 study for the Shelby County government. Black-owned businesses won just 5.8 percent of contracts over that period. A similar study for the city found that Memphis had awarded 12 percent of its public contracts to minority- and women-owned businesses between 2009 and 2014.

“We have to help companies build capacity and be able to compete,” Massey said.

A 1967 edition of the Memphis Press-Scimitar. The story on black businessmen featured Darrell Cobbins' grandfather, Samuel Peace.

There was a time when black entrepreneurs thrived in Memphis.

Black business owners founded several firms in the city during the 1870s and ’80s, according to John N. Ingram, a history professor at the University of Toronto who has studied African-American businesses in the South. The Downtown artery of Beale Street flourished into a black-owned business district in the late 19th century. There were few black residential areas nearby, Ingram said, so those shop owners depended on white clientele. But black entrepreneurs were also opening barbershops, tailors, funeral homes and catering companies in their own neighborhoods.

The city had 248 black-owned businesses by 1900, according to Ingram’s compilation of census data. At least 29 of them were on Beale Street, and 97 were in black neighborhoods. Just 10 years later, the number of black businesses in the city had climbed to 599. Today, Beale Street is largely a nightlife hotspot known for live blues music. And only 20 percent of the businesses there are black-owned.

The success of black-owned shops with white patrons didn’t eliminate racial tensions. A white mob killed three black businessmen — Thomas Moss, Calvin McDowell and Will Stewart — on March 9, 1892, after their store began absorbing business from a white grocer. And as Jim Crow laws began to strengthen and segregation became more entrenched across the South, many black businesses were pushed out of areas where there was high foot traffic from white patrons, Ingram said.

Many African-Americans began to migrate north in the years after World War I in what is known as the Great Migration, seeking better opportunities in states that weren’t as segregated. White businessmen in Memphis, concerned about the possibility of a labor shortage, began to rally around the idea of uplifting and investing in black entrepreneurship.

In 1919, the Memphis Chamber of Commerce established the Industrial Welfare Committee to investigate why so many black Memphians were moving north. The 23-person committee eventually made a case to the city’s white elite to foster a good business relationship with black community members.

“We ask you to stand with the Committee in an endeavor to secure for the Negro a square deal at the hands of all employers and public officials,” committee members said in their appeal, according to A Handbook for Interracial Committees.

One white banker declared in a 1919 edition of the Memphis Commercial Appeal that black folks were the city’s greatest asset. “Anything therefore that will make our colored people more contented and happy, will necessarily be a great advantage to us in the future,” he said. Another banker proclaimed that Memphis should aim to be “the best town in this country for our Negro population.”

Nearly a century later, the Greater Memphis Chamber is still trying to lower barriers for black-owned businesses.

The scene around Handy Park on Beale Street. The street, which is now known for its nightlife, flourished as a black-owned business district in the late 19th century.

Institutional obstacles have hindered growth, particularly for businesses competing with white-owned firms, said Phil Trenary, the chamber’s president. Those hurdles have included hard-to-navigate requirements to become a city-certified minority- or women-owned business. To address that, the chamber recently created a universal, streamlined application process, and later this year it plans to launch an online portal to connect small, minority-owned firms with contractors and companies looking to fulfill diversity requirements.

The chamber also started a mentor-protege program last year. Thirty-two small firms have connected with more established businesses through the program, and Trenary said some of those companies are already seeing increases in the number of contracts they’ve landed.

Trenary said the new programs are helping break down old barriers.

“We can never be the kind of community that we want to be until we have the minority firms have a much larger piece of the pie,” Trenary said.

Similar economic development efforts have sprouted and died on the vine in the past. But Trenary said he believes the latest wave is likely to affect real change because the public and private sectors are finally aligned in the goal to help minority- and women-owned businesses.

“The reason it’s going to work this time is because the business community has come together and agreed to lead,” he said.

The largest companies of the chamber have entered into a voluntary program establishing a goal of awarding 300 new contracts to minority- and women-owned businesses and 300 new contracts to locally owned small businesses between April and the end of 2017.

The city of Memphis has also undertaken its own recent efforts to improve the wealth of minority- and women-owned businesses in Memphis.

Massey, who has led the Office of Business Diversity and Compliance since it started last year, cited a host of new city-backed efforts — including an annual symposium, networking events and a 12-week accelerator program — that she says will prepare minority-owned businesses to expand.

At the core of these city-backed programs is the idea that minority- and women-owned businesses need help gaining enough traction to hire employees and navigating the process to become accredited.

There are already signs that the renewed focus on minority-owned businesses is paying off. As of June 2017, the city of Memphis had increased the percentage of its contracting money spend on minority- and women-owned businesses to 21.3 percent, up from 12.6 percent in January 2016. (Businesses owned by white men don’t make up the remaining 79 percent; that share also includes other business entities, such as publicly traded companies and nonprofits.)

But public contracts represent a small percent of Memphis’ overall economy. There are more opportunities for growth in the private sector — which the Memphis-Shelby County Economic Development Growth Engine, or EDGE, is trying to address.

EDGE is a city-county agency that administers tax incentives to attract and retain businesses in Memphis. The agency adopted new criteria in 2016 that requires any company benefiting from these tax incentives to spend its contracting dollars with minority- and women-owned businesses. EDGE was created in 2011, and this is the first time it has adopted such criteria.

Companies that receive benefits through the EDGE program are also required to provide employer-subsidized healthcare and pay at least $12 an hour, which is well above Tennessee’s minimum wage of $7.25 an hour.

Opponents of the contracting requirement — including the Greater Memphis Chamber — say it could deter some large businesses looking to relocate to the city.

Reid Dulberger, EDGE’s president and CEO, said that’s necessarily not a bad thing.

“We know that our nearest competitors do not do these things. So we understand that we have raised the cost of doing business, and we do understand that that may cost us some projects,” Dulberger said. “But there is an offsetting benefit and we think that offsetting benefit far outweighs the cost.”

Proponents of the new criteria say it will bring in millions of dollars to for local minority- and women-owned businesses. EDGE’s policies would create nearly $432 million in spending for those businesses if all of the projects under development currently come to fruition, according to the group’s projections.

“We don’t think it’s bad or wrong for communities to stand for something. And this community has standards,” Dulberger said. “This community has a vision of what it wants to be, and there is absolutely nothing wrong with that. We will also stipulate that good public policy is not always competitive.”

Darrell Cobbins, president and principal broker at Universal Commercial Real Estate, LLC, near his office in Downtown Memphis.

Cobbins sees himself as a man who, like his grandfather Samuel Peace, is willing to do whatever it takes to support black Memphians. Peace helped a lot of black people become homeowners after they’d been told by white lenders that they could never buy a home as he mentored prospective buyers and worked with them to craft letters to mortgage companies.

Cobbins says he’s continuing that legacy by making sure that the city’s economic policies work for everyone. Several of the city’s new initiatives came about after he and several other black entrepreneurs held a press conference in the lobby of the National Civil Rights Museum three years ago to demand that the public and private sectors work together to expand opportunities for black-owned businesses in Memphis.

The programs are showing promise, Cobbins said, but he noted they’re still in their infancy.

“The jury’s still out,” Cobbins said. “Ultimately, the goal should be to see the needle moving in the right direction. Right now everything is so young and introductory that it may be another year or two before we’re able to determine what’s making a difference.”

Cobbins said he has found that the biggest barrier for black entrepreneurs is often the perception that their businesses lack the capacity to handle large contracts.

“When I worked for the white commercial real estate company, I knew what I was doing,” Cobbins said. “I was a professional. I was respected. But suddenly when you step out on your own as an entrepreneur, you have you fight against all these [perceived] deficits. If I knew what I was doing when I was working for the white company, why don’t I know what I’m doing when I’m out here solo?”

Ultimately, overcoming those perceptions is about personal relationships, Cobbins said. He started Universal Commercial Real Estate when a wealthy high school classmate approached him. The former classmate was pursuing a large development project, so he tapped Cobbins to acquire the property and agreed to be his first long-term client.

Cobbins went on to secure work from such major clients as FedEx Corp. and Blue Cross Blue Shield. And on Aug. 19, 10 years after he launched Universal Commercial Real Estate, the project he discussed with his former classmate came to fruition: The Crosstown Concourse — a $200 million redevelopment project that includes a high school, a 25,000-square-foot YMCA, several restaurants, a coffee shop, a pharmacy and a barbershop — had its grand opening. The development will employ at least 700 people.

“Unfortunately, the average black business owner doesn’t have those relationships,” Cobbins said. “And I think the final frontier [of equality] is on the side of commerce.”
 

Read more articles by Julia Craven & Madeline Faber.

Julia Craven covers race, policing and civil rights for HuffPost. If you have a story to tell, you can reach her at julia.craven@huffingtonpost.com or on Twitter @juliacraven. Madeline S. Faber is an editor and award-winning reporter based in Memphis, Tenn. Her work can be found at @highgroundnews (Twitter, Instagram and Facebook) and @maiden_memphis (Twitter).
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