$500 million Goldman initiative intends to reach 10,000 low-income and minority small business owners within five years. Here, a few of the program's 75 graduates report what they learned
Jessica Johnson did not have time to mourn her father's death in 2008. "He passed on a Saturday, the funeral was the next Thursday, and Friday was payday," she recalls. "We had 16 families depending on us and five clients who needed our services. We had to figure out a way to make it work." The unexpected death left Johnson, 36, and her brother in charge of their third-generation family business, Johnson Security Bureau in the Bronx. Although neither had prepared for succession, both left jobs to work in the company their grandparents had founded in 1952. "I went to business school, but that really prepared me to go to work for somebody else," says Johnson, who had worked in pharmaceutical sales. Knowing she needed more training, Johnson last year jumped at the chance to participate in 10,000 Small Businesses, a $500 million initiative established by Goldman Sachs (GS) in November 2009 to provide entrepreneurial training, mentoring, and capital to low-income and minority business owners. So far 75 entrepreneurs have graduated from three sessions in New York and Southern California and a fourth is in progress with 30 participants in New York.Goldman has committed $60 million to community development financial institutions that lend to small businesses, including Seedco Financial, Valley Economic Development Center, National Development Council, and Hope Enterprise. As the program's name implies, Goldman's goal is to reach 10,000 small businesses in urban and rural areas across the country over five years, with training, mentoring, capital, or all three. Staff More Than Doubled in 2010
Johnson was among the graduates of the program's first class, which was run out of LaGuardia Community College in Queens. The time commitment was substantial, she says: ten all-day Saturday modules, each on a basic business topic, plus networking events and regular one-on-one meetings with business counselors and mentors. The focus has paid off: Her company started 2010 with 16 employees and now employs 37. Revenues in 2010 grew to $550,000, from $350,000 in 2009. She attributes that growth to the classes and to the relationships she made during the 10,000 Small Businesses program, as well as to the business growth plan she drafted as part of the program. Such growth is not unusual. More than 80 percent of the New York graduates report that they have hired new staff since they started the program, according to Goldman Sachs. More than half project double-digit growth this year. Miguel Guajardo, 47, doubled his staff from five to 10 at El Camino Construction and Engineering in Long Beach, Calif., while he was participating in the program. The concrete and masonry company he founded two years ago brought in $930,000 in 2010, more than twice his 2009 revenue of $450,000. In 2011, Guajardo projects sales of $1.5 million and has already booked $250,000 in business. He found accounting the most valuable module. Having been a longtime construction manager, Guajardo thought he knew how to run a business. But reviewing his company's balance sheets and profit-and-loss statements "was like looking at a different language and not understanding it." Learning how to translate the numbers "shed a huge spotlight on what I was doing right and showed clearly that I was grouping certain things wrong, like my overhead and my profit margins," he says. "Before, I felt like I was out here by myself and there was this big secret everybody knew but they weren't sharing on how to manage a business and employees and everything that goes with it." Being able to clean up his books has helped him submit smarter bids and given him confidence about approaching banks for the capital he will need to expand, Guajardo says. Refocusing on Higher-Margin Products
For Richard Klein, president and chief executive officer of Advanced Battery Systems in Culver City, Calif., a highlight of the program was developing an exit strategy for the company he founded 24 years ago. At 52, he is not ready to retire, but he's thrilled to have a transition plan laid out for when he does. Although Klein has run a successful business for more than two decades, he says many of the business lessons were enlightening. As a result, he decided to drop a lower-margin product line and shift the company's marketing focus to higher-margin lines. A management module prompted him to make some key staffing changes that helped Advanced Battery hit $3.5 million in revenues last year—the company's highest-ever. Dina Habib Powell, managing director and president of the Goldman Sachs Foundation, says one long-term goal is to expand the five-year program to additional communities, including New Orleans in 2011. "Graduates from 10,000 Small Businesses embody potential of the American small business sector and are already growing and creating jobs," she wrote in an e-mail. To be selected, participants undergo a rigorous process that involves applying, submitting financial data, and being interviewed. Applicants must have owned their companies for at least two years, have revenues that range from $150,000 to $4 million, and employ at least four people. The program is designed for those in underserved areas with limited financial resources. Selection is now underway for classes in Southern California and New Orleans. Interested business owners can apply on this website.