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Strategies of Successful Minority-Owned Startups

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Minority business owners are similar to their "majority" counterparts when it comes to describing the reasons they've made it. Here's a closer look at what it takes to be an entrepreneur.

Talk about being in a minority. Minorities own just shy of 15% of American businesses, most of them small firms, according to the U.S. Small Business Administration's Office of Advocacy. Hispanics account for about 12.5% of the country's population and own only 5.8% of U.S. companies; African-Americans make up 12.3% of the population and own only 4% of firms.

But if you ask entrepreneurs of color what's behind their success, their answers echo those of "majority" business owners asked the same question. We recently spoke to four minority owners and gleaned the following lessons about entrepreneurship:

Fill a need. Like other prosperous small business owners, founders of many thriving minority-owned firms say it's important to spot an unserved niche in the market and then try to fill it.

That's what Carmen Natal-Melendez did when she opened Melendez Garcia Realtors in Trenton, N.J., in 2001. In the three years since, the 37-year-old Puerto Rican-born mother of two has built a booming business helping minorities buy homes and secure mortgages in the Trenton area.

Ms. Melendez was working as a self-employed agent for several Realtors when she sensed the potential for a business that would help low-income minority families find and buy affordable housing in the local area.

Having relocated eight times in one year as a child, she knew about the instability and uncertainty that can afflict a family that hasn't put down roots. She also knew that no other Realtors were addressing the needs of this group of potential home buyers. She decided to put her skills to work helping minorities to secure affordable mortgages and providing seminars (in English and Spanish) and credit counseling to educate them about the home-buying process.

Now, Ms. Natal-Melendez and her team are working 18 hours a day, seven days a week--just to keep up with demand. The low-interest-rate environment and hot real-estate market have helped her business grow by 200% in the past two years, and she's confident sales will double in 2004. She's planning to open a second office in Trenton and another outside the area within the next three years.

Pursue a passion. Colombian-born Eduardo Lopez's venture also was born of his passion to make a difference in his community. A former youth counselor and assistant director for Hispanic affairs in Morris County, N.J., Mr. Lopez, 36, had long known that local Hispanic youths weren't being adequately prepared for college or the workplace.

Six years ago, he set up an educational consultancy, The Education Development Center, in Dover, N.J., to help reduce the college dropout rate. He developed a mentoring program to help prepare Latino teenagers for college and careers, which also offers a series of developmental workshops with Latino professionals and college students. He called it ESCUCHA!, which means "listen" in Spanish.

Half of the startup funds for his center--approximately $8,000--were loans from friends and family. Most went for rent and a few computers. A business plan helped him to secure government contracts, youth-development grants and sponsorship from corporations, which have kept the business going. While state funding has declined in the past two years, he's hoping to secure new funds from colleges and corporations.

He knows that his work won't make him rich, but to Mr. Lopez, success isn't about making millions. "It's about doing something I feel passionately about and making a difference to young people's lives," he says.

Know the market. Kelli Pacheco, 33, who is part Mexican and part American Indian, knew that she and her husband, Lance Bullington, had the insight and background to begin selling custom law-enforcement and military equipment last year. Mr. Bullington, a former corrections officer and a member of the U.S. Army Special Forces, has firsthand knowledge of the needs of this specialized market. She brings to the table her problem-solving skills honed by her training and experience as an engineer.

The new company, Bull Tactical Outfitters, quickly put up a Web site, which features testimonials and a biography of Mr. Bullington. This helped to establish its credibility, says Ms. Pacheco, who left a well-paying engineering job to co-found the company. "Having the ability to gauge trends, being predictive about customers' needs and being ready to adapt have also helped," she says.

Based in Austin, Texas, Bull Tactical Outfitters now sells gear ranging from holsters to quick-drying shirts worn under ballistic vests. While the war in Iraq fueled demand, the business focuses equally on civilian and law-enforcement markets.

"In just six months, the business has broken even," says Ms. Pacheco, who expects to turn a profit by the end of the year and plans to open manufacturing plants in Mexico and Afghanistan in two to five years.

Keeping costs low early on is vital since cash flow is tight. About a dozen friends in law enforcement staff the store, working a few hours a week in exchange for equipment, says Ms. Pacheco. Additionally, the business has minimized overhead costs by hiring seamstresses who work from home.

Keep trying. Finally, trust your hunches and don't give up. Despite setbacks, Charmin Edwards, a New Orleans entrepreneur of African-American descent, didn't give up on her dream of owning her own business. Twenty years ago she'd run a beauty salon, which folded after she failed to raise enough funds to support an expansion. But when she came up with a new idea for a business, she was determined to be an entrepreneur again. Her new invention--the Rocyalox--is a coil-style hair accessory for all types of hair, which she is betting will be a bigger hit than the scrunchy. She recently set up CK Enterprises to launch it.

A New Orleans nonprofit economic-development organization is helping to get the product off the ground and mass market it. Its team of five consultants is negotiating with potential distributors and investors. "They believe that this product has enormous potential both at home and abroad," she says. She hopes to become part of Wal-Mart Stores Inc.'s local-vendor program.

Her advice to other minorities who want to become entrepreneurs: "Take the initiative, seek out help, and don't give up."

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