A strong ecosystem of local, diverse businesses are foundational to dynamic, resilient local economies and communities – made clear by the toll of Covid-19 on small businesses as well as the spotlight on racial diversity and equity across communities and sectors. In February, a Census Bureau report showed that people of color own 18% of businesses in the United States — despite representing 40% of the population — and that Black people own 2% of all businesses, despite representing close to 15% of the population. The economic impacts of Covid-19 on small businesses have exacerbated these inequities – for example, the Paycheck Protection Program loan success rate for white applicants was 60% versus 29% for Black business owners.
Now is a critical juncture for local leaders and institutions, including universities and hospitals, to directly support small local and diverse businesses in their communities. For over a decade, U3 has served as a leader in developing successful local and diverse procurement strategies across the country, that have helped institutions drive new dollars into and grow the capacity of local businesses, especially those owned by people of color.
Anchor institutions are unique in the diversity of their procurement needs, with expenses that span hundreds of industries and purchasing opportunities that can engage businesses of various sizes. Through intentional procurement strategies, anchor institutions can sustain local businesses, create and protect local jobs, and increase the likelihood that capital recirculates within the local economy. Local/diverse purchasing programs serve as effective strategies to directly invest in the communities surrounding anchors, addressing tensions and community concerns while fulfilling mission-aligned goals.
U3 Advisors has developed a strategic, intentional approach to designing Buy Local programs as part of a suite of anchor institution neighborhood strategies, including Live Local and Hire Local. Across our Buy Local work to date, U3 has partnered with 80+ organizations – including hospitals, universities, and major corporations – in nine cities to channel their economic power through inclusive procurement strategies. Our Buy Local initiatives are rooted in comprehensive data analysis on institutional spending, which enables us to set benchmarks and establish tangible goals for increasing the percentage of operating and capital budgets spent with local, small, and diverse businesses. Paired with additional analysis on the existing supply of these businesses, U3’s Buy Local process has resulted in concrete action plans, including matching institutions with businesses as well as capacity-building for small businesses in key opportunity sectors.
In cities such as Memphis, TN or Buffalo, NY, where U3 Advisors has engaged anchor institutions in diverse procurement strategies for several years, anchors have shifted over $25M+ new dollars to local, minority-owned businesses in as little as four years. Beyond the revenue opportunities, this engagement has helped dozens of businesses enhance their brands, secure certifications, and expand their operations.
Below we highlight two examples of our Buy Local work: an ongoing, multi-year partnership in Memphis, TN that has led to tangible results, and a promising recent initiative launched in Newark, NJ.
Memphis Medical District Collaborative (MMDC) Buy Local Council
Since 2017, U3 has been working with the MMDC Buy Local Council, comprised of eight Memphis-based hospitals, educational institutions, and a national fundraising entity, to increase spending with local minority-owned and woman-owned businesses. The creation of the Buy Local Council allows for individual tracking and accountability, collaborative action, and investment in shared resources. In addition to creating a database to track Memphis-based suppliers, U3 conducts spend analysis annually for all members to benchmark their procurement patterns. In 2020, through regular participation in matchmaking opportunities, contracting workshops, and networking opportunities, the Council increased local non-capital spending by 26% from the original baseline in 2016, totaling $95.4M, with $23.2M going to local diverse suppliers (a 119% increase above the original baseline). Read more on U3’s work with the Memphis Medical District Collaborative.
U3’s work with the Newark Alliance is currently in its first phase and primarily focused on benchmarking and institutional spend analysis. For the benchmark year, our team found that among the 11 participating anchors, 1% of total addressable spending ($74M out of $7.6B) went to businesses headquartered within the city of Newark. Of this, $10.48M was spent with minority- and women-owned businesses – altogether, indicating a significant opportunity to grow local spend. U3 created individual reports and opportunity analytics specific to each of the 11 anchors, conducted matchmaking sessions with businesses based on targeted spend categories, and delivered a collective report with recommended strategies to continue the momentum and formalize future participation in a Buy Local collaborative. As the anchors coalesce around the energy and excitement spurred by this study, the Newark Alliance is currently exploring opportunities to continue this local/diverse procurement effort.
U3 is proud to work with institutions across the country to find new ways to impact their communities. Our team has seen how a well-designed, specifically-tailored Buy Local program, along with complementary anchor strategies like Live and Hire Local, can generate direct, meaningful change for local economic development. To learn more, please contact Vice President of Research Shea O’Neill (email@example.com).