Business revenue: Race and gender should not hinder business success and growth.
Insights & Analyses
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The disparity in average annual revenue between White-owned businesses and businesses owned by people of color has increased from $355,000 in 2007 to $378,000 in 2012.
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Across all firms, Black business owners earn the least annual revenue on average at $58,000. Black-owned sole proprietorships also make the least annual revenue on average at $19,000. For firms with paid employees, Filipinx business owners earn the least annual revenue at $834,000.
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West coast cities with higher minimum wage and business tax rates, such as Seattle and Irvine, have the highest annual revenue for businesses owned by people of color. Cities in states with lower minimum wage and business tax rates, such as Corpus Christi and Detroit, have the highest annual revenue for White-owned businesses.
Drivers of Inequity
People of color are less likely than Whites to have access to capital and contracts to start and grow a business, due in part to historical policies such as redlining that denied home loans and wealth-building opportunities to people of color. Today, business loan denial rates for firms owned by people of color are three times higher than for firms owned by Whites. Business owners of color also pay higher interest rates and receive lower loan and equity investments. Although creditworthiness is a factor in loan denials, this metric does not reflect how reliably individuals pay their rent. Underrepresented groups also often face barriers accessing important networks and training programs.
Strategies
Grow an equitable economy: Policies to help small businesses grow and thrive
- Create dedicated technical assistance and business supports for underrepresented entrepreneurs in high-growth, innovation sectors.
- Direct economic development efforts to support the growth of existing businesses that provide jobs for low-income residents.
- Help growing companies owned by underrepresented entrepreneurs access affordable office and commercial space.
- Ensure underrepresented entrepreneurs have access to business opportunities created through public sector spending, anchor institution spending, and the supply chains of major corporations.
- Implement workforce development strategies that train youth and low-wage workers for jobs in growing companies and business sectors.
- At the federal level, target small and very small businesses in federal investment programs and set aside a share of public contracts for businesses owned by people of color to mirror area demographics.
Strategy in Action
Creative financing program helps small businesses in California thrive. Based in Oakland, California, ICA Fund Good Jobs uses a framework called the Good Employer Matrix (GEM), which measures good jobs based on providing livable wages and health benefits, minimizing barriers to entry, building strong and inclusive cultures, scheduling shifts fairly and reliably, and actively developing employees to help them advance in their careers. This hybrid banking institution/venture capital fund leverages its GEM tool for underwriting investments, and for providing financial incentives (such as interest rate reductions) for companies that hire from local workforce development partners and implement strategies that demonstrate improvement in their GEM score over time. Since 1996, the loan fund has worked with over 600 companies, 56 percent of which are owned by people of color and 39 percent of which are owned by women. Learn more.
