Business Services Collective

A 2017 IPS study showed wealth in communities of color to be just 10% of white household wealth. The Aspen Institute reports entrepreneurship is the most promising path to wealth, while 48% of minority-owned businesses identify unstable back-office operations as their barrier to profitability. A 2019 NextStreet study recommended addressing the racial wealth gap by increasing capacity of Chicagoland’s 4,400 minority-owned construction firms to hire and spend.

We create equitable workforce opportunities fueled by Chicago’s booming construction sector by matching construction entrepreneurs with service professionals in communities of color, developing back office capacity for growth. By uplifting entrepreneurs, we create resilient employment centers for trades laborers and back office staff.

Construction is a $12 billion annual market in Chicagoland; increasing capacity among our region’s 4,400 minority-owned construction firms to meet the sector’s estimated 12,000 unfilled positions will scale wages, spending, and hiring in communities of color. 

The $1,200 billion US construction market collapsed during the 2008 Recession, driving a mass exodus of laborers and managers who never came back. In a 2019 Construction Outlook Survey, nearly 80% of General Contractors still reported difficulty in hiring. Construction employment remains below pre-pandemic levels, but is rebounding, with 36,000 net jobs in the latest national jobs report.

The industry also needs diversity. According to the US Bureau of Labor Statistics, just 6% of all employed African Americans work in the construction industry, compared to 12% of employed whites and 14% of employed Latinx populations. Illinois faces one of the worst unemployment rates for African American population in the country. The construction sector provides a unique workforce opportunity, with an estimated 12,000 unfilled construction positions in Chicagoland. The Illinois construction workforce is on average age 50, suggesting a systemic labor market failure that is only going to get worse as the current workforce retires. With minimal education requirements and healthy living wages, construction is primed for workforce solutions that advance racially equity.

Many apprenticeship programs suffer from the same shortcomings of their industry; our approach creates an equitable labor market within communities of color to drive change in the industry.

Business Services Collective is a matchmaking platform connecting construction entrepreneurs to experienced, local back office service providers. Our unique blend of mentoring, coaching, training and direct services enables diverse businesses to become job creators in their communities. 

Founded in 2019, Business Services Collective (BSC) is a 501(c)3 nonprofit enabling construction firms of color to develop back office capacity for growth. We accomplish this by creating a marketplace for construction firms on the demand side and qualified service providers who offer direct services such as bookkeeping and bid estimating, delivered through a mentorship model ensuring contractors upskill their understanding of financials and project management. We match growing construction businesses with workforce partners, and help service providers expand with a back office internship program.

We meet most clients through our community partners. We interview each potential client to understand their existing systems, the challenges they face, and build a relationship. Based on the assessment we match a service provider who best fits the business needs and personality of our client. BSC serves as a relationship manager, coordinating meetings, collecting feedback and ensuring a quality experience. Due to COVID-19 all our services are delivered online.

BSC has worked with over 100 entrepreneurs of color in the construction trades to create a marketplace. These businesses typically have annual revenues under $500,000 and specialize in trades like carpentry, plumbing and masonry. Most employ 3-5 trades laborers. 80% of our entrepreneurs identify as Black, 58% are women, 50% of crews include a veteran, 25% include people with disabilities, and 33% employ returning citizens. Our service providers are also entrepreneurs of color, with similar-sized businesses.   

Construction entrepreneurs report ample opportunities for work, but insufficient capital and an unstable labor pool prevent most from taking on additional projects. Our market research revealed the problem was rooted in unstable back office practices. While they are talented in their trade, many entrepreneurs struggle balancing time on the job site with back office functions like preparing estimates, and submitting invoices.

BSC has served 29 construction entrepreneurs with over 350 hours of one-on-one training, learning how to read blueprints and use software to increase efficiency. BSC has assisted with bidding on 37 projects, helping win approximately $717k in expected new revenue. Our bookkeeping program has helped businesses prepare documents required to win PPP loans and learn how to maintain financial records using Quickbooks. 

Most apprenticeship programs remain out of reach for diverse youth; by first strengthening small construction businesses in their community our solution lowers barriers while creating role models and champions who look like them.

Our back office services direct resources to small construction businesses of color, positioning them to take on more work with large general contractors, train and hire workers from their communities. In addition, through our internship program, our service providers create career pathways for students of color in back office professions such as construction cost estimation and accounting.

• Co-founders/ FTE – 2
• Board Member/Advisors: 5
• Contracted Service Providers – 11
• Back office interns - 3

From day one, BSC recognized our success would be dependent on input and ownership from the communities we serve. We started with a panel of community advisors who worked for decades to diversify the construction sector through workforce and small business support. Our model was developed through interviews with over 100 entrepreneurs from construction and support services, identifying local assets and human capital we can elevate to keep equity and wealth within the community. Our advisors, participant entrepreneurs, service providers and student interns all hail from communities of color and share our vision for a community of mutual aid.  We have an intentional vacancy for our CEO/Executive Director position, as we plan to strategically hire a community leader into that role in the years ahead. Transitioning to a cooperative owned by our member entrepreneurs and workers will ensure this marketplace continues to operate by and for the community it serves. 

Our approach elevates diversity, inclusion and equity to solve the labor shortage in construction. Instead of working with the largest general contractors to run expensive apprenticeship programs where diversity has not been a priority, we focus exclusively on partnering with small subcontractors of color. 

Existing solutions within the small business support ecosystem such as Small Business Development Centers and Chambers of Commerce rely on “10 week workshop” classroom models. These classes are helpful in introducing back office concepts but do not equip business owners to deploy their learnings. Our marketplace for back office support delivers immediate services required by construction firms, paired with one-on-one mentorship and relationship management for successful implementation of best practices. 

Beyond the above disruptions, we are innovative in the following ways:

Dual Impact: Supporting growth of subcontractors and service providers of color in our network.

Sector specific: Most small business programming is one size fits all; we are tailored to the unique needs of construction. 

Personalization: Our intake assessment and matchmaking personalizes the experience for the business and service provider.

Fee for Service: We will phase in a revenue model reducing dependency on philanthropy.

Collective ownership: Our goal is to launch a two-tiered cooperative providing businesses access to support and workers access to steady employment.

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Chicago supports about 20,000 construction trades businesses plus 33,000 design and engineering firms, together only 6% are Black owned. Pre COVID, the sector witnessed high employment growth (9% for construction of buildings, 4% for specialty trade contractors). The sector is expected to continue growing despite COVID disruptions.

Our theory of change is that our equitable labor marketplace can elevate businesses of color to meet the construction industry’s talent shortage and diversity challenges, fueling wealth generation in communities of color.

By offering critical back office services such as estimation support for subcontractors of color, we will enhance their capacity to bid on projects and project labor and capital needs for a growing stream of work. These insights paired with bookkeeping and accounting support will prepare them to access capital. In 2020, our pilot program provided over 350 hours of one-on-one back office support, helping secure over $720,000 in construction revenues while generating more than $30,000 in new revenues for professional service providers. With our assistance completing financial statements and navigating applications, construction entrepreneurs accessed $515,000 in relief capital and loans. 

Equipped for growth, our clients will tap our workforce partners to hire and train talent from their neighborhoods. While we have not collected demographic data on employees, 80% of our entrepreneurs identify as Black, 58% are women, 50% of crews include a veteran, 25% include people with disabilities, and 33% employ returning citizens. Our program has begun training 3 college students to provide back office services and we are forming partnerships with workforce agencies to place diverse trades candidates next year.  

At scale, our marketplace will be structured as a two-tiered cooperative enabling member businesses to access services and supporting workers with steady employment and benefits. Employee ownership and cooperative models are proliferating as a strategy to build equity in communities of color. Last year, the Co-op Ed Center in Chicago and start.coop’s national accelerator launched to assist entrepreneurs and workers realize this vision.

In 2020 we verified our Proof of Concept. We piloted the marketplace model with philanthropic funding and by partnering with community organizations.

In 2021 we want to grow the value we create and test our clients’ capacity to sustainably pay for services. We will launch our fee for service model, expand community partnerships in workforce and access to capital. We are exploring an opportunity to replicate our model in another midwestern city.

In 2022, we will introduce collective ownership to our clients and their workers. We will identify a core team of businesses and workers to be the first members of our cooperative and work with them to create governance infrastructure and a path to self-sufficiency.

2023 will be the launch of our cooperative. We will double membership and expand into services such as co-bidding on large construction projects and co-purchasing construction materials for members. In addition we will actively start pursuing opportunities in the Midwest to replicate our marketplace model.

2024-2025 will be transition years for the cooperative in Chicago with member owners in leadership positions and day-to-day operations, reducing our role as deemed fit by the coop. We will aggressively seek expansion opportunities to replicate our marketplace and cooperative models.

Our biggest barrier could be the disruption caused by COVID-19 and the unclear path to reopening and economic recovery. We aim to launch a fee for service model based on our initial success, however, COVID’s impact on our clients creates uncertainty on how quickly we can achieve financial self-sufficiency.

We are confident in our theory of change and have extensive experience supporting entrepreneurs as drivers of wealth and job creation in communities of color. However, we recognize our lack of experience in the traditional workforce development field. 

As we evolve into a cooperative, we anticipate technical and legal barriers in implementation. We have board expertise in cooperatives, however, we expect to tap national and local experts to consult us on the best structure for our unique model.

Lastly, we recognize that we do not represent the socio-economic profile of the businesses we serve. This increases the difficulty of winning the trust of new businesses and community partners, and creates blind-spots in our approach and understanding. We recognized this gap early on and created a board with expertise in construction and representation from the community. Our co-founders have intentionally left the CEO/Executive Director position vacant. We firmly believe the leader of our organization at the right time needs to come from the community we serve. 

Market and financial uncertainty: If a market contraction disrupts construction industry, our back office services may be even more valuable, as expertise in competitive bidding and careful financial management become even more crucial to survival. Philanthropy has recognized the increased need to support small business owners which may allow us to fill gaps in earned revenue.

Workforce expertise: Our advisors include professionals from Chicago-area workforce development, we also partner closely with community-level and anchor workforce organizations focused on construction. We would greatly benefit from added workforce expertise through the MIT Solve Challenge.

Cooperative structures: We are building relationships with the emerging national and local cooperative movements. Our board chair provides a network to national and international experts on cooperatives, and we’ve begun conversations with legal experts advocating for cooperative structures in the State of Illinois.

Cultural barriers: Through our combined decades of experience working with entrepreneurs of color, our team has learned to develop trust through Servant Leadership; careful listening, being present, and unconditional support. This includes frequent feedback from our advisors, partners, and clients. We are also intentionally elevating stakeholders from the community to leadership positions across our board, executive staff, and program team.

Providing back office services creates an opportunity to evaluate impact in real time. We currently track impact qualitatively through client feedback surveys and assess learning in coaching sessions. Quantitatively we track construction bids, construction projects we’ve referred, and began collecting quarterly financial information. We’ve engaged an IT consultant to build a digital platform pulling API data from entrepreneurs’ construction software and Quickbooks. However, we recognize these indicators of growth are correlated to our program, we do not yet know how to prove a causal link. It may be that the best entrepreneurs recognize the value of our program and thus were always positioned to outperform their peers. How do we measure the counter-factual?  If they never met us, would they have won that bid, would they have hired a great workforce candidate? How do we separate our impact from the overlapping efforts of partners in our ecosystem?

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Our previous experience working with hundreds of entrepreneurs to solve market failures in capital access and procurement validates the need for the deep investment of day-to-day business support and fuels our passion to see that solution realized. Our innovation is rooted in agile responsiveness to our stakeholders. For example, community partners inspired us to act as ecosystem-builders rather than direct service providers. By matchmaking construction entrepreneurs to existing service professionals and workforce candidates in their communities, we create economic opportunity and community leadership on all sides of our platform. 

Our core team has decades of combined experience building marketplaces with the input of low-income and diverse small business owners. Nitika directed two previous start-ups. As co-founder of Credit Serve she helped design lending to break the payday loan cycle of military veterans. As first Executive Director of Chicago Anchors for a Strong Economy (CASE) she shifted nearly $30M in procurement to more than 400 diverse businesses. Kyle was Director of Community Lending at Accion, building servant leadership outreach to expand business lending in communities of color. Nora has been founder and CEO of several successful social enterprises and workforce organizations, with deep roots in the Canadian cooperative and credit union sectors, where she served as a Vice President and CEO.  

The effectiveness of our model is grounded in partnerships with organizations that expand our ecosystem and share our vision for community ownership. In 2020 we piloted “Lightbulb,” a partnership with Elevate Energy, a regional leader in environmental justice, and Sustainable Options for Urban Living (SOUL), a construction workforce and business training nonprofit on Chicago’s South Side. We provide participant businesses a holistic suite of supports; an introduction to clean energy construction (Elevate), construction software and business management training (SOUL) and back office support (BSC). In 2021 we will expand with workforce matchmaking and identifying construction projects looking for diverse contractor participation. This unified program experience is possible by developing shared vision, values, and accountability through project management tools and crucial conversations on race and inclusion.

In 2021 we plan to replicate this model with Chicago Neighborhood Initiatives, a CDFI revitalizing the South Side through large community development projects and small business loans. Our partnership (called “EMPOWER”) will get construction businesses loan-ready with BSC’s back office program, then fuel growth with access to CNI’s capital and contracting opportunities. 

We also have relationships with workforce partners including Hire360, an initiative by Chicago’s largest unions and developers to grow diverse careers in the trades, and Safer Foundation, which trains returning citizens in carpentry. We’ve begun internships with Illinois Institute of Technology and DePaul for students of color interested in construction back office careers such as project management and cost estimating. 

We nurture a marketplace in communities of color by connecting construction entrepreneurs to the back office service providers they need to grow. Our program mixes direct service delivery with training and mentoring, ensuring construction businesses receive the back office support they need paired with the knowledge to make the most of it. Better able to bid on projects competitively, track job site performance and profitability, these construction businesses are able to take on more projects and hire more laborers. This collection of construction businesses represents a sizable boost in revenues for our professional service providers, who in turn can grow their business and increase their staff. We collaborate with traditional workforce partners and local universities to source candidates for construction trades and professional support roles like bookkeepers and cost estimators. Most of these components already exist—what makes BSC’s platform powerful is the way we continuously nurture this growing marketplace with our emphasis on relationship management. We constantly share stakeholder feedback to improve communication and effectiveness among connections. In all areas of the model, we prioritize engaging businesses and workers in communities of color, each connection multiplying wealth generation, mutual support, and resiliency. 

In 2019 we raised $140,000 to fund our 2020 start-up year. About half came through the Chicago Community Trust to fund “Lightbulb,” our partnership with two nonprofits to combine back office support, project management, and industry connections to a cohort of diverse construction businesses. The remainder of our start up funding came through a business plan competition and business incubators at The University of Chicago Booth School of Business. In 2021 we are introducing a sliding scale fee-for-service for construction entrepreneurs to reduce our dependency on philanthropy. Over the next few years, we will refine this fee for service model to approach self-sufficiency. We plan to use philanthropy to sponsor the “onboarding” of new construction businesses to our back office services; as our services support their growth, businesses increasingly cover their own cost of service. Within 5 years, we plan to transition into a member-driven cooperative from which businesses can co-purchase major expenses such as construction materials and health insurance. We plan to fund this growth with philanthropy, corporate sponsorships, and a sliding-scale fee for service as a path toward self-sufficiency.

All of our funding to-date (with the exception of a PPP loan) have been in the form of philanthropic grants, with the breakdowns as follows: 

2018

$70,000 – The Dividend Project Research Grant 

2019

$30,000 – Social New Venture Challenge, 2nd Place – Unrestricted Grant

$10,000 – Polsky Summer Accelerator – Unrestricted Grant

$25,000 – Tarrson Social Venture Fellowship – Unrestricted Grant

$75,000 – Fund for Equitable Business Growth (formerly Businesses of Color Partnership Fund) – Program Grant for “Lightbulb” Partnership

2020

$19,000 – Paycheck Protection Program, Self-Help Credit Union – Forgivable Loan for increased staffing in pandemic

$4,000 – Together Now, City of Chicago – Unrestricted Grant for increased programming in pandemic

$45,000 – Anonymous Donor-advised Fund, Chicago Community Trust – Program Grant to expand programming in pandemic

For 2021 our total budget is $450,000 of which we have secured $50,000 and hope to earn $50,000 in revenue through the launch of our fee for service model. 

We seek an additional $350,000 through philanthropic support. We have applied for $200,000 outside of the New Profit Grant application. If we secure $125,000 through this competition, we will have raised most of our 2021 budget. Additional funding beyond this goal will expedite the creation of our IT platform and support more staff to expand our programming.

Program Cost

_Program Staff              135,000 

_Direct services            127,500 

_Outreach                        7,500

_Platform MVP               30,000

Management & General

_Mgmt Staff                  75,000 

_Marketing                    10,000

_IT                               10,000

_Legal/Insurance            5,000

Fundraising

Fundraising Staff           50,000 

Total:               -----------------     

                                   450,000

We attribute every success that BSC has been able to accomplish in its short existence to the power of our individual and collective networks, and are excited to expand our network through this Challenge.

We hope to engage with current and former grantees and investees for MFF and New Profit who have a marketplace business model. In addition we would like to seek introductions to board and staff members of the partners who can share legal, cooperative, technology and construction expertise. 

Lastly, we want the leadership of BSC to reflect the community we serve. We understand that this will be an intentional process to identify, recruit and nurture the right talent from the community to serve on the board and in executive leadership. As we move toward a cooperative structure, we will need support in nurturing our clients’ transition from members to owners. We are particularly impressed with New Profit’s Inclusive Impact strategy and we hope to learn from your team to advance “equity, opportunity and systemic change” in our small ecosystem. 

Cooperative and Workforce Development

We are excited about the possibilities to learn from and leverage the expertise, networks and connections of the Challenge hosts and partners. The following are some of the ways we hope to tap into to the power of Challenge partnerships:

• CSU Global: Adapting our construction coaching and guidance to a culturally competent curriculum for busy entrepreneurs and their teams, as we seek scale across other markets in the Midwest.
• IBM: In addition to resources through the IBM Clouds team, we hope to connect with the IBM Garage and IBM Data and Analytics teams, to help us think through our digital platform.
• New Profit: We aspire to be part of New Profit’s investment portfolio in the future. We see a values and vision alignment, particularly on the ecosystem-building pillar of New Profit’s investment thesis.
• Morgridge Family Foundation: We are particularly interested in a connection with the American Enterprise Initiative which has been a partner to the MFF.
• Gary Community Investments: We look forward to discussing with GCI lessons from their economic development portfolio in Colorado and seek guidance and connections as we explore expansion to the West.
• Workforce Boards: We are most excited about the potential opportunity to work with West Michigan Works in Southwest and Berrien-Cass-Van Buren. We are confident on our theory of change and how our work can ultimately solve the workforce and diversity challenge within construction. Collaborating with workforce experts will help us quickly integrate best practices and prepare for scale.