BUILDER
Nitin Bhatt set out to become an investment banker, but the L.A. riots led him to join the Business Expansion Network at USC and help inner-city firms rebuild and multiply instead
Nitin Bhatt didn’t set out to help small businesses in Los Angeles. Instead, his career began in a steel plant in India.
But standing near a hot, metal-melting oven wasn’t this engineer’s idea of the greatest job in the world. Charting a new course, he received a fellowship to get his MBA at USC.
Bhatt was studying to become an investment banker when the L.A. riots turned the surrounding USC neighborhoods into a wasteland. Bhatt was one of several business students who volunteered with the University Community Outreach Program to aid small businesses in their efforts to get government loan packages to repair the destruction.
With that, he was hooked on the idea of aiding inner-city entrepreneurs and minority small-business owners. “I saw people in the inner city enmeshed in industries, putting in 250 percent of what they had into making their ventures successful and making a better life for themselves,” he recalls.
After graduating, he became director of training of the USC outreach program, which is now called the Business Expansion Network. In 1999, he became executive director of the organization, which has helped more than 6,000 entrepreneurs.
Question: How did the Business Expansion Network start?
Answer: It started in 1986 with a business professor, Mack Davis, who lived in Denver and taught at USC. He flew in every week to teach class and every time he would fly into LAX, he would see these dilapidated neighborhoods. Every time he would drive to USC he would see the same mom-and-pop stores. Year after year, nothing changed. There seemed to be a lack of hope.
It struck him one day that he was teaching students how to be entrepreneurs and be in control of their own destiny. Why couldn’t he do something for USC’s neighboring businesses? He talked to Dick Buskirk, head of USC’s Entrepreneur Program at the time, and the two of them created a program called FastTrac. The intent was to take entrepreneurs in the community and bring them into an entrepreneurship boot camp that taught entrepreneurs the fundamentals of business planning.
Q: What are some of the common mistakes that small businesses make?
A: The first mistake they make is assuming that the existence of a product or service implies there is a market for their product. They expend the resources, set up shop, open doors and have no customers.
Second is the lack of a plan. We ask people, “How will you get there? What are your goals? Quantify them.”
You need to have a budget. How much will this cost you? And do they have the resources to sustain them.
Q: What kind of businesses does the Business Expansion Network help?
A: BEN has gone beyond helping inner-city and minority businesses. Now we get people all the way from, “I have an idea” to people who have been in business five, 10 or 15 years. They might be struggling or they might want to grow.
Typically the companies we see have been in business less than five years and may be doing $150,000 to $250,000 in (annual) sales, have four to six employees, and have some issues to be worked out or want to grow.
Q: What is one of the more bizarre business ideas presented to you?
A: I had a client once who called and said he had built a spacecraft and he thought it was better than any other. He was looking for $10 million to $15 million in financing. We all laughed about it at the staff meeting but booked the appointment. The client showed up with these pieces of what looked like a craft. This guy had worked at McDonnell Douglas for 25 years as a mechanic. He had built this craft, which was a plane that could hover for five minutes longer than other craft. It was one of those things you saw at aviation shows. He said he wanted to sell 40 of these to collectors.
We thought he was joking. We took him to USC’s School of Engineering, and one of the professors said, “This guy has a viable technology. You guys need to look at it from a business perspective.” Obviously, it wasn’t viable from a business perspective.
Q: Do you think it is easier for small businesses to make it with the economy booming right now?
A: This is an incredible time because we are flush with capital on two fronts. One front is venture capital. There is more venture capital today in Los Angeles than we’ve seen ever before. This financing was nonexistent five years ago.
The other front is traditional capital. Five years ago you didn’t have a lot of banks lending to small businesses. That has totally changed. You have banks wanting to lend to minority, immigrant, and women-owned businesses.
Q: BEN has been focusing on helping various small businesses in L.A.’s “cluster industries.” What are those industries?
A: We have five: the apparel industry, tourism, furniture making, biomedical and multimedia, which is anything from the entertainment cluster to new technologies for communications. These are hot clusters because they account for most of the small businesses and small-business employment in Los Angeles County. The rationale is that if we focus on growing and maintaining and nurturing these clusters, they will lead to long-run employment in the area.
Q: What else is BEN focusing on?
A: There is one thing that fascinates me, which is social entrepreneurship, focusing on employing low-income people. There is one such company called Pueblo Nuevo in MacArthur Park. This is a workers’ cooperative where you have owner/workers who provide janitorial services throughout Los Angeles County. It was started around 1992 by a Los Angeles pastor named Phillip Lance who got 15 people together who put in their own money.
He came to us in 1994 as an entrepreneur who wanted to take FastTrac and grow the company. We worked with him and last year the company did $550,000 in sales with 43 employees.
Q: And those employees are faring better than they would at a traditional company?
A: In the janitorial industry, the usual wage is $6.20 an hour. They pay their employees $8 an hour plus three weeks of paid vacation. And the future direction of the company is decided by the workers.
So for the past two years, with the Liberty Hill Foundation in Santa Monica, we have been working with eight businesses, including Los Angeles Men’s Place, the men’s shelter in downtown Los Angeles; the bakery Food from the Hood; Venice Building and Clayworks, which employs gang members producing clay tiles; and New Directions in Santa Monica, which contracts with veterans to provide meals on wheels.
Q: Having emigrated from India, how is the business world there different from the business world here?
A: This is a free market where there is little government intervention. The government here plays the role of an enabler. In India, there are fundamental changes going on that were triggered in 1991 and 1992. The economy is opening up and there is a wave of privatization. The government still owns a major number of businesses there, but the changes have been significant in the last nine years.
Q: Why did you come to the United States to study business instead of studying in India?
A: At that point, in the early 1990s, India was developing its business schools and didn’t have the quality of business schools it has now. Now they are excellent. I also wanted to get exposed to different ways of thinking, ideas and cultures. It is critical to develop one’s world views, otherwise you are insular and provincial.
The other big draw is that I heard a lot about Los Angeles from my friends who were musicians. They told me about seeing things, like Grateful Dead concerts.
Q: You’ve been a fan of American music for some time. Why is that?
A: I was in a British school in India and we had the choice of studying an instrument. I chose the guitar and have played since I was 12. I started by playing country western music, and very shortly later got into Santana music. I played in a band for seven years. We would play at a local hotel in Benares, where I went to university. We played rock, blues and some jazz. I played lead guitar.
