Small Business as a Sustainable Solution
The previous posts in this series discussed the relationship between the racial wealth gap and small business, what created the racial wealth gap, and how it has impacted small business, especially minority-owned small businesses. This week’s post brings good news: building capacity among minority-owned businesses and businesses located in low- to moderate-income communities may contribute to closing the wealth gap.
Compared to African-American non-business owners, African-American business owners have 12 times more wealth and also have higher levels of wealth mobility. In addition, small businesses are important job creators for other members of their communities. Employers of color are more likely than whites to hire people of color.
Impact assessment data from Interise’s StreetWise ‘MBA’™ has demonstrated that growing established small businesses can increase jobs and revenue for the businesses and their communities through increased access to capital and contracts.
What’s more, compared to Interise alumni businesses overall, Interise’s minority-owned businesses tend to create jobs faster than the network as a whole, with a higher average salary. These new jobs, with good salaries, create local employment and local wealth.
Additionally, Interise alumni who are racial minorities access a much higher average amount of new financing than their white peers. One reason for this may be that Interise’s StreetWise ‘MBA’™ curriculum provides access to knowledge, know-how, and markets from which racial minorities tend to be more frequently excluded.
A greater share of Interise alumni who are racial minorities or Hispanic secure new contracts than white peers, although their contracts tend to be smaller. This data suggests that by building their business capacity and contract readiness, minority-owned firms are better positioned to take advantage of supplier diversity programs and contracting opportunities.
Future Interise research will take a closer look at how building capacity among small businesses can help build wealth among minority communities. Especially given demographic trends, which show minorities becoming the majority of Americans, closing the racial wealth gap requires an inclusive approach to supporting economic development.