How the Small-Business Community Is Becoming More Diverse
The small business community appears to be growing more diverse, according to a new survey by BizBuySell, an online marketplace for buying and selling small businesses. BizBuySell’s president, Bob House, says there are demographic shifts between the current generation of business owners and the next generation of owners (the would-be business buyers).
“Both groups (owners and buyers) skew white and male at pretty consistent levels, although there are more women in the buyer group,” House says. There are also more millennials in the buyer segment.
“There’s also more more ethnic diversity as well, with increases in the number of buyers who are Asian/Pacific Islander, Hispanic/Latino, and African American – as well as naturalized citizens and permanent residents,” House says. While diversity seems to be increasing, he says there is still a long way to go.
Combining Necessity and Opportunity
American Express’ 2018 State of Women-Owned Businesses Report says that since 1972, the number of women-owned businesses is up nearly 3,000 percent. And women are staring an average of 1,821 net new U.S. businesses a day, the report says.
“The surge in women-owned businesses in 2018 is being driven by a combination of necessity and opportunity entrepreneurship,” American Express research adviser Geri Stengel says. She notes that during the recession, women who couldn’t find quality jobs, and some who couldn’t find any work, became entrepreneurs because they didn’t have other options. “While employment has improved, the wage gap for women of color has not, and these women are starting businesses to make ends meet,” Stengel says.
In fact, the report reveals that from 2007 to 2018, firms owned by women increased by 58 percent, but that number skyrocketed among minority groups. Firms owned by women who were African-American, Native Hawaiian/Pacific Islander, Asian American, and Native American/Alaskan increased by 163 percent, 146 percent, 105 percent, and 76 percent, respectively.
It’s also interesting to note the generational differences between the ethnic groups. “African-American women business owners tend to be millennials, Latina and Asian-American women-business owners tend to be Gen Xers, and non-minority women business owners tend to be baby boomers,” Stengel says.
“At the same time, the study reveals that opportunity entrepreneurship has returned, and these women are starting businesses because they see a need in the market.” Stengel says that businesses started by women tend to grow bigger and to have higher survival rates.
The View from 2 Entrepreneurs
Millennial entrepreneur Luvleen Sidhu is the co-founder, president and chief strategy officer of BankMobile, a digital bank. She views the news of diversity in the small-business community less optimistically than some. “Small-business owners may marginally be becoming more diverse, but the reality is that women, Hispanics and African-Americans are significantly underrepresented in this demographic,” Sidhu says. “This entrepreneur gap exists even when controlling for factors such as income, wealth and education.”
However, she says this is the best time to be an entrepreneur. “We have more capital and knowledge available to us than any time before,” Sidhu says. “The marginal cost for starting a business is also less than it has ever been historically, creating huge opportunities for entrepreneurs who are driven by passion to solve consumer pain points.”
Sidhu says there’s ample capital available to fund innovative ideas. “If you’re a minority, you should specifically look for venture capitalists that want to invest in both great ideas and minority founders.”
Entrepreneur Nichelle McCall also says this is a good time to start a business. “There aren’t as many barriers of entry into entrepreneurship since you don’t need as much capital upfront, and just being able to leverage technology and even create online businesses allows you to be able to break in and do your own marketing versus needing a lot of money up front for things like advertising,” she says. McCall has founded several companies, including Bold Startups, which helps entrepreneurs make and raise money. She was named one of nine black women tech founders to watch by Inc. magazine, and was included in Crain’s Cleveland Business magazine’s 2014 edition of 40 notable professionals under the age of 40.
“Less than 1 percent of African-American founders are receiving funding, but by the same token, only about 1 percent of venture capitalists are African-American,” McCall says. To increase diversity in the small-business community, she says, minorities have to be connected to the knowledge, information and resources needed to create an investment-ready company.
Finally, she has a message for investors: Be open to new ideas. “Organizations supporting various entrepreneurs have to understand that, often, these services or products are going to be geared toward people that they really identify with — but not necessarily a population that you readily identify with,” McCall says. “But understand that it can still be a very successful and sustainable company with the right resources and tools to help them make a solid plan and grow their company and their customer base.”
*This post first appeared on TalentCulture.