Derek T. Dingle: Thank you, Shawn. Thank you, Director Hinson, for agreeing to do this interview.
David Hinson: Thank you so much, I am happy to do it.
Dingle: Congratulations on your appointment as the new National Director for the Minority Business Development Agency.
Hinson: Thank you, I’m honored to work for the President.
Dingle: In terms of the expansive plans of the Obama Administration, what are your goals for MBDA? What are the planks of your agenda?
Hinson: The Obama Administration is absolutely committed to helping minority businesses grow. We focus a lot on and talk a lot about economic parity, which is achieving the level of scale in the minority business community that is consistent with the population. By 2050 the minority community nationwide will represent 53% of the U.S. population, so it’s important that the business community keep up with the growth, in terms of gross receipts, jobs created, and taxes paid of the size of the population. So what we’re here to do and what we are focusing on is to essentially create an entirely new generation of substantial minority businesses across industry sectors.
Dingle: So what have been the barriers to economic parity and how do you remove them?
Hinson: There are a number. The largest ones are access to capital, access to contracts at the scale and at the size that are necessary to move the minority business community ahead quickly. We believe that those factors are not necessarily negative to the extent that there is some large factor that prevents that from happening, but rather it’s — we believe that and what we see in the marketplace is that businesses need to restructure themselves so that they are — so the capital that they need is more available. Restructure themselves in a way that will make them more — will put them in a position to really be able to apply for and get the amounts of capital that they need. On the contracting inside it really entails creating the relationships and building strategic partnerships that are necessary to compete for large and more substantial contracts.
Dingle: So basically you’re talking about these businesses developing a new model? In terms of restructuring, are they restructuring to gain private equity capital as opposed to loans? In terms of partnerships, are they trying to access contracts with the Recovery Act or are you talking about other types of contracts that they have not been able to access in the past?
Hinson: All three. On the capital side we’re talking about really thinking about your capital sources differently. Bank financing has been the primary source of capital for minority owned businesses. What we want to talk about and what we want minority firms to think about is new forms of capital. Those forms require relationships and building those relationships so those sources of capital are available. Sources of capital may be an angel network, they may be the private equity community, maybe the family office community. All around the nation there are these family offices that are controlled by very, very wealthy individuals, who are interested in investing in all types of companies. So we’re really thinking about and talking about how we can expand the pool.
On the contract side most of the great opportunity really is in the private sector. We are looking at how to improve the performance of minority firms in the supply chains of substantial corporations. On the government side we are looking to help minority owned firms gain access to the relationships throughout the various channels of government so they are in a better position to compete for substantial contracts. We do a pretty good job of getting some of the smaller contracts. It gets a little more difficult when we are going for the more substantial contracts, but it’s the larger contracts with the real economic value is.
Dingle: How do you measure success? Is one measurement, two years from now, you’ll have minority businesses that have gone on to become BE 100s companies? What are your metrics?
Hinson: Our metric, we measure success through what we call our return on investment — that’s one. So, right now, in our current model, our return on investment is 74 times. So, in other words, for every dollar that flows into the Minority Business Development Agency, we produce $74 of economic output for the country, and so we continue to push that number up higher and higher.
We also look at the number of jobs we create. MBDA has created 5000 jobs last year, 5000 new jobs, and that’s in addition to all the jobs that were retained because of our efforts. Those are the two primary matrices. We look at the financing that we do. How many firms have we helped to achieve the financing that they need to grow? How many firms have we helped achieve the capital — I mean the contracts, I’m sorry, that they need to grow? So those are really the four overall matrices that we use to judge our determine success.
Dingle: So with the changing demographics you see minority businesses as the drivers of the economy?
Hinson: There is no question that the minority business community is really the cornerstone of the growth in America. What’s interesting about the minority business community is that from a hiring standpoint they tend to be more balanced in hiring, both majority employees and minority employees. So what the minority business community does, actually, is they create economic opportunity for all Americans. So it’s really critical, when we look ahead, that the minority business community continues to grow and flourish, because it’s simply bet for America.
Dingle: There’s a lot of talk about business innovation. One, how do you get minority businesses by and large on the path to innovation and how do you get them positioned to access the new economy industries, such as the green industries, greater technological industries? How do you do that?
Hinson: Well, what we’re doing inside MBDA is creating an industry focus within these key industries that both we believe in and the president believes are very important. What we are doing there is aligning these firms together with an idea of taking those firms, those entrepreneurs and business owners who are interested in green technology and healthcare IT, for example, and smart grid technology, and we are looking to partner them up with substantial firms who are already in those industries to create sort of an incubator and business relationship model, so that those firms have an easier path to gain access to these new and innovative technologies.
Dingle: So an expansion of the mentor-protÃ©gÃ©e model?
Hinson: An expansion of the mentor-protÃ©gÃ©e mode is one way. The other way we’re looking to do it is to identify those companies that have the management teams and the capacity to actually get bigger and really work with them on a one-on-one basis, so they can begin to gain access to the technologies, first, and the contracts that follow those technologies.
Dingle: When looking at the future and looking at the possibility of accessing these cutting-edge industries to grow businesses, a lot of businesses are hurting now. What three steps should companies take to stabilize themselves now so that they can position themselves for the future?
Hinson: The first thing I think companies need to do is to really reconsider their growth model and ask themselves are they really positioned to make it? Not every business is going to be successful, nor should it. The capitalistic system, by definition, results in some people who will stay and continue to flourish and some people who decide they want to do something else. I think one of the benefits of this current economy is it forces people to ask the question how committed are you to that business? And if you are, what steps are you going to take to grow your business. And if you’re not, maybe you should consider selling your business or exiting the business.
The second thing I think firms should do, once they determine that, is to really ask themselves what are their relationships? What type of relationships do they have to acquire the capital and to expand? If they have the right relationships they should move ahead. If they don’t then they have to ask themselves are they going to acquire those relationships. And if they decide not to, again, that gets them to an exit strategy.
I think the third one is is to just really consider if they are growing their business in an area that has a future. Most of the minority businesses are in services industries and many of those industries are becoming commoditized. And so if they have a business model that is not geared to future growth, they may consider really either exiting that model and going into another model, or trying to find a way to perfect that model and that industry focus so they can be more successful.
Dingle: So, if I’m an automotive supplier, I should think of myself as a manufacturer that can redesign my plant so that I can accommodate the new industry?
Hinson: Absolute. That’s a perfect example. If you’re an automotive manufacture and you’ve been producing bumpers, for example, for the automotive industry, how can you take that intellectual capital that you’ve developed, producing that product, and apply that same sort of intellectual capital to windmills. How can you apply that to another new technology? How can you apply that to the airline industry? Those are the sort of thought processes that these entrepreneurs need to go through and frankly many of them are already going through that.
Dingle: So the industry you’re in today you may not be in tomorrow?
Hinson: It may be something very different, so you’ve got to be flexible and nimble and prepared to change.
Dingle: Thank you, Director Hinson.
Hinson: Thank you so much.